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...Parallel to the budget, New Delhi has just "radically transformed" the fiscal relationship between the central government and the states. That's the judgment of Anit Mukherjee at the Centre for Global Development, who draws attention to the fact that the split of public revenue will jump from about 30-70 to 40-60 in the central government's favour. That's a radical act of fiscal devolution.
Very noteworthy is that some of this money (about USD6bn per year) will be allocated according to the extent of forest cover, giving an incentive for states to protect their forests. Mukherjee's CGDev colleague Jonah Busch has the details. This could bring a host of environmental benefits in the form of the ecosystem services forests generate. But it is important far beyond India.
By creating incentives for forest preservation (and expansion) for the states, the reform also creates incentives for the central government to work for a global climate deal that rewards countries for contributing to emissions control. Given that India has traditionally been one of the most recalcitrant emerging countries in previous climate negotiations, this is very good news in the run-up to the Paris climate talks at the end of the year. Other countries should look and learn from India's way of making environmentalism pay.
Second, the new incentive is one of surprisingly few policies worldwide that pay for developmental or environmental results. No conservation, no money. The global development community will no doubt watch India's experiment with intense interest.