We recommend all aspirants to try an essay on the topic “Effect of Climate Change on Indian Economy”. This is an important issue.
According to estimates, production of Kharif crops in the current year is expected to decline by 2.8% because of an uneven monsoon. The possibility of such weather events is likely to increase in the future. And that means a serious challenge for a country like India where about 50% of the population directly or indirectly depends on agriculture for a livelihood.
Economic impact of climate change –
- World Economic Outlook report of the IMF notes that for the median emerging market economy, growth goes down by 0.9 percentage point in the same year because of a 1-degree Celsius increase from a temperature of 22 degrees Celsius.
- Weather does not affect the agriculture sector alone; it affects productivity in general. Research shows that productivity starts declining strongly after peaking at an average annual temperature of about 13 degrees Celsius.
- Therefore, 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.
What steps should be taken?
The necessary steps to minimize the impact of climate change will have to be taken at both the individual country level and the global level.
- In order to reduce the impact of changing weather patterns, emerging market and low-income economies will have to build significant macroeconomic resilience. The IMF, for example, notes: “The instantaneous effect of a temperature shock is slightly smaller in countries with lower public debt, higher inflows of foreign aid, and greater exchange rate flexibility.” India is relatively better off in this context, but it needs to preserve and further strengthen macroeconomic stability to be able to deal with such shocks.
- More needs to be done to enhance productivity in the agriculture sector. Financial losses can be reduced by higher penetration of insurance products.
- India can work on programmes that will help improve the quality of land and reduce the risk of climate change. In Ethiopia, for example, food and cash is provided to the poor who participate in local environmental programmes. This has resulted in reduction in soil loss and has increased the availability of water. India can perhaps use employment under the Mahatma Gandhi National Rural Employment Guarantee Act in a better way to enhance soil and water conservation.
- India also needs to 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. Example – A district cooling system is being constructed in Gujarat International Finance Tec-City.
At the Paris Agreement, the advanced countries have committed to provide financial assistance to developing countries to help cope with the impact of climate change. However, things are not moving as desired. The lack of will among industrialized economies to contain emissions is disappointing, and it could lead to consequences that go beyond the realm of macroeconomics. India would do well to prepare for the challenge.
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