Winning Bizness Desk
Mumbai. Heat waves are about to hit India when we all will have dry throat, sweaty body, frequent power cuts and fear of getting scalded. So far it is okay, but when the heat wave goes on, it affects humans as well as plants and the economy. As far as the economy is concerned, there are two main factors. This will affect the growth of the economy and will certainly affect the company's balance sheet and the household budget as well. However, a key advisor to Prime Minister Narendra Modi has recently said that the economy can withhold any possible weather shock. According to Poonam Gupta, head of the National Council of Applied Economic Research, even if a heat wave hits and crops are affected, overall growth should not be affected. According to her, “Agriculture and allied activities are a small part of our GDP considering the contribution of 17%." However, the concern over the ever rising temperature cannot be brushed aside as the impact of heat waves on food inflation .This has a direct impact and threatens macroeconomic stability.
According to the India Meteorological Department, This year's February was the hottest month ever recorded in India since 1877. Recently released data by the Ministry of Statistics and Program Implementation shows that the average number of heat wave days in 2022 was the highest in a decade. India witnessed 190 heat wave days in 2022, six times more than last year. The IMD said 2022 was the fifth warmest year since 1901 and 2023 will also be unusually warm. IMD says most parts of India are likely to see above normal maximum temperatures from April to June.
Heat wave adversely affects food economy
The heat wave is going to have a profound impact on India's food economy as the shortage of commodities will lead to a rise in inflation and force the RBI to raise interest rates again which will not be an encouraging scenario for India's GDP growth. Crops will wither or fail to grow or ripen early due to heat waves. This will reduce production and may increase prices. Heat waves increase the demand for water for irrigation, which puts pressure on water resources in affected areas. Crop yields will be lower, drought, pests and diseases will increase, and soil erosion may also occur. Heat waves reduce the production of cattle feed as well as their productivity, leading to an increase in milk prices. Similarly, poultry farming and fisheries are also getting affected by rising temperatures. The Indian Institute of Horticultural Research (IIHR), Bengaluru, recently reported that this year there would be 10% to 30% loss of fruit and vegetable crops in different regions due to sudden rise in temperature. Also, the supply of vegetables may be erratic and prone to early ripening, leading to short periods of excess supply and short periods, raising concerns about food inflation.
Demand for electricity to shoot up
Amid rising temperature, there will be more use of AC and motor to extract water from under the ground which requires electricity. India may once again face power shortage. The country faced coal supply disruptions last year as record high temperatures and a deadly heat wave drove up electricity consumption unexpectedly. Notably, to ensure smooth availability of power supply, the Center has ordered India's coal-based power plants to run at full capacity for the second year in a row. India is dependent on coal to produce 70% of its electricity. Coal India's preparations come after a power crunch last summer when several parts of the country faced blackouts.
Labor productivity will also be affected
Extreme heat has an effect on labor productivity as laborers often have to work in the open. A World Bank report released in December last year said that nearly 75 per cent of India's workforce depends on heat-affected labour, which at times works in life-threatening temperatures. This means a sharp decline in labor productivity in various sectors of the economy. The report states that by 2030, 80 million people could lose jobs worldwide by heat wave, of which, India could contribute to 34 million. Therefore, if combined with the reduction in economic productivity, stress on various sectors of the economy, increase in inflation and consequent deterioration in India's macroeconomic conditions, the heat wave appears to pose a major challenge to India's GDP growth. And can derail India's dream of economic growth.
