Industrial Economist (IE): What are the key climate trends observed in India over the past few years?
TM: India’s unique geography makes it highly exposed to climate risks which appear as sustained temperature rises, irregular monsoon patterns and increase in the frequency and severity of extreme weather events. According to the World Risk Index, India is ranked third among 193 countries for disaster risk in 2023. Over 45 million hectares of land are at risk of flooding. India’s long coastline is a densely habited part, thanks to its lush soil and easy access to ports. It is very significant in terms of macroeconomics. On the other hand, global warming makes coastal plains vulnerable to flooding due to the increasing severity and frequency of extreme sea level occurrences such as tides, waves, storm surges and mean sea level rise. Furthermore, global warming threats include land loss and retreating coasts caused by coastal erosion, which will have an impact on coastal infrastructure, human settlement and industrial and agricultural activity. Coastal cities are vulnerable to cyclones, as well as frequent floods and salinisation of farms and freshwater sources. Similarly, heatwave’s intensity frequency and duration have increased thirty-fold in recent years. The current heatwave threatens food security, public health, and the country’s economic productivity.
IE: How has climate change impacted the Indian economy?
TM: India is one of the top ten economies in terms of vulnerability to climate-related catastrophes. For example, in 2019, India lost roughly USD 69 billion owing to climate-related disasters, which is in sharp contrast to the USD 79.5 billion lost between 1998 and 2017. Floods in 2019 impacted roughly 14 states, displacing over 1.8 million people and killing 1800. Overall, the severe rainfall during the monsoon season in 2019 affected around 12 million people, with an estimated economic loss of USD 10 billion. Furthermore, in recent years, the southwest monsoon rains have frequently been accompanied by considerable temporal and spatial dispersions, causing agricultural damages and hence leading to higher food inflation and volatility.
IE: Climate scenarios are expected to become more unpredictable. What measures must be taken to tackle it?
TM: A multifaceted approach is essential. We require both adaptation and mitigation options. Investing in early warning systems, preparedness measures and climate-resilient infrastructure projects can help to reduce vulnerability, loss and damage and enhance community resilience to climate-related risks. Simultaneously, addressing the primary cause of climate change, GHG emissions, through mitigation measures contribute to the battle against climate change.
IE: What is climate change’s consequence on India’s GDP growth, employment rates and poverty levels?
TM: As per IPCC reports, if global warming raises temperature by 2°C as against 1.5°C, there will be a high risk of reduction in economic growth in countries like India, Brazil and Mexico. Directly, climate change impacts agricultural productivity, a crucial sector in India’s economy, contributing around 15-20 per cent to the GDP and employing over 50 per cent of the population. Erratic weather patterns and increased frequency of droughts, floods and heatwaves adversely affect crop yields, leading to reduced agricultural output and income for farmers. This decline in agricultural productivity can reduce GDP growth as the sector contracts and rural economies suffer. Furthermore, extreme weather events can cause infrastructure damage, increasing repair and maintenance costs, diverting resources from other development projects and further slowing economic growth.
Indirectly, the economic consequences of climate change extend to employment rates and poverty levels. As agricultural productivity falls, there is a ripple effect on employment, particularly in rural areas. Reduced agricultural income can lead to lower consumption and demand for goods and services, adversely impacting non-agricultural sectors and leading to job losses across the economy. Additionally, climate-induced migration from rural to urban areas in search of better opportunities, can strain urban infrastructure and resources, exacerbating unemployment and underemployment in cities. High intensity of heatwaves is already causing misery among workers in agriculture, construction and other industries, thus reducing productivity. According to the World Bank, India will account for 34 million of the anticipated 80 million employment losses from heat stress by 2030. These job losses will disproportionately affect the poorer segments of society. Heatwaves alone might cost India 4.5 per cent of its GDP by 2030. Furthermore, if carbon emissions continue at their current rate, heatwaves might stay 25 times longer, or become more severe, by 2036-2065.
IE: Is there a value of economic loss due to climate, that can be calculated?
TM: The unpredictable rise in temperature and monsoon patterns could lead to a loss of 2.8 per cent of India’s GDP in 2030, further increase to 22 per cent, three per cent higher than the global average and depress the living standards of nearly half of its population by 2050. This loss in GDP might increase to 3-30 per cent by 2100, if adequate mitigation and adaptation measures are not considered.
IE: Which sectors are most vulnerable?
TM: Agriculture is the most vulnerable sector in terms of climate risk. Temperature anomalies in India have an impact on agricultural outputs. For example, the wheat harvest in the rabi season of 2022 was negatively impacted, resulting in lesser production. Approximately 75 per cent of India’s yearly rainfall occurs during the four months of the southwest monsoon (SWM) season, which is critical for agricultural productivity during the kharif farming season, as over half of the country’s net planted acreage remains unirrigated. Furthermore, rainfall during this season is vital for filling the country’s reservoirs, allowing for much-needed irrigation throughout the rabi farming season. As most of the excess and unseasonal rainfall events and cyclones take place during the monsoon or post-monsoon seasons, their impact on the kharif crop is greater than on the rabi crop, in terms of crop loss. Even though India has become self-sufficient in food grains, aberrations in SWM will affect food prices.
On the other hand, the increasing cyclones and sea-level rises will affect the livelihood of the coastal population. IPCC reports that by the middle of the present century, around 35 million people in India could face annual coastal flooding, with 45-50 million at risk by the end of the century. Further, the agriculture sector and fisheries would face significant adverse consequences due to rising sea level and groundwater scarcity. Studies indicate that most of India has been experiencing adverse effects of temperature on living standards, as the households most affected are dependent primarily on agriculture for their livelihood.
Climate change can increase operational costs and reduce profits in the industrial sector due to factors such as new climate-friendly regulations, reduced utilisation of old stock and relocation of production processes and activities due to climate-related losses.
IE: What additional measures should be taken at the national, regional and local levels to enhance resilience and adaptation?
TM: In addition to improving our local infrastructure and building resilience, there is a big financing gap in India, when it comes to adaptation financing. India can strengthen its sustainable financing mechanisms using new financial products such as climate-specific insurances, weather derivatives, catastrophic bonds etc., to help deal with climate related
IE: What policy changes or institutional reforms are necessary to better integrate climate considerations into economic planning and decision-making processes?
TM: First and foremost, should be to make climate change a mainstream conversation, and include it in all decision-making, including the grassroot well. This will help integrate it into all aspects of the economy such as infrastructure planning, urban planning, trade considerations,… This will help us preempt the impacts of climate change on all aspects, the extent it might go to, and subsequently plan for it. Institutional reforms can vary widely based on sector, objective etc. But some reforms important for climate adaptation are reducing inequalities within the system and promoting decentralisation. Often the most poor and vulnerable are the ones most affected by climate change, even though they had little contribution to it. Thus, it is important that their voices are heard, their opinions taken into account and they are strengthened.
For climate mitigation, the cost of carbon must be included in all the decision-making process, so that negative externalities associated with our actions in the name of development can be realised. This would help making pro-climate decisions easy.
IE: Some best practices from across the world that India could adopt?
TM: European Union has some of the most forward-looking climate legislature, in terms of sustainable finance. However, India being a developing country is at a very different position than developed nations, thus copying best practices should be done with precaution. In a country as diverse and informal, policies should be designed in such a way that they can be implemented smoothly.
IE: What are your projections for the future economic impact of climate change, if current trends continue?
TM: As per the IPCC AR6, in a business-as-usual scenario, with no new decarbonisation policies, the median temperature by end of the century would be 3.6°C. Even 1°C temperature rise (current increase in global mean temperature), have led to severe heatwaves all across the country. These heatwaves led to not only loss of life, but also, loss of productivity, health hazards, increase in energy (cooling) demand, negative impacts on biodiversity,… Based on various projections, India could lose upto 3 to 20 per cent of its GDP by 2050, with sectors such as agriculture to informal manufacturing being the most vulnerable.
