In Short : Climatic challenges, including extreme weather events and resource shortages, threaten India’s economic growth and its ambition to become the fastest-growing G20 nation. These obstacles can disrupt agriculture, infrastructure, and overall development, requiring urgent climate resilience measures.
In Detail : The impact of extreme weather extends beyond agriculture. About 93% of India’s workforce is in informal jobs without guaranteed working conditions. When temperatures exceed 40°C, many laborers must stop working to avoid heatstroke, disrupting construction and other outdoor activities crucial for development.
Despite its geographical constraints, India has managed to support nearly a fifth of the world’s population. However, record-breaking temperatures, such as the recent 52 degrees Celsius (125.6 degrees Fahrenheit) in New Delhi, indicate that the country’s climate resilience is being severely tested, posing a critical challenge for both its inhabitants and its broader economic ambitions.
India, with its limited natural resources, is more vulnerable to climate change compared to Europe, North America, and China, which have more robust natural endowments. The fragile gains India has made are at risk of being eroded by climate change, threatening the foundations of its growth.
Prime Minister Narendra Modi’s election campaign during the Lok Sabha elections highlighted the BJP ruled government’s success in making India the fastest-growing G20 economy. However, much of this progress is dependent on favourable weather conditions. India’s agriculture, the largest in the world after China, relies heavily on the southwest monsoon rains from June to September.
Pre-monsoon heatwaves have become another challenge, affecting crops from March to May. For instance, a heatwave in 2022 reduced wheat output by about 4.5%. The lack of refrigeration and high temperatures can spoil produce before it reaches consumers, leading to increased vegetable prices, which have risen at double-digit rates in eight of the past ten months. This puts pressure on living costs and forces many to rely on cheaper, less nutritious food.
The monsoon rains, while breaking the heat, can also bring severe downpours, flooding fields and washing away crops. Hailstorms are becoming more frequent, as seen in Kashmir, which experienced 27 hailstorms in 2022 compared to just two in 2007.
Recently, a Reserve Bank report also highlighted that frequent weather shocks caused by climate change pose challenges for monetary policy as well as downside risks to economic growth. The report said that climate change has increased the frequency and ferocity of weather shocks, posing challenges for monetary policy. Climate change directly impacts inflation through adverse weather events affecting agricultural production and global supply chains, climate change could impact the natural rate of interest, and the after-effects of climate change might weaken the transmission of monetary policy actions to financing conditions faced by households and firms.
In the absence of any climate mitigation policies, the long-term output will be lower by around 9 per cent by 2050 vis–vis a no climate change scenario with full pass-through of the physical risks of climate change to the economy. “Lower productivity may lead to a fall in the natural rate of interest. Frequent shocks to inflation will, however, necessitate tighter monetary policy even with a lower natural rate of interest,” the RBI had said.
The report also stressed that frequent weather-related disturbances due to climate change pose downside risks to the baseline growth path.
The impact of extreme weather extends beyond agriculture. About 93% of India’s workforce is in informal jobs without guaranteed working conditions. When temperatures exceed 40°C, many laborers must stop working to avoid heatstroke, disrupting construction and other outdoor activities crucial for development. India’s construction sector, vital for economic growth, faces significant challenges due to both heat waves and monsoons. Currently, India has only about 30% of the urban infrastructure needed by the end of the decade.
India, responsible for a minimal share of global carbon emissions, must still address its future climate resilience. While solar power installations are increasing, India lags behind China in renewable energy deployment. Public charging infrastructure for electric vehicles is also inadequate, with only 12,146 stations, far short of the number needed by 2030.
All political factions in India share the goal of becoming a prosperous nation. However, this goal is jeopardized by increasingly severe weather patterns. India risks being trapped in a carbon-intensive past, unable to build a sustainable, future-proof economy due to its own extreme climate conditions.
The global economy is expected to lose around 19 per cent of income by 2050 due to extreme weather conditions triggered by climate change, according to a study published in Nature journal. India is expected to face a steeper decline, losing 22 percent of its income, according to researchers from the German state-funded Potsdam Institute for Climate Impacts Research, who also predict a global annual economic loss of $38 trillion by mid-century, even with significant reductions in carbon dioxide emissions starting now.
Last month, S&P, Morgan Stanley and Moody’s too have revised India’s growth projections upwards. S&P revises India’s growth projections from 6.4 per cent to 6.8 per cent, Morgan Stanley from 6.1 per cent to 6.8 per cent and Moody’s from 6.6 per cent to 8 per cent for the current fiscal. The growth projections were revised upward by rating agencies, reflecting both global and domestic optimism in the country’s economy on the back of robust manufacturing activity and infrastructure spending.
Moody expects India to be the fastest growing economy among the G-20 countries on the back of strong government expenditure and domestic consumption. The Modi government has raised capital expenditure from 2 per cent of GDP nine years ago to 3.8 per cent of GDP in the interim budget of 2024, that is about 4.5 times since 2014-15.
