News Excerpt:

In its annual World Development Report, the World Bank has advised India to move beyond its traditional practice of 'jugaad' and focus on "capital deepening" to sustain economic growth.

More details about the news:

• While low-income countries benefit from building physical capital and achieving basic education, middle-income countries like India are at a pivotal point and would need to take additional steps.

• In the 1980s, India relied on capital deepening to drive growth. Due to a lack of capital, enterprises and families resorted to using technologies that were not new but available.
• The term 'jugaad' became synonymous with making do with limited resources, often in legally questionable ways.
• However, the World Bank stressed that such improvisation can only take a country so far, and capital deepening is crucial for further development.
• Middle-income countries, including India, face complex challenges in their quest to reach high-income status.

Key highlights of the Report:

• Economic Growth in Middle-Income Countries outlines essential steps such as managing a steady energy transition, maintaining competitive markets, and promoting economic equality.
• India, currently a lower-middle-income country, aims to become a developed economy by 2047.
• The report emphasizes the importance of transitioning energy systems away from coal to support job creation, innovation, and enhanced production and trade.
• It noted that decarbonization would disrupt carbon-intensive industries and regions.
• Just as coal, oil, and natural gas have shaped economic geography, the low-carbon transition is altering patterns of comparative advantage and growth drivers in middle-income countries.
• This means the path to high-income status in the 2020s will likely differ from the past, necessitating policy updates.
• The World Bank has urged countries like Brazil, China, India, and the Philippines to prioritize regulatory adjustments to transition from imitation to innovation.

Target for Energy Transition

• India has set ambitious targets, such as achieving 500 GW of non-fossil fuel energy capacity by 2030 and reaching net-zero emissions by 2070.
• However, the country still heavily relies on fossil fuels. Government data shows a 2.44% increase in fossil fuel-based power generation capacity to 243.22 GW in FY24, while non-fossil fuel capacity, mainly from renewables, rose by 10.79% to 190.57 GW in the same period.