Subir V. Gokarn

Climate Change and India's Energy Policy Options

Abstract This paper presents an analysis of CO 2 emissions in the Indian economy and examines the implications of alternative policies to reduce them. This analysis goes beyond the conventional approaches of looking at energy supply structure and end-uses of energy. Instead, it examines flows of energy in the economy of India through a 60-sector input-output mode). The authors show that direct emissions of CO 2 are highest in the electricity sector followed by iron and steel, road and air transport, and coal tar. If a similar analysis by final demand is carried out, incorporating both direct and indirect emissions, the highest emitting sector is construction, followed by food crops, road and air transport, and so on. This indicates that, in addition to energy efficiency, improving construction efficency could also lead to CO 2 savings (by using less energy-intensive materials or by making optimal use of them). It is also shown, by generating alternative energy policy scenarios, that if India saves energy from coal rather than from imported oil to reduce CO 2 emissions, then savings foregone are more than Rs 5634 million for only 10% of energy saving. Sectoral priorities also change. To save coal, the power sector, iron and steel, coal tar, etc will require attention. To save oil, transport, refinery and fertilizers will require attention. Similar arguments are made for substitution of coal by oil and gas. Additional costs of Rs 10 billion would be incurred for 10% substitution of coal by oil and gas as compared to the current policy of substituting oil and gas with coal. This article offers another Interpretation of the notion of ‘incremental costs’ though comparison of two alternative development strategies.

India: Crisis and Response

The first signs of India’s most recent balance of payments crisis became evident in the second half of 1990–91 when foreign exchange reserves began to fall. The immediate cause of the loss of reserves, which started in September 1990, was the rise in world oil prices following the annexation of Kuwait. This led to a sharp escalation in India’s oil import bill, from an average of

Measures of Competitiveness

287 million per month in June–August 1990 to

Selective Policies: Instruments, Outcomes and Institutional Contexts

671 million per month in the following six months. The effect of the increase in oil prices was aggravated by the events that followed. Indian workers employed in Kuwait had to be airlifted back to India and their remittances ceased to flow in. Further, the UN trade embargo on Iraq led to the stoppage of exports to Iraq and Kuwait, imposing a loss of approximately

Fundamentals: Labour Markets and Human Resource Development

280 million on the economy. Thus, from a level of

Fundamentals: The Macroeconomic Environment, Savings, Investment and the Financial Sector

3.11 billion at the end of August, India’s foreign exchange reserves had dwindled to

Introduction: The State of the Debate

896 million on 16 January 1991.

A Conceptual Framework

In this chapter we provide a quantitative description of the behaviour of the variables that we use as indicators of competitiveness; the revealed comparative advantage ratio (RCA), supplemented by market shares or export shares where appropriate. Initially, we discuss the computational aspects of these measures and some of the problems associated with their interpretation, particularly that of the RCA. We attempt to justify its use on the grounds that, given particular trends in the behaviour of exports in the East Asian countries, this ratio does allow us to make inferences about the relative performance over time, and across countries and commodities.

Economic Restructuring in East Asia and India

This chapter investigates the role of selective policies in the achievement of industrial competitiveness for the sample of countries under consideration. As we indicated in the introductory chapter, the issue of selective intervention raises two basic questions. Firstly, is such intervention necessary? Secondly, if it is undertaken, under what conditions is it likely to be ‘successful’?

Policy Regimes and Industrial Competitiveness

There is little doubt that labour is the most important factor of production as it is indispensable in the production process. Thus, the efficient use of the labour endowment of a country is crucial for its rapid economic growth (see Lucas, 1988; Rebelo, 1991). The role of policy in enhancing the productivity of labour can be important in two ways: firstly, policies that provide an environment for the smooth functioning of labour markets can greatly increase labour productivity by making it possible for workers to be allocated to their most productive uses. Secondly, the role of policy is critical in the accumulation of human capital either by direct investment by the state in systems of education and training, or by making investment in schooling profitable to households. We call the first set of policies labour market policies, and the second policies relating to human resource development. In this chapter, we review these two set of policies in East Asia and India and analyse their role in determining the differing successeses of East Asia and India in manufacturing exports.