Most underrated risk to Indian economy– climate catastrophe!

One of the first priorities of the new government in New Delhi would be to address climate crisis – one of most underrated risks to the Indian economy. Temperatures are soaring across the country (reaching a 36-year high in May 2024), nights are getting warmer, and the Indian Meteorological Department (IMD) says, heatwaves are going to be more frequent, durable, and intense.

How do they matter?

Here are a few examples:

(i) Services sector activities dipped to a five-month low in May 2024 – despite higher sales, output, and demand (HSBC India Services Business Activity index). Remember, the services sector is the Indian economy’s mainstay – contributing 63.7% to output (GVA) in FY24 (P), generating trade surplus of 4.7% of GDP in FY23 (no sectoral data for FY24) and 41.9% jobs in 2022-23 (PLFS).

(ii) Manufacturing activities dipped to a three-month low in May 2024 – despite an upbeat mood among producers and an expansion in export orders (HSBC Manufacturing PMI). Footfalls and consumption have reduced. Manufacturing has been at the centre of India’s fiscal push for decades – starting with the first industrial policy of 1948 to the PLI/DLI now. Nevertheless, manufacturing contributes very little – at 17.3% to GVA in FY24 (P) and 11.4% job share in 2022-23 (PLFS).

(iii) Agricultural production is being hit – raising the spectre of higher food inflation (wheat production likely to be lower by 6.25%, and the main seasonal fruit, mango, already hit). India is likely to import wheat after six years by removing a 40% import duty. After services, agriculture is the second mainstay of Indian economy – supporting the maximum population, 54.6% (Department of Agriculture and Farmers Welfare), and the maximum number of jobs, 45.8% in 2022-23 (PLFS), but its share of GVA (income) is abysmally low, at just 14.5% in FY24 (P).

There are other ways to look at these risks:

(iv) World Bank report of 2022 says: “Up to 75% of India’s workforce, or 380 million people, depend on heat-exposed labor…With heat-exposed work contributing to nearly half of the country’s Gross Domestic Product (GDP), the country is extremely vulnerable to job losses. By 2030, India may account for 34 million of the projected 80 million global job losses from heat stress associated productivity decline.”

(v) RBI’s May 3, 2023 "Report on Currency and Finance" estimated 'up to 4.5% of India’s GDP could be at risk by 2030 owing to lost labour hours from extreme heat and humidity conditions'. This, it said, would “depress the living standards of nearly half of its population by 2050". It also said that “India ranked high (seventh) in the list of most affected countries in terms of exposure and vulnerability to climate risk events”.

These are one part of the problem (soaring heat). The other is:

(vi) Devastating floods hit Assam towards the end of May 2024, inundating nine districts, killing scores of people, and damaging crops and properties – the magnitude of which is not difficult to gauge. Manipur and Meghalaya too are reeling under floods and landslides. Monsoon hit these states earlier than usual; it came at the end of May (along with Kerala), instead of the usual June 5, hastened by Cyclone Remal (another event being linked to climate change, which hit India and Bangladesh on May 26). More rains and cloudbursts would bring more floods and landslides as the monsoon season progresses (as happened in Himachal Pradesh, Haryana, Punjab, and Rajasthan in 2023).

The reasons for such extreme events are not unknown. Here are some sobering acts.

Depleting trees and forests

In April 2024, the Global Forest Watch, which uses real-time satellite pictures and other sources to tracks forest cover, uploaded its latest data on the loss of tree cover and forests in India and the world. About India, it shows:

· Between 2001 and 2023, India’s net loss of tree cover was 4.5 lakh hectares with a gross loss of 23.3 lakh ha and gain of 18.8 lakh ha. The loss of tree cover was “equivalent to 1.20 Gt of CO₂ emissions".

· "From 2002 to 2023, India lost 414 kha (thousand hectare) of humid primary forest, making up 18% of its total tree cover loss during the same time period” – a decrease of 4.1%. 60% of all tree cover loss between 2001 and 2023 happened in 5 states: Assam, Mizoram, Arunachal Pradesh, Nagaland and Manipur.

This loss in the northeastern states has been known for long time and generally attributed to shifting cultivation (University of Maryland's Global Land Analysis & Discovery, 2021, India State of Forest Report, 2021). However, this is not the case with massive deforestation occuring in the central tribal belt – particularly in Chhattisgarh’s dense Hasdeo Arand forests – for coal mining.

In 2009, the Ministry of Forests and Environment (MoEF) had declared Hasdeo Arand a “no-go” area. Beginning with 2011, it buckled to pressures from industry and granted concessions. The ministry soon added “Climate Change” to itself in 2014 (becoming the Ministry of Environment, Forests and Climate Change or MoEFCC). Ironically, it accelerated the diversion of forests by removing all protections, including forest rights of tribals. In March 2019, the MoEFCC allowed coal mining in 170,000 ha (1,700 sq km) of the Hasdeo Arand – of which 137 ha have reportedly been cleared of trees for the Parsa East and Kanta Basan (PEKB) coal mines.

Over and above that the Forest Conservation (Amendment) Act of 2023, passed in August 2023, removes protections for forests by: (i) reversing “dictionary meaning” to forests (“broad and all-encompassing”) the Supreme Court mandated in the Godavarman case in 1996 – to earlier “declared or notified” and “recorded” and (ii) giving wholesale exemptions from forest clearances – up to 100 km in international borders, up to 10 hectare for security-related infrastructure, and up to 5 hectares in naxal-affected areas, etc.

The change in definition is more devastating as it throws open “deemed forests” (forest patches not declared so in government records due to omission errors) for every commercial activity. The size of this “deemed forest” is 27.62% of the total forest cover recorded by the State of Forest Report (SFR) of 2021! The MoEFCC said so to a parliamentary panel in 2023: “India’s State of the Forest Report of the Forest Survey of India mentions that about 5,16,630 sq km of the forests of India are within Recorded Forest Areas (notified forest areas) while 1,97,159 sq km of forests lie outside Recorded Forest Areas”.

In response to a petition, the Supreme Court instructed the MoEFCC to go back to the Godavarman definition (1996) on February 19, 2024, and also record “deemed forests” as forests – which remains unimplemented for 28 years! This is necessary as forests are being cleared without considering environmental consequences. On August 7, 2023, the MoEFCC informed the Lok Sabha: “…17,301 projects involving 3,05,945.38 hectares of forest land have been approved for non-forest use under Forest (Conservation) Act, 1980 from 2008-09 to 2022-23”. In other words, 3,059 sq km of forests (100 ha equal to 1 sq km) have been diverted for non-forest use.

More push for coal, not less

Meanwhile, despite its push for non-fossil/renewable energy, India is pushing ahead with more coal-based power. It has declared it will export coal by 2025-26; extended coal mining contract to 2052; increased mining auctions; re-opened abandoned mines; sanctioned funds for explorations and the setting up of new coal-based power plants – exactly the opposite of its commitments to phase down coal at the UNCC (COP27 and COP28).

In fact, India is installing 80 GW additional coal-fired plants by 2032 – to take it to 283 GW. After installing 4 GW of coal power in 2023 – most in a year since 2019 – another 13.9 GW will be commissioned in 2024.

Dilution to environmental protection

Giving green clearances without due diligence to control environmental pollution is rampant. For example, one business group received green nods for three large hydel projects in the ecologically fragile Western Ghats in 2022 and 2023.

Meanwhile, all three environment protections laws – Environment Protection Act of 1986, Air (Prevention and Control of Pollution) Act of 1986, and the Water (Prevention and Control of Pollution) Act of 1974 – were diluted in August 2023 through the Jan Vishwas (Amendment) Act of 2023. Industrial pollution is now de-criminalised and government officials, rather than independent authorities and courts, will decide such cases.

In the mean time, the practice of granting ex post facto clearance to polluting industries (operating without sanction) continues, even after the NGT (2016) and Supreme Court (2020) declared it “illegal, void and inoperative” and “unsustainable in law”. The apex court stayed two such clearances in January 2024, which had been issued through new executive orders in 2021 and 2022. The petition had listed 11 mega mining and infra projects for illustration.

Supreme Court had nailed India’s problem on March 21, 2024 (Great Indian Bustard case): “Despite governmental policy and rules and regulations recognising the adverse effects of climate change and seeking to combat it, there is no single or umbrella legislation in India which relates to climate change and the attendant concerns."

The result of this lack of real effort is reflected in the Yale Center for Environmental Law & Policy’s Environmental Performance Index of 2024 (EPI). It ranks India at 176 – among 180 countries. This marks a marginal improvement from 180 (out of 180 countries) in 2022 but a massive fall from a decade ago, in 2014, when it stood at 155.

Global warming intensifying

Things are going to get worse. 2023 was the warmest year in recorded history (since 1850) – with the NASA reporting a temperature rise of 1.2°C above the average for 1951-1980.

Now, the World Meteorological Organisation (WMO) says, in its June 4, 2024 report, that one of the years "between 2024 and 2028” is “likely (86%)” to beat the 2023 temperature record.

Do you know climate crisis is man-made?

A global study published on June 5 (World Environment Day), 2024, shows that 90% global warming in 2023 was caused by human activities – the rest 10% from natural forces (solar and volcanic activity) and internal variability of the climate system (related to El Niño/La Nina events). It said: “Human-induced warming has been increasing at a rate that is unprecedented…caused by net greenhouse gas emissions and reductions in the strength of aerosol cooling.