India-U.S. Financial Dialogue includes new focus on climate change

The eight Ministerial meeting of the U.S.-India Economic and Financial partnership held a session dedicated to climate finance for the first time

Finance Minister Nirmala Sitharaman and her American counterpart, Treasury Secretary Janet Yellen, met on Thursday, October 14, 2021 for the eight Ministerial meeting of the U.S.-India Economic and Financial partnership. Also in attendance, were Federal Reserve Chair Jerome Powell and RBI Governor Shaktikanta Das (attended virtually). The Ministerial held a session dedicated to climate finance for the first time, as per a joint statement.

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In the run up to the UN Climate Change Conference ( “COP26”) in Glasgow at the end of the month, India has been pushing for rich countries to meet their Paris Accord climate finance commitment of $100 billion per year.

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The two sides “reaffirmed the collective developed country goal to mobilise $100 billion annually for developing countries from public and private sources, in the context of meaningful mitigation actions and transparency on implementation,” the statement said. Holding such a session, the statement said, reflected the “critical” role climate finance has to play in achieving global climate goals and the two sides’ commitments to drive “urgent progress” in combatting climate change.

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“We intend to engage further on addressing climate change between our two ministries, as well as through the Finance Mobilisation pillar of the recently launched Climate Action and Finance Mobilisation Dialogue (CAFMD) under the U.S.-India Climate and Clean Energy Agenda 2030 Partnership,” it said, referring to a partnership launched in April this year, after a visit by U.S. Climate Envoy John Kerry to India.

At Thursday’s meeting, the sides also shared views global efforts to increase climate ambition and each country’s effort to meet stated goals. India has been under pressure – including from the U.S. and U.K. – to up its commitments from Paris , including by providing a deadline to reach ‘Net Zero’ emissions. India has so far not declared further climate action commitments (beyond its Paris-related goals) and has argued that developing countries need space to grow and that rich countries need to move towards ‘net minus’ commitments in addition to fulfilling their climate finance pledges.

Also read: Explained | Why is it difficult for India to get to net zero?

In line with themes from the week’s discussions so far around the World Bank IMF annual meetings, topics of discussion also included the economic recovery from the pandemic, anti-money laundering and financing of terrorism (AML/CFT), bilateral lending and debt sustainability , as well as international taxation.

India and the U.S. also reiterated their support for “debt sustainability and transparency in bilateral lending,” presumably a reference to China’s lending practices under its Belt and Road Initiative which has led borrowing countries to unsustainable debt positions.

On international taxation, the two sides welcomed the OECD (Organisation of Economic Co-operation and Development, a group of wealthy countries) tax agreement and committed to work with others to implement the agreement’s two pillars by 2023. Pillar One involves the allocation of taxing rights (tax on multinationals) between jurisdictions , and Pillar Two, a global minimum tax of 15% on certain companies.

The sides also took note of the U.S.’s FATCA law, under which other countries provide the U.S. with information on financial asset information of Americans . “The two sides should continue to engage in discussions on full reciprocal arrangement on FATCA,” the joint statement said, with a view to tackling offshore tax evasion.

On AML/CFT, the two sides agreed on “the importance of fighting financial crimes and on the effective implementation of the Financial Action Task Force standards to protect our financial systems from abuse.”

The statement also referred to the Group of 20 (G20), of which India will be the President in 2023.

As India prepares for its 2023 G20 Presidency, the United States stands ready to support India in hosting a successful and productive year,” it said.

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