Climate change effects in India will be severe, but not without recourse

In India, increasing extremities in temperature, rising sea levels and disruptions to rainfall patterns are adversely affecting agricultural livelihoods as well as displacing the country’s coastal populations.

However, India’s long-term climate change policy, which focuses on resource efficiency, energy conservation and promotion of renewable energy, can create opportunities for businesses.

  • According to the Indian government, based on data for the period 1901-2000, the surface air temperature of India is warming at a rate of 0.4°C per 100 years while the sea level is rising 10-25 cm per 100 years. In India, 2009 was the warmest year on record while March 2010 was the second hottest March since 1900;
  • According to a 2004 study by the Indian government, during the last century rainfall increased approximately 10.0-20.0% along the west coast, the north and north-west, while there was a 6.0-8.0% decrease in rainfall in the east and north-east of India;
  • Climate change effects – including erosion, floods and droughts, and increasing salinisation – are of great concerns to India where 5.2% of the employed population worked in agriculture, hunting, forestry and fishing and the sector contributed 17.7% of GDP in 2009.
India’s economic sectors as a % of GDP: 2009
% of GDP

Source: Euromonitor International from national statistics and the IMF.

Implications

Long-term climate change effects are posing significant challenges to India’s economy and population:

  • Disruptions to rainfall patterns have caused fluctuations in the growth rates of the agriculture, hunting, forestry and fishing sector. In 2009, a severe draught damaged crops and caused real annual growth in agriculture, hunting, forestry and fishing to slow to 1.5% (from 5.5% in the previous year). In the same year, as a result of food price hikes, annual inflation reached 10.9% (compared to 8.3% in 2008), negatively affecting consumer spending and overall economic growth;
Annual real growth in agriculture, hunting, forestry and fishing in India: 1990-2009
Annual % change
Source: Euromonitor International from national statistics.
  • Unemployment can rise as agricultural livelihoods are harmed by rising temperatures and inadequate rainfalls. India’s unemployment rate in the formal sector alone was 8.8% in 2009, up from 8.6% in 2008. Actual unemployment will be much higher when factoring in the informal sector in both urban and rural areas;
  • A one-metre sea level rise is expected to displace 7.1 million people in India. The country’s densely-populated coastal zone will feel the greatest impact. Three of India’s largest cities – Mumbai, Kolkata and Chennai – are located in the coastal region. Population displacement and infrastructure damage can harm the business environment as well as adding to India’s existing poverty problems, increasing the risks of social unrest.

India’s long-term climate change policy focuses on resource efficiency and the promotion of renewable energy. This can create opportunities for businesses:

  • India is an active participant in the Clean Development Mechanism (CDM) established by the Kyoto Protocol. (The CDM allows industrialised nations to invest in emission cutting projects in developing countries as an alternative to more expensive emission reduction in their own countries.) More than any other country, India has about a third of all global CDM-registered projects, many of which are in renewable energy;
  • In March 2010, HSBC bank agreed to finance energy efficient projects accredited by India’s Bureau of Energy Efficiency (BEE). During 2010-2011, 1,200 projects are expected to be implemented under the new HSBC-BEE agreement;
  • Investment projects in energy efficiency and renewable energy will generate jobs and help reduce unemployment in India. In the long term, they will help cut costs for businesses through energy savings whilst also contribute to mitigating negative climate change effects.

Prospects

  • In April 2010, India’s Meteorological Department predicted a nearly normal monsoon for the 2010 summer. Good monsoon rains will ease pressure on the Reserve Bank of India to further raise interest rates. In April 2010, in an effort to curb inflation, the central bank raised the repo rate – the rate at which the central bank lends to commercial banks –to 5.25% from 5.00% and the reverse repo – the rate it pays to banks for deposits – to 3.75% from 3.50%;
  • In January 2010, India pledged to reduce its carbon intensity – the amount of carbon dioxide emitted per unit of economic activity – by 20.0-25.0% by 2020 compared to 2005 levels. As a step towards this goal, the government is expected to introduce mandatory fuel efficiency standards in 2011, enforce green building codes for greater energy efficiency and deploy cleaner technology in coal-fired power plants.