Climate Change: A Roadblock to Economic Growth | 27 Aug 2022

There is a mounting global consensus that climate change is putting a stress on the growth trajectory of nations worldwide, with evident economic, social and environmental implications.

According to the World Economic Forum’s Global Risks Report 2020, the top 5 risks over the coming decade, in terms of likelihood, are all Climate-related including human-made environmental disasters, climate action failure, natural disasters, biodiversity loss and extreme weather.

The Nobel Prize for Economics in 2018 (William D. Nordhaus and Paul Romer) was awarded for integrating climate change into long-term macroeconomic analysis.

While the world is grappling with the challenges posed by climate change, developing economies like India are particularly vulnerable. Thus, climate risk as a material aspect is going to play a critical role in charting out national-level policies, business strategies and reorientation of finance in an emerging economy like India.

How Climate Change is Relevant for Indian Economy?

• The climate of India is quite diversified in nature, from the Himalayan crown to the flat beaches, a significant transition in climate is visible.
  • The climate varies from the freezing temperatures of the Himalayan Mountains to the tropical climatic conditions of Southern India.
  • The North-Eastern states received the maximum rainfall while the North-Western states dried of water make up the arid deserts of Thar and Great Indian Desert.
• Such a vastness of climatic conditions has always benefited India. India has one of the highest densities of economic activity in the world, and a large section of population rely on the natural resource base for their livelihoods, with a high dependence on rainfall.
• Climate change can make weather patterns less predictable. These unforeseen weather patterns can make it difficult to maintain and grow crops In an agricultural economy like India where rainfall is so vital, climate change has an immediate impact on the Indian economy.

What are the Impacts of Climate Change on the Indian Economy?

• Lower Crop Yield: Climate change can make weather patterns less predictable. Uncertainties about monsoonal changes affect farmers' choices about which crops to plant and the timing of planting, consequently reducing productivity.
  • In addition, earlier seasonal snowmelt and depleting glaciers will reduce river flow needed for irrigation.
• Impact on Livestock: India has the largest livestock population in the world, with animals used as milk producers, manure and seeding and as household capital, particularly in landless households.
  • Heat stress reduces feed and fodder and increases conditions favourable to disease.
• Reduced Labour Workforce: Workers' productivity tends to be lower on days with extreme heat which leads to lower industrial yields, leading to decreased exports, and resulting in lower national income and indirectly affecting world trade.
  • Climate change reduces cognitive performance and decreases work hours in sectors that require heavy outdoor activity like construction.
• Energy Crisis: According to the The International Energy Agency (IEA), India’s primary energy demand will double by 2030.
  • Energy and climate share a distinctive relationship such that rising temperature demand a surge in energy usage to assist the process of mitigating the heat effects.
  • Also, the rising energy demands often clash with climate-change policies.
• Impact on Infrastructure: A good and sound infrastructure contributes a great deal to the economy of a nation. Increased extremes of natural calamity as an outcome of climate change have deeply affected the infrastructure.
  • For instance, India spent 3 billion dollars of economic damage caused by floods in the last decade which is 10% of the global economic loss.
  • In 2020, cyclone Amphan distressed around 13 million people in India.
• Impact on Drainage System: India withdraws 34 percent of its available water annually with Indo-Gangetic Plain as the “breadbasket”. Increasing temperatures and increased seasonal variability cause Himalayan glaciers to melt more and more quickly.
  • If the rate increases, glacial lakes burst out of their natural bounds and flooding is likely in river valleys fed by these glaciers, followed by diminished flows, resulting in water scarcity.
• Exacerbation of Inequality: Adaptive capacity in India varies by state, geographical region, and socioeconomic status. Families with low income are more vulnerable to climate change-related economic losses, as they are directly impacted by rising cereal prices and declining agricultural wages.
  • Thus, for the welfare of those who have limited means to adapt to climate change can result in a tightened budget and low economic growth.

What Should be the Way Forward?

• Mitigation:
  • Towards Nature-Based-Solutions: The development of clean and green energy can help divert the burden of fossil fuels and lower air pollution.
    • Developing new transit systems and extending the existing ones can also result in a boom in employment.
    • The Nationally Determined Contribution (NDC) report of India aims at 40% of energy generation from clean energy by 2030.
• Environment-Friendly Policies: Economy and Environment go hand in hand. A planned approach to development which ensures uncompromised growth prospects especially for the rural economy in India is needed to address climate change challenges effectively.
  • Climate Change also presents an opportunity to adopt a cautious yet sustainable approach to development.
• Forests and Wetland Conservation: Forests are known for regulating rainfall and temperature. Conservation and enhancement of forests and wetlands will support agricultural productivity, sequester CO₂ emissions, and enhance resilience to environmental shocks as Frontline Warriors.
• Proper Waste Management: The mismanagement of waste adds to climate change by adding a variety of pollutants to the atmosphere.
  • The development of waste-selective management plants like waste gasification will tackle this problem.
  • Building the infrastructure of these plants and future maintenance will open new employment opportunities for both skilled and unskilled labourers.
• Adaptation: Planned adaptation assumes the importance in building adaptive capacity.
  • Passive Cooling Technology: For residential and commercial buildings, passive cooling technology offers a viable alternative to reduce urban heat islands.
    • The Intergovernmental Panel on Climate Change (IPCC) report cites ancient Indian building designs that utilised this technology, which could be used in modern facilities.
  • Better Farming Practices: Crop diversification, irrigation-based farming, which reduces dependence on rainfall, and other practices can be considered to address climate change challenges.
  • Disaster Resilient Infrastructure: It includes development of disaster resilient infrastructure through shelter houses, coastal embankments, and the construction of flood-resistant buildings and roads.
    • It is also important to develop more accurate and timely weather forecasts and early warning systems.