Why in news?
In an analytical chapter released ahead of the World Economic Outlook, IMF has highlighted the damaging macroeconomic impact of weather shocks.
What are the highlights?
- It emphasizes that adverse weather events are particularly very impactful for the low-income countries.
- 1 °C increase from a temperature of 22degree Celsius reduces the growth of median emerging market economy by 0.9% in a year.
- Its impact on the median low-income developing country is even higher.
- The growth doesn’t recover quickly after a weather shock and takes evens decade to fully recover.
- Countries located in areas with higher temperature are highly vulnerable to the impact of global warming.
- The resultant loss of output and lower productivity also affects capital formation.
- The overall impact is a considerable bearing on the medium- to long-term growth prospects of the country.
What makes India more vulnerable?
- India, being a tropical country, is more susceptible to changes in temperature.
- Also, in India, about 50% of the population directly or indirectly depends on agriculture for a livelihood.
- The existent distress in the farm sector and the state governments' response with loan waivers have already strained their fiscal condition.
- Furthermore, the production of kharif crops is expected to decline.
- The possibility of adverse weather events is likely to increase in the future posing a greater challenge.
- The impact of climate change in agriculture is thus expected to reverberate in other sectors of the economy and affect the overall growth prospects.
What should be done?
- India- India, which is considerably better, still has to strengthen its macroeconomic stability to deal with temperature shocks.
- India has considerably reduced its dependence on the monsoon as evident from avoiding a runaway inflation even after two successive years of drought.
- However, more needs to be done to enhance productivity in the agriculture sector.
- India can work on programmes that will help improve the quality of land and reduce the risk of climate change. Ex: Use employment under the MGNREGA to enhance soil and water conservation.
- India also needs to strengthen its overall capability by investing in and adopting new technology.
- Global - Emerging market and low-income economies will have to build significant macroeconomic resilience so as to reduce the impact.
- Right policies and institutions in place may help attenuate the effects of temperature shocks, to some extent.
- In all, it is essential for the countries to realize that steps to minimize the impact of climate change will have to be taken both at individual country and global levels.
Source: Livemint
