Emission commitments pose medium-term risks to BRICS (Brazil, Russia, India, China & South Africa) nations and could engender energy shortages, technology gaps and thus pose risks to medium-term growth and inflation, RBI deputy governor Michael Patra has said.

The comment comes at a time when India has been under pressure globally to reduce dependency on coal-fired power plants and cut emissions. Patra said this in his keynote address in the conference on ‘Growth and development in the BRICS economies’ organised by the Delhi School of Economics (DSE) and Indian Statistical Institute (ISI), which was released by the RBI on Monday.

“Medium-term challenges for the BRICS arise in the context of climate risks and emission commitments, which may engender energy shortages, technology gaps and hence pose risks to medium-term growth and inflation, especially for countries with large total emissions,” said Patra. He added that the immediate challenge was from elevated commodity prices for net importers like India, although they confer terms of trade gains for net exporters like Brazil and Russia. “For all the BRICS, rising food prices on account of natural calamities and demand-supply imbalances caused by the pandemic involve elevated inflation risks,” said Patra.

In his address, Patra said capital accumulation is the biggest contributor to India’s growth and a striking feature of Indian investment is that it is financed primarily by domestic savings, with capital flows from abroad playing only a supplemental role. However, the saving rate has started slowing down after the global financial crisis (GFC). Eventually, this pulled down the investment rate from 2012-13. “Reversing this trend is critical to achieving higher growth,” said Patra.

(With inputs from agencies)