Heatwaves aheadA worry not just for economists but politicians as well

By Koustav DasThe scorching heatwaves that haunted India for a long period in 2022 are back. The India Meteorological Department (IMD) has forecast very hot days in the coming days and weeks while issuing heatwave warnings for several parts of the country. These are developments that will be closely watched not just by economists, but by politicians as well.

India is building up to a high-stakes general election year. And, like in every election, the state of the economy will be a top focus area for all politicians – whether from the ruling party or the opposition – as they gear up to campaign for the 2024 polls.

Longer periods of heatwaves during the summer months of this year could have a negative impact on key sectors that contribute to economic growth – a development that could hurt sentiments ahead of the crucial Lok Sabha elections next year.

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But in what ways do heatwaves exactly impact the economy and, by extension, the politics of the country? Let us understand that.

IMPACT OF HEATWAVES OVER THE YEARS

Over the past few years, heatwave conditions in India have gotten worse. The situation was particularly scary last year when the country experienced twice as many heatwave days as compared to the same period in 2012.

The average number of heatwave days rose to a decadal high in 2022, as per data released by the Ministry of Statistics and Programme Implementation.

The rising mercury level has not only made summer months unbearable for Indian citizens, but it has also taken a big toll on economic growth over the years.

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LABOUR LOSS

A 2022 report, compiled by an international partnership of organizations, stated that the country suffered an income loss of USD 159 billion in the service, manufacturing, agriculture, and construction sectors due to extreme heat in 2021.

Meanwhile, a World Bank report indicates that the country will suffer a GDP loss of 2.5 per cent to 4.5 per cent by 2030 from only lost labour hours due to extreme heat and humidity conditions. By 2050, climate change-related impact is projected to reduce agricultural yields in India by up to 25 per cent.

It also indicated that 40 per cent of India’s GDP is dependent on heat-exposed work, and in just seven years, it could lead to 3.4 crore job losses.

And this is just the impact of heatwaves on labour force productivity. Soaring temperatures have an equally devastating impact on crucial agriculture, which could lead to prolonged periods of high inflation.

CROP DAMAGE AND RISING INFLATION

The farm and agriculture sectors, which contribute to 14 per cent of India’s GDP, play a vital role in balancing growth. More than half of the country’s population is dependent on it for their livelihoods.

A 2022 report prepared by the Indian Council of Agricultural Research indicated that the scorching heatwave impacted crops, fruits, vegetables and animals in the nine states, including agriculture-heavy states like Punjab, Haryana, Uttar Pradesh and Maharashtra.

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In fact, the heatwave conditions also impacted milk production as body temperatures of livestock and milch animals increased by 0.5 to 3.5 degrees Celsius. Milk yields were reduced by as much as 15 per cent.

This led to a sharp rise in inflation across the country, and it took months of efforts by the government to bring the situation under control.

Farm production and income are crucial for India, and more so in election years.

MOUNTING PRESSURES

The situation could get far worse this year if the weather department’s prediction of a longer spell of heatwave is accurate.

At a time when the global economy is facing a slowdown and inflation is rising across the globe, a longer duration of heatwaves could mount additional pressure on India’s economy.

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Radhika Rao, senior economist at DBS Bank, said in a recent interview that farm sector outputs could be affected if weather forecasts are accurate. Crop production has already been impacted in parts of the country and the situation could worsen if there is no respite from the heatwave conditions.

Many essential food items, including grains, pulses and cereals, are in tight supply and the prolonged heatwave could put further pressure on the government to support farmers, according to economists.

The government has already acknowledged that there are risks to growth and prices if El Nino conditions prevail.

India’s Chief Economic Adviser V Anantha Nageswaran stressed the need to be ready with both supply side and monetary policy measures if El Nino disturbs the monsoon season. The RBI in its past two policy reviews said it is aware of the risks from adverse weather events.

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OTHER RISK FACTORS

Prolonged heatwave conditions will also lead to increased power demand, which can put pressure on the government to import more energy. This could have a direct impact on fiscal expenditure. It may be noted that rising temperatures could increase energy demand in India by up to 50 per cent by 2030.

Low-income households, who spend a larger proportion of their income on energy, could bear the brunt of these rising costs.

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In addition to agriculture and energy, rising temperatures can also impact public health. In most rural parts, the healthcare system is not prepared to deal with the health impacts of rising temperatures, with limited access to air conditioning during the peak summer months.

Infrastructure, such as roads and bridges, can also be affected by rising temperatures, which can lead to damage and deterioration, leading to higher repair costs and disruptions in transportation.

With the 2024 general elections approaching, the government will be hoping for a short spell of heatwaves, but will also need to assess and address the impact of rising temperatures on the economy, particularly on vulnerable populations.