Climate Change : Impact on Indian Economy

  • World Economic Outlook of the IMF, highlights the damaging macroeconomic impact of weather shocks, particularly for low-income countries.
  • It notes that for the median emerging market economy, growth goes down by 0.9 percentage point because of a 1-degree Celsius increase from a temperature of 22 degrees Celsius
  • Climate change is serious challenge for India where about 50% of the population directly or indirectly depends on agriculture for a livelihood
Consequences of climate change:
  • Productivity will starts declining strongly
  • Countries located in areas with higher temperature will face a disproportionate impact of global warming.
  • Loss of output and lower productivity also affects capital formation, which has a bearing on medium- to long-term growth prospects.
Present scenario:
  • Consensus was attained under the Paris Agreement to contain the rise in global temperature to below 2 degrees Celsius from the pre industrial levels
  • But now Trump administration in the US is not keen on continuing with the Paris Agreement.
  • It is being reported that advanced economies may not meet their commitment of reducing emissions
  • The lack of will among industrialized economies to contain emissions, could lead to consequences that go beyond the realm of macroeconomics.
Necessary steps that needs to be taken:
  • Emerging market and low-income economies have to build significant macroeconomic resilience.
  • The IMF notes that right policies and institutions in place may help attenuate the effects of temperature shocks, to some extent.
Way forwards:
  • Strengthen macroeconomic stability to be able to deal with such shocks.
  • Work on programmes that will help improve the quality of land and reduce the risk of climate change.
    • In Ethiopia, food and cash is provided to the poor who participate in local environmental programmes. (Use this as a case study in Answers)
    • This has resulted in reduction in soil loss and has increased the availability of water
  • India can use employment under the MGNREGA in a better way to enhance soil and water conservation.
  • Strengthen its overall capability by investing in and adopting technology as the impact of climate change is not limited to agriculture
  • For instance, better use of technology can reduce energy consumption for air conditioning. A district cooling system is being constructed in Gujarat International Finance Tec-City.
  • It can be adopted in other cities as well.

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