Archives: Publication

As the European Union (EU) sets a commendable example by effectively reducing its CO2-equivalent emissions, the emissions from non-EU countries with less rigorous climate obligations are accused of undermining the EU’s climate objectives. Consequently, mainstream Western media portrays the Carbon Border Adjustment Mechanism (EU-CBAM) as a fair pricing strategy for carbon emissions, thereby positioning the EU as a leader in promoting cleaner production practices in non-EU nations. On the other hand, voices from the Global South incriminate the EU-CBAM as an innovative protectionist instrument, that has crooked the chronic North-South divide in addressing climate obligations, often overshadowing the precautionary, prudent, and pragmatic approaches that developing economies like India advocate for. Around this disputation, the CBAM has successively occupied the centre-stage of discussion in some recent editions of the Conference of the Parties (COP) organized under the UN Framework Convention on Climate Change (UNFCCC).

During COP28, held in Dubai in 2023, representatives from developing economies expressed their concerns regarding the CBAM, highlighting evidence that its economic implications for Africa could be three times the level of aid provided by the EU to the continent. At COP27, convened in Sharm El-Sheikh, Egypt, a statement from Brazil, South Africa, India, and China, collectively known as the BASIC countries, described the CBAM as discriminatory and urged developing nations to present a unified response to what they perceive as an unjust transfer of responsibilities.

The CBAM is scheduled for implementation in its definitive form beginning 1 January 2026. This mechanism is a crucial component of the EU’s climate strategy and may present significant risks to international trade in energy-intensive and trade-exposed products. Therefore, consistent with previous COPs, the CBAM is expected to garner substantial attention from stakeholders involved in the ongoing negotiations at COP29, currently taking place in Baku, Azerbaijan, since 11 November 2024. Discussions will likely feature arguments both supporting and opposing its eventual implementation and rollout.

The EU comprises 20.33% of India’s total merchandise exports, with 25.7% of these exports impacted by the CBAM, valued at $8.7 billion. Of this total, iron and steel alone account for a significant 76.9%, followed by aluminium at 19.4%, cement at 3.7%, and fertilizers at 0.02%, based on data from the past three fiscal years. Therefore, India must revitalize the CBAM discussion at the COP29 platform and beyond concerning the equitable allocation of emission reduction responsibilities among international trade partners. This approach is vital not only for ensuring fairness but also for recognizing the important role that international trade plays in shaping the national emission inventory.

India has already undergone rounds of consultations with experts to develop strategic arguments aimed at pitching the voice as a representative for the Global South and countering the imposition of the CBAM. In this policy context, India is also exploring the possibility of implementing retaliatory tariffs on imports from the EU. However, it is important to note that poorly executed retaliatory measures may generate negative perceptions of India on the international platform, potentially conflicting with the EU’s laudable initiative to protect the climate. Consequently, an intriguing question arises: Can India effectively pursue retaliatory measures rooted in climate protection against developed nations, while simultaneously encouraging other developing countries to adopt similar approaches?

The prevailing practice of production-based accounting (PBA) for nationally determined contributions (NDCs) aimed at reducing carbon emissions assigns the responsibility for the emission content of traded goods to exporters. This methodology inadvertently results in the stigmatization of India and several other developing economies within the context of climate negotiations with the European Union (EU). Nonetheless, recent empirical research has identified opportunities for the implementation of alternative principles in national emission accounting.

India has the potential to effectively execute a retaliatory CBAM directed at the EU, based on one of these alternative accounting principles. A notable approach is Equity-based Accounting (EBA), which promotes a mutual obligation for emission reductions among trading partners. The EBA delineates the principles of intra-generational horizontal equity among economies engaged in trade, particularly concerning the allocation of responsibilities for emission reduction. This allocation is determined by each country’s capacity to mitigate climate change impacts related to trade and the benefits derived from international trade. In the context of a trade relationship between India and the EU, it is imperative that both parties collaboratively assume their respective responsibilities for reducing emissions generated from both production and consumption activities linked to their trade interactions. Furthermore, the EBA integrates the principle of horizontal equity with inter-generational vertical equity, which assigns a greater burden to those countries with a more substantial historical contribution to climate change. Specifically, in the India-EU scenario, this methodological framework suggests that the EU bears a greater proportional responsibility for emission reduction compared to India.

In the context of the EU-CBAM framework, the determination of retaliatory tariffs should be based on an adjustment of the emissions embedded in India’s imported commodities from the EU. This adjustment would employ an inflator derived from the EBA, thereby ensuring that importers fulfil the obligations established by the EU. The tariff base may be calculated through the application of validated inflators found in the trade-environmental literature (Banerjee et al., 2021). This calculation involves multiplying the actual emissions present in imports by a complex ratio that incorporates several relative factors, such as per capita GDP, per capita emissions, benefits from trade, avoided emissions through trade, etc. Additionally, the inflator may be further extended to encompass other relative attributes of the EU in comparison to India. This would facilitate a more nuanced conversion of the actual emissions embedded in imports, allowing for an accurate representation of the developmental disparities between trading partners within the framework of shared responsibility. Through these measures, India can position itself to propose innovative rules that offer a fair evaluation of international climate initiatives. This approach will enable India to advocate for the EBA as a standardized method for delineating the allocation of emission responsibilities among nations.

Suvajit Banerjee is a Fellow and Sovini Mondal is a Research Associate at National Council of Applied Economic Research (NCAER), New Delhi. Views are personal.

The 2024-25 Union Budget, with its allocation of substantial resources tonatural farming, marks a pivotal moment, but much needs to be done

Natural farming, with its emphasis on biodiversity, soil health, and reduced chemical inputs, is gaining traction across India’s agricultural landscape. Andhra Pradesh, Gujarat and Himachal Pradesh have emerged as testing grounds for this promising method, showcasing unique models that focus on sustainable agriculture. The 2024-25 Union Budget, with its allocation of substantial resources to natural farming, marks a pivotal moment. However, as we push toward a low-carbon agricultural future, there are still some pertinent questions to be answered. Will natural farming transform Indian agriculture? Or will it remain an ambitious but niche endeavour? 

Successes and challenges in some States

In Himachal Pradesh, the State’s Prakritik Kheti Khushhal Kisan Yojana (PK3Y) has been an important driver of change. Farmers receive ₹33,000 to buy indigenous cows and an additional ₹8,000 to improve cowshed conditions, helping to promote the use of ‘Jeevamrit’ and ‘Beejamrit’, which are bio-fertilizers made from cow dung and urine. These practices are helping 6,438 farmers in districts such as Bilaspur adopt natural farming. Maize grown naturally is being purchased at a support price of ₹3,000 a quintal.

In Gujarat, the ‘Aapnu Dang Prakrutik Dang’ initiative, which declared Dang district as fully natural farming-based in 2021, exemplifies the State’s focus on mechanisation and financial assistance. Farmers receive ₹900 a month for maintaining one indigenous cow and a 75% subsidy for purchasing natural farming kits to prepare ‘Jeevamrit’. Additionally, the Gujarat Natural Farming Science University, established in 2017, has strengthened research in sustainable farming practices. These efforts have helped train over 9,000farmers in 285 cluster-based programmes.

Andhra Pradesh stands out with its Andhra Pradesh Community-Managed Natural Farming (APCNF) initiative, which has become a global model. With 1.03 million farmers practising natural farming over 1.2 million acres, the State has implemented practices such as Pre-Monsoon Dry Sowing (PMDS), which enhances soil fertility and reduces water use by relying on early monsoon rains. The State’s goal is to convert all six million farmers and eight million hectares to natural farming by 2027.

These examples highlight the diversity of India’s agricultural landscape and the potential for region-specific solutions. Yet, the question remains whether these models can be scaled nationally. Each region’s successes is tied to localised initiatives, and replicating these on a larger scale presents significant challenges.

Focus point in the 2024 Budget

The 2024-25 Union Budget took a bold step by cutting fertilizer subsidies and focusing on natural farming as a cornerstone of India’s low-carbon agricultural transition. One of the most ambitious initiatives is the establishment of 10,000 bio-input resource centres (BRCs). These centres will be essential for distributing bio-fertilizers such as ‘Jeevamrit’and ‘Beejamrit’, as well as neem-derived natural pesticides. By reducing the reliance on chemical inputs, the BRCs aim to support the government’s commitment to bringing one crore farmers into natural farming by 2025.

However, logistical challenges may undermine this ambitious plan. The experience of Chhattisgarh’s Godhan Nyay Yojana, where inconsistent supply chains for cow dung hampered progress, is a cautionary tale. The success of the BRCs will depend on the ability to source and distribute bio-inputs reliably, especially in regions where livestock ownership is low. This problem is especially pronounced in Andhra Pradesh, where the shortage of Indigenous cows makes sourcing dung and urine more difficult for some farmers.

Moreover, while bio-inputs can replace chemical fertilizers, they are often labor-intensive to produce and apply. Natural farming’s reliance on manual work —particularly in the preparation and application of bio-inputs — can be a deterrent. In Gujarat’s Dang district, mechanisation has helped ease this burden, but many small holders across India lack access to such tools.

Although the Budget’s focus on branding and certification for natural products is commendable, the ability of farmers to access premium markets remains uncertain. Certification is crucial for helping farmers fetch better prices, but the scale and the pace of this transition are slow. Can India’s agricultural system effectively support millions of farmers in making this leap, financially and logistically?

 The issue of mainstreaming

One of the most significant barriers to scaling natural farming is labour. Unlike conventional farming, which relies heavily on chemical inputs, natural farming often requires more manual intervention. Farmers must prepare bio-inputs such as ‘Jeevamrit’and ‘Beejamrit’ and apply them frequently. The process of producing these bio-fertilizers at home is not only labour-intensive but also depends on the availability of livestock. Without mechanisation or technological support, many farmers will find it difficult to transition to natural methods.

Input supply is another critical issue. As seen in Chhattisgarh’s Godhan Nyay Yojana, the availability of cow dung and urine, the core ingredients for bio-fertilizers, is inconsistent. The success of the 10,000 BRCs depends on building a reliable supply chain for these materials. In regions where livestock numbers are low, such as parts of Andhra Pradesh, alternative sources of bio-inputs must be developed. If these supply chains falter, farmers may revert to chemical inputs, thus undermining the entire initiative.

Finally, market dynamics remain a challenge. While natural farming products can command higher prices, most farmers struggle to access premium markets. Only a

fraction of India’s agricultural output is certified as organic or natural, and the competition, with cheaper, chemically grown crops, is fierce. The Union Budget’s push for certification and branding is a step in the right direction, but will these measures be enough to sustain farmers during the costly transition away from chemical farming?

Natural farming has the potential to transform Indian agriculture, but its future hinges on addressing several critical challenges. Strengthening bio-input supply chains, mechanising labor-intensive processes, and improving market access are all essential. Will the BRCs be able to meet the demands of millions of farmers, or will supply chain disruptions limit their impact? Can India create a robust market for natural products that benefits farmers and consumers?

The Union Budget has laid a promising foundation, but much remains to be done to ensure the long-term success of natural farming. Can this ambitious vision of a chemical-free agricultural future become a reality for millions of smallholder farmers across India? Or will natural farming remain a niche practice in select regions?

 Laxmi Joshi is with the National Council of Applied Economic Research (NCAER), New Delhi. Souryabrata Mohapatra is with the National Council of Applied Economic Research (NCAER), New Delhi. The views expressed are personal

Expressions of dissatisfaction with the global dominance of the dollar go back at least to French finance minister Valéry Giscard d’Estaing in 1965. But even today, the euro is no challenger to the greenback, and no one should hold their breath waiting for the BRICS to unveil their own attempt at an alternative currency.

Last month’s BRICS summit in Kazan, Russia, was, like all summits, heavy on photo ops. And it yielded a second act that was similarly heavier on symbolism than substance: the release of a report by the Russian finance ministry and central bank on “improvement of the international monetary and financial system,” by which Russian officials obviously meant “finding an alternative to the weaponized dollar.”

Expressions of dissatisfaction with the dominance of the dollar over global money and finance go back at least to French finance minister Valéry Giscard d’Estaing in 1965, who famously lamented the greenback’s “exorbitant privilege.” Indeed, the desire for an alternative played no small part in the creation of the euro 34 years later.

Herein lies the rub for the BRICS (named for its founding members Brazil, Russia, India, China, and South Africa). Creating the euro took 34 years. It necessarily built on a half-century of other steps that deepened European integration and established shared political institutions. And the euro, in any case, has shown no signs of challenging the dollar, or even of modestly denting its global supremacy.

Policymakers in emerging markets have in fact offered a long list of possible substitutes for the dollar. None of their proposals has borne fruit. In 2009, People’s Bank of China (PBOC) Governor Zhou Xiaochuan suggested replacing dollar reserves with the International Monetary Fund’s Special Drawing Rights. It quickly became apparent that no one was particularly interested in holding, much less using, an artificial asset pegged to an arbitrary currency basket.

Chinese officials then embarked on a campaign to promote use of the renminbi in international payments. In fact, Chinese firms now settle a majority of their cross-border transactions in renminbi. Globally, however, the renminbi accounts for less than 6% of trade settlements, while Chinese capital controls and governance issues limit the currency’s utility for financial transactions. Despite having built a Cross-Border Interbank Payments System, Chinese banks clear barely 3% of the daily transactions, by value, of US-based clearing houses.

Then came proposals for a BRICS currency, constituted as a weighted average of existing BRICS currencies, or perhaps backed by gold or other commodities. But a BRICS basket currency was not a natural fit for any of its member countries’ exporters. With no BRICS equivalent of the European Central Bank, which manages the euro, or of the European Parliament, to which the ECB answers, fundamental questions – like who would manage it – remained unanswered.

A gold-backed currency would have obvious appeal to major gold producers like Russia and South Africa. But payments would be expensive, insofar as they involved actual gold shipments. If “gold-backed” meant convertible into gold at the prevailing market price, then the unit would not be stable. If it meant convertible at a fixed price, this would be tantamount to donning the straitjacket of the gold standard.

There have since been discussions of local currency settlement, like those occupying Russia and India for much of 2023. But this could work only if bilateral trade were perfectly balanced, with neither country having much appetite for accumulating the currency of the other. The benefits of multilateral trade would be lost. Predictably, these Russia-India talks led nowhere – except to Kazan.

The Russian report to the BRICS summit recommended a common platform for cross-border payments using a set of BRICS central-bank digital currencies. This could avoid having to go through the dollar, the US banking system, and the SWIFT interbank payment service. The Bank for International Settlements has helped to develop such a platform, known as Project mBridge, with the participation of five central banks, including the PBOC, which is said to be privy to the technical details, having designed many of them. The accession of additional emerging markets could provide for own-currency settlement while preserving a modicum of multilateralism. Participants might be happy about holding one another’s currencies now that these were usable at low cost throughout the bloc.

But if the technological problem has been solved, the governance problem remains. Participants would have to agree on who to license as foreign-exchange dealers on the platform, or on the exchange rate at which to execute trades algorithmically. They would have to agree on who was responsible for providing liquidity, and under what conditions. They would have to agree on a dispute-settlement mechanism. They would have to agree on privacy and data-protection laws and practices, and how to guard against cyber threats. They would have to agree on the enforcement of anti-money-laundering rules. They would have to agree on which central banks could join over time. They would have to agree on ownership and voting shares, analogous to ownership and voting shares in SWIFT.

In their Kazan Declaration, summit participants limply “recognized” the role of the BRICS in improving the international monetary and financial system, and “took note” of the Russian report. No one should be surprised that they failed to do more.

Barry Eichengreen, Professor of Economics and Political Science at the University of California, Berkeley, is a former senior policy adviser at the International Monetary Fund. He is the author of many books, including In Defense of Public Debt (Oxford University Press, 2021).

Of the four key areas that define women’s empowerment, personal efficacy, power in intra-household negotiations, societal engagement, and access to income-generating activities, we see improvements in the first three domains. In contrast, the fourth — access to employment — has stagnated.

As economists struggle to explain the stagnation in women’s participation in wage work in India, conservative social norms have emerged as a handy target to explain why rising economic prosperity has not translated into greater employment for women. However, this assumption of social stagnation has little basis in reality. The India Human Development Survey (IHDS), organised by the University of Maryland and the National Council of Applied Economic Research, has tracked changes in the lives of Indian households between 2004 and 2024. This survey of over 42,000 households documents steady changes in Indian women’s lives and highlights the aspirational transformation that young Indian women in the 2020s are living through compared to their sisters who came of age in the first decade of the century.

The second wave of IHDS was conducted in 2011-12, and the third wave covering the period 2022-24 was recently completed. Here, I focus on interviews with approximately 18,000 married and unmarried women, aged 20-29, in each wave. Ten years is a relatively short time, but this decade was pivotal for changing the course of how young Indian women live their lives.

Over this decade, Indian parents have increased their investments in developing their daughters’ capabilities. Parental aspiration for their children — both sons and daughters — has grown rapidly, resulting in a massive increase in education. Today, the gender gap in education has virtually disappeared, and girls seem poised to outdistance boys. In 2011-12, IHDS found that 27 per cent of 20-29 year-old women had completed class 12 and only 12 per cent had a college degree. In 2022-24, more than 50 per cent had completed class 12 and 26 per cent had a college degree. More importantly, there was no difference between the proportion of young men and young women with a college degree. This increase in girls’ education was accompanied by delayed marriage. In 2011-12, 76 per cent of the women in their 20s were married, by 2022-24 the proportion had dropped to 66 per cent.

This expansion of girlhood allowed women to expand control over their own lives. Marriage remains a family affair, but whereas only 42 per cent of young women in 2012 had any input in selecting their partners, by 2022, 52 per cent did. Premarital contact between spouses has historically been low, but is increasing sharply. In 2011, 30 per cent of women met their husbands before marriage, and 27 per cent connected via phone, WhatsApp, or email. By 2022, this proportion was 42 per cent and 54 per cent, respectively. Many of these changes reflect how women view their lives and families. While 23 per cent of young women in 2012 thought having more sons than daughters was essential, the proportion had fallen to 12 per cent by 2022.

Young women also began to expand their connection with the world around them. The proportion of women who felt comfortable travelling a short distance alone by bus or train grew from 42 per cent to 54 per cent, and membership in Self Help Groups increased from 10 per cent to 18 per cent for women in their 20s. Even political engagement has increased slightly; in 2012, 6 per cent attended a political meeting of a gram sabha or ward committee; by 2022, this proportion was 8 per cent.

These are not revolutionary changes; women continue to negotiate their lives within various constraints. But the sum total of these changes reflects the ongoing transformation in the social and normative climate in which Indian women live their lives.

However, the one area where a transformation has not even begun relates to economic opportunities. Women continue to contribute to the economy by working on family farms, and the Periodic Labour Force Survey has documented a substantial increase in this work. However, participation by women in wage labour has stagnated. The IHDS shows that the proportion of 20-29 year old women in wage labour was 18 per cent in 2012, falling to 14 per cent in 2022. Some of it may be due to increased college enrollment, but even for women in their 30s, participation in wage labour stagnated.

The new economic orthodoxy tells us that women’s low levels of employment are because of restrictive social norms that look down on families where women work. However, among married women in our sample who were not employed, 73 per cent in 2011 said they would be happy to work if they could find suitable jobs; this proportion had grown to 80 per cent in 2022. Moreover, 72 per cent said their families would allow them to work if they could find a suitable job. These do not simply reflect wishful thinking. When MGNREGA started paying women the same amount as men, women jumped in with both feet to seek out even manual work. Today, more women work under MGNREGA than men. Improvements in transportation systems have also contributed to increased non-farm work by women.

Of the four key areas that define women’s empowerment, personal efficacy, power in intra-household negotiations, societal engagement, and access to income-generating activities, we see improvements in the first three domains. In contrast, the fourth —access to employment — has stagnated. It is time to invite India’s daughters to partake in the fruits of economic development; they have clearly shown that they are ready and willing to help harvest the gender dividend. 

The writer is Professor and Centre Director, NCAER Data Innovation Centre and Professor Emerita, University of Maryland. Views are personal.

The G20’s “Roadmap Towards Better, Bigger, and More Effective Multilateral Development Banks (MDBs)” is an ambitious blueprint for transforming MDBs to address global development challenges. The roadmap sets bold objectives: scaling MDBs’ financing capacity, fostering collaboration, and integrating climate-related goals into development strategies. These priorities underscore a strategic shift toward a more responsive, impactful multilateral finance system. Yet, while this roadmap reflects significant forward-thinking, several areas call for more specific attention and clearer pathways for actionable outcomes. These gaps — especially regarding governance, private sector engagement, and debt sustainability — are crucial if MDBs are to realize their full potential in aiding low-income and developing economies.

Among the roadmap’s most promising aspects is its target of enhancing MDB lending capacity by $300–400 billion over the coming decade. This increase is essential to meet the financing needs of developing economies, aligning with the G20’s Capital Adequacy Framework (CAF) Review, which promotes the optimal use of MDB balance sheets. Expanding MDB capacity can address a broad spectrum of urgent needs, from poverty alleviation and infrastructure to climate adaptation. However, the roadmap stops short of outlining how these funds will be generated — a critical element for effective implementation. Another strength lies in the roadmap’s call for enhanced collaboration among MDBs. By promoting synergy, the G20 aims to optimize each institution’s unique strengths, mitigate operational redundancies, and amplify collective impact. Such an approach is increasingly relevant as MDBs tackle intertwined issues like climate change and financial stability. The roadmap’s focus on aligning MDBs with the Paris Agreement objectives acknowledges climate risks as systemic threats, ensuring that MDB resources are directed toward sustainable and resilient growth. Notably, the World Bank set up the Global Collaborative Co-Financing platform as a convening mechanism earlier this year to help improve coordination among Multilateral Development Banks and other co-financing partners. One objective is that, in its mature form, the platform will enable it to channel additional capital for development scale and impact.

However, some crucial gaps in the roadmap may hinder its implementation and broader effectiveness. A primary concern is the lack of a concrete governance reform framework. Current MDB governance structures often underrepresent the interests and voices of developing nations, risking an imbalance that could undermine MDBs’ ability to address diverse global challenges. Historical precedents, such as the Bretton Woods institutions’ reform after WWII, underscore how governance restructuring has been critical in adapting to shifting global economic power. A lack of representation for developing economies risks perpetuating an imbalance that could impede the MDBs’ effectiveness. This aspect ties directly to themes from the recent BRICS Kazan Declaration. The role of underrepresented voices in multilateral settings is increasingly seen as pivotal for effectiveness.

Furthermore, while the roadmap acknowledges the need for private-sector engagement, it does not offer specific, actionable strategies. The private sector is crucial to scaling climate and infrastructure investments but mobilizing private capital requires more than intentions. The roadmap could benefit from clear strategies for risk-sharing mechanisms, public-private partnerships, and blended finance models. As discussed in ORF America’s Background Paper #13, Rebooting Development Finance: An Agenda for Reforming Multilateral Development Banks, private sector confidence hinges on robust instruments that effectively mitigate risks while aligning with their investment return expectations. The Asian Development Bank’s recent success in leveraging private finance for climate projects is a testament to the power of such mechanisms when tailored to investor needs. For MDBs to attract substantial private capital, they must introduce a sophisticated financial instrument toolkit that bridges the public and private sectors.

Debt sustainability is another crucial area where the roadmap needs to catch up. Many developing countries already grapple with high debt burdens, and MDBs play a critical role in providing concessional finance and supporting debt restructuring. While institutions like the IMF and World Bank have advanced global debt discussions, MDBs must engage actively to prevent their financing from aggravating existing debt challenges. The interconnectedness of MDB lending and debt sustainability makes it essential for MDBs to incorporate debt assessments into project planning, ensuring that lending practices support long-term financial health.

Realizing the roadmap’s ambitions will entail significant operational shifts within MDBs. Resource mobilization, for instance, is essential for scaling up lending, but the roadmap lacks clear strategies for securing additional capital or leveraging innovative financing. The G20’s Independent Expert Group has underscored the need for actionable plans. MDBs could struggle to translate the roadmap’s targets into effective financial solutions without tangible commitments from major shareholders. Operational efficiency is another area crucial to the roadmap’s success. To meet expanded mandates, MDBs must improve processes to facilitate faster project approval and disbursement, particularly for climate and infrastructure projects that require agility. The G20 sustainable finance working group’s recommendations on streamlining accreditation and reducing approval times are critical if MDBs are to respond effectively in an evolving financial landscape. The roadmap also lacks a comprehensive monitoring and evaluation framework, essential for tracking progress and adjusting strategies. Establishing metrics and timelines is necessary to assess reform implementation and identify potential obstacles. The Center for Global Development’s MDB Reform Tracker offers a helpful benchmark model, highlighting areas where MDBs have succeeded or need improvement.

The roadmap’s impact extends significantly to low-income and developing countries. The proposed increase in MDB financing could give these countries greater access to affordable capital for critical projects, accelerating their progress toward Sustainable Development Goals (SDGs). Integrating climate considerations into MDB mandates allows for targeted climate adaptation and resilience support, helping vulnerable nations manage climate-related risks. Enhanced MDB collaboration could strengthen capacity-building efforts, enabling low-income countries to build the skills and institutions needed for sustainable development. By making MDB resources more accessible and tailored to local needs, the roadmap offers the potential to bolster long-term economic stability and resilience across regions where it is most needed.

The roadmap’s success will have profound implications for global finance. By addressing systemic risks such as climate change, MDBs can contribute to deepening global capital markets and a more resilient international financial system, mitigating potential economic shocks from climate events. Effective private sector mobilization, if realized, could redirect capital flows towards sustainable projects worldwide, fostering a more balanced and resilient global finance landscape. Furthermore, the emphasis on collaboration could serve as a precedent for more robust multilateral responses to shared challenges, potentially setting a new standard for international financial cooperation to aid global financial stability.

The G20’s roadmap for MDB reform is a bold step toward reimagining multilateral finance for a world facing unprecedented challenges. However, the roadmap’s success will depend on closing critical gaps. Governance reforms that give developing countries a greater voice, concrete strategies to mobilize private capital and comprehensive debt sustainability measures are essential for realizing its vision. Drawing from institutional evolution and recent financial crises, MDBs have a unique opportunity to align more closely with global needs. By addressing these areas, MDBs can become “better, bigger, and more effective,” driving meaningful progress toward a stable and equitable global future.

Udaibir Das is Visiting Professor NCAER and Distinguished Fellow at ORF America.  Views are personal.