The recent findings from economists at the U.S. National Bureau of Economic Research (NBER) and a study published in the journal Nature offer a sobering analysis of the economic impacts of climate change.
The NBER working paper reveals that global GDP could have been 37% higher without global warming from 1960 to 2019. Additionally, the study in Nature predicts a nearly 20% decline in average incomes over the next 26 years due to climate change, highlighting its significant impact on global economic productivity and potential.
INDIA'S VULNERABILITY TO CLIMATE CHANGE
India's vulnerability to climate change is complex due to its geographical diversity, demographic pressures, and economic structure.
The nation faces a range of climate-related threats, including heatwaves, erratic monsoons, increased frequency of extreme weather events, and rising sea levels, each of which poses significant challenges to its development trajectory.
As per the Reserve Bank of India's (RBI) research, the last two decades have seen a sharp rise in average temperatures and changes in precipitation patterns, which have made monsoons more erratic (RBI, 2021).
India's vast topography exposes different regions to varied climate risks. For example, the coastal areas are prone to cyclones and sea-level rise, while the northern regions face glacial melts and changing rainfall patterns.
The Indian economy, though increasingly service-oriented, remains significantly reliant on agriculture, which is highly vulnerable to climate variations.
ECONOMIC COST OF CLIMATE CHANGE IN INDIA
The economic repercussions of climate change in India are profound, affecting various dimensions of the economy:
Agricultural Productivity and Food Security:
The Reserve Bank of India has identified that increased occurrences of extreme weather events such as floods and droughts can disrupt agricultural output, causing fluctuations in food availability and prices. This has serious implications in a nation where a significant portion of the populace relies on farming for their livelihood.
Additionally, climate change can severely affect crop cycles by altering temperature and precipitation patterns, increasing pest infestations, accelerating soil erosion, and exacerbating water scarcity. These factors contribute to reduced agricultural yields, affecting the rural economy and pushing up prices in urban centres.
Water Scarcity:
According to NITI Aayog's 2019 report, about 600 million Indians currently face high to extreme levels of water stress, a condition expected to intensify with a decrease in per capita water availability due to climate change.
Economic Growth and Employment:
Climate change poses significant threats to economic stability and employment. The World Bank's 2020 forecast suggests that heat-induced productivity declines could jeopardize around 34 million jobs in India by 2030.
The economic disruptions caused by extreme weather necessitate costly repairs and recovery, further depleting economic resources.
Inflationary Pressures:
The transition and physical risks associated with climate change can lead to inflationary pressures. As per the RBI's analysis using the National Institute Global Econometric Model (NIGEM), aggressive policies towards achieving Net Zero emissions could spike inflation in the short term due to increased costs of energy and commodities.
Financial Stability and Transition Risks:
Transition risks arise as economies shift towards low-carbon models. Mark Carney, former Governor of the Bank of England, captured this with the phrase "success is failure," suggesting that while essential, a too-rapid transition can destabilize financial systems. This illustrates the delicate balance needed in implementing environmental policies to ensure economic stability during the shift.
Energy Sector Strains:
As noted by the International Energy Agency, India’s energy demand is set to double by 2030, with rising temperatures intensifying the need for energy to cool environments
Challenges in Financial Services:
Climate change increases credit risks for financial institutions, as economic impacts from climate-related disasters make it harder for borrowers to repay loans, lead to higher insurance claims, and reduce profitability in the travel and hospitality sectors.
For example, banks and NBFCs in India face increased credit risks as unseasonal rains or prolonged droughts disrupt the repayment abilities of farmers and small businesses.
Infrastructure Damage:
Critical infrastructure like roads, bridges, and water systems are increasingly vulnerable to damages from climate-related events such as floods and storms.
For instance, In 2023, the Teesta III Dam in Sikkim suffered extensive damage due to a glacial lake outburst flood (GLOF) caused by heavy rains and the breach of the South Lhonak lake.
Industrial Sector Challenges:
The industrial sector faces increased operational costs and potential reductions in profitability due to stringent environmental regulations and the necessity to adapt production processes to mitigate climate risks.
For instance, in India, the textile industry faces increased operational costs and reduced profitability due to stringent environmental regulations like the Zero Liquid Discharge (ZLD) requirement, which mandates costly investments in water treatment technologies.
Fisheries Sector Disruption:
Changes in sea temperatures and shifting migratory patterns of fish due to climate change can disrupt the availability and composition of fish stocks, adversely affecting the livelihoods of communities dependent on fishing.
Increased Health-Related Expenditures:
The escalation of diseases such as malaria, dengue, and heat-related illnesses due to climate change is expected to increase health-related costs significantly. The World Health Organization (WHO) estimates that climate change could result in approximately 250,000 additional deaths per year worldwide, from causes such as malnutrition, malaria, diarrhea, and heat stress, in the period between 2030 and 2050.
INDIA’S INITIATIVES TO TACKLE CLIMATE CHANGE
Panchamrit: India’s climate action plan includes reaching 500 GW non-fossil energy capacity by 2030, sourcing 50% of energy from renewables by 2030, reducing carbon emissions by 1 billion tonnes by 2030, decreasing the carbon intensity of the economy by 45% by 2030, and achieving net zero emissions by 2070?.
Mission LiFE (Lifestyle for Environment): Launched to encourage environmentally conscious lifestyles at the individual level, promoting sustainable practices in everyday life?.
Ministry of Environment, Forest and Climate Change (MoEFCC):
Zero Defect and Zero Effect (ZED): Rates MSMEs on energy efficiency and pollution control.
International Collaborations:
India continues to play a leading role in global climate initiatives, such as the International Solar Alliance (ISA), which aims to deploy solar energy technologies globally.
WAY FORWARD:
India has undertaken numerous initiatives to combat climate change, but additional measures can enhance these efforts further:
Strengthening Climate Resilience in Agriculture: Implement advanced irrigation techniques, such as drip irrigation, and introduce drought-resistant crop varieties to improve agricultural resilience, particularly in drought-prone areas like Maharashtra. This method has already shown substantial water savings and increased crop yields, enhancing food security and farmer incomes.
Enhancing Water Management: Develop and implement comprehensive watershed management plans that incorporate modern water recycling and rainwater harvesting technologies. An example of success in this area is Gujarat’s Sujalam Sufalam Yojana, which has effectively increased groundwater levels through large-scale desilting and conservation efforts, benefiting agriculture and local communities.
Promoting Sustainable Urban Development: Accelerate the implementation of green building codes and enhance public transportation systems to reduce the urban carbon footprint. This approach encourages sustainable urban planning and development, reducing energy consumption and pollution while improving the quality of urban life.
Boosting Renewable Energy Capacity: Scale up investments in solar, wind, and other renewable energy sources. Encourage the adoption of decentralized renewable energy systems, such as rooftop solar installations , especially in rural and remote areas, to reduce dependence on fossil fuels and enhance energy security.
Improving Energy Efficiency:Expand energy efficiency programs like UJALA (Unnat Jyoti by Affordable LEDs for All) and the Perform, Achieve, and Trade (PAT) scheme to include more industries and sectors. Promote the adoption of energy-efficient appliances and practices among consumers through incentives and awareness campaigns, leading to significant reductions in energy consumption.
Strengthening Disaster Preparedness and Response: Enhance early warning systems and develop robust disaster response strategies and infrastructure. The effective management of Cyclone Fani in Odisha in 2019 serves as a model example, where early warnings and prepared coordination minimized casualties and facilitated swift rehabilitation efforts.
Advancing Climate-Smart Infrastructure: Invest in climate-resilient infrastructure such as roads, bridges, and coastal protection measures, and ensure that all infrastructure planning and development processes incorporate climate risk assessments. Projects like those in Gujarat's coastal areas are designed to mitigate the impacts of sea-level rise and storm surges, providing safer and more durable infrastructure for the community.
Promoting Sustainable Livelihoods: Support eco-tourism and sustainable forestry initiatives, like those in the Western Ghats, which provide resilient livelihoods while preserving biodiversity and training communities to adapt to environmental changes.
Debt-for-Climate Swaps : Debt-for-Climate Swaps are financial agreements where countries reduce their debt in exchange for commitments to invest in climate change projects. This mechanism helps debtor nations alleviate financial burdens while simultaneously funding environmental initiatives.
Engaging in International Collaboration:Strengthen global partnerships to share best practices, access climate finance, and actively participate in international climate negotiations for equitable and effective climate action.
Enhancing Public Awareness and Education: Conduct nationwide campaigns on climate change impacts and integrate climate education into school curriculums to foster a well-informed and proactive future generation.
PRACTICE QUESTION:
Q. " The economic impacts of climate change on India are profound and multifaceted” .Discuss. (15 marks, 250 words)
