Indian Agriculture Is Most Vulnerable to Physical Risks of Climate Change: CRISIL
Moneylife Digital Team 24 November 2022
Calling India one of the countries in Asia most vulnerable to the physical risks of climate change, CRISIL Ratings says the damage from climate change, especially to agriculture, is already visible. Multiplying extreme events magnify the vulnerabilities of agriculture in India and, in the short term, the Union government's climate action response should also more sharply focus on mitigating risks to the agriculture sector, it added.
 
In a report, the rating agency says, "While the government cannot control the physical climate risks to the sector, it can speed up other efficiency improvements, such as reducing crop wastage, improving irrigation, setting up warehousing facilities, and promoting research, development and introduction of weather-resilient, high yielding varieties of crops. Promoting investment in food processing and cold storage to reduce food wastage is another option that can help reduce losses."
 
According to CRISIL, India's problem is also unique, given its high reliance on agriculture for employment and output, repeated struggles with controlling food price inflation, high reliance on fossil fuel for power, high emission intensity of industrial production and limited fiscal space to react and/or respond to climate change.
 
An analysis by the United Nations (UN) intergovernmental panel on climate change (IPCC) indicates agriculture in India will come under more significant pressure from increased frequency of heatwaves, more rainfall extremes, more frequent dry spells and extreme rainfall, water scarcity, and soil degradation.
 
This year has been a wake-up call for India, as well as for others in the sub-continent and other parts of the world hit by intense heatwaves, erratic rains, floods, droughts, storms and cyclones causing wide-spread damage to life and property. 
 
In India, heatwaves pre-monsoon, patchy progress of rainfall during the monsoon, and excess rainfall post-monsoon have impacted several agricultural crops and swayed food inflation. 
  
This year, CRISIL says, the unanticipated rise in food inflation has been a concern. "Elevated global food prices amid supply shortages and input cost pressures due to the Russia-Ukraine war initially played spoilsport, but closer to home — truant weather aggravated pressure on domestic prices."
 
"Full-year agriculture growth does not face much downside as rabi prospects appear bright, thanks to good soil moisture content and healthy reservoir levels. Yet, patchy rainfall during the southwest monsoon resulted in lower kharif sowing, especially for rice and pulses, while unusually high October rains led to some crop damage, leading to higher prices of foodgrains, fruits and vegetables," it added.
 
In India, changing monsoon patterns and rising frequency of extreme weather events could largely be explained as offshoots of climate change. This highlights a bigger concern around the need to assess climate shocks and the impact on the Indian economy. 
 
Though there are learnings from other countries, which are first movers attempting to mitigate the impact of climate change, India's problem is also unique. 
 
According to CRISIL, a key risk to agriculture is the damage from unseasonal rain and heat patterns to foodgrains, vegetables and other crops.
 
"Such weather shocks have become more frequent, intense, and worryingly, remain unpredictable. For instance, October this year was one of the wettest in recent years at the all-India level. The unevenness or lack of predictability of weather conditions highlights a bigger concern about the need to assess climate shocks and the impact on the agricultural economy. This is especially important in a 46% rain-fed, agriculture-dependent country like India," the report says.
 
 
While parts of east and north-east India, including Bihar, Jharkhand, West Bengal, Manipur, Tripura and Uttar Pradesh in northwest India, received consistently poor rainfall, others in the central part, like Madhya Pradesh, Gujarat, Maharashtra and southern India, such as Tamil Nadu, Telangana, Karnataka, and Kerala had excess rainfall for the entire season.
 
For the southwest monsoon season, out of the 36 sub-divisions, only 18 received normal rainfall, with 12 receiving excess rainfall and six deficient. The chart below shows the variation in rainfall activity at the regional level.
 
 
According to CRISIL, uneven rains put pressure on agri output and keep inflation elevated. "Preliminary estimates suggest a likely hit to rice production by 6%-7%. Pulses, which saw lower acreage this year, because of some shift to oilseeds which became more lucrative, was also affected by excess rains. This has immediately impacted inflation in these two segments. Compared with a 0.4% on-month rise in overall consumer price index (CPI) food inflation during August-September, cereals and pulses saw larger increase of 2.2% and 1.3% on-month, respectively. Wheat inflation is already in double digits, thanks to the heat wave in the early part of this year."
 
Not only are rainfall patterns undergoing changes, but extreme weather events, in general, also seem to be on the rise, largely as a result of climate change, the rating agency says.
 
For instance, according to the Indian meteorological division (IMD), March this year was India's hottest in recorded history between 1901-2022. Temperatures were high across India, especially in the northwest which saw a scorching heat wave. The average maximum temperature over northwest and central India in April this year has also been the highest in 122 years.
 
Last year, India experienced five cyclones, three of which were 'severe' and higher in intensity. 
 
"It is worrying that — according to the Germanwatch Global Climate Risk Index (CRI), which is based on extreme weather events, such as storms, floods, and heatwaves in a particular year — India is one of the most vulnerable countries for the extreme weather events. Compared with 31 in 2010, India ranked 7 on CRI in 2019. In fact, India has been ranked in top 20 in almost all the years in the past three decades," the rating agency says.
 
In addition to the risk to human lives and damage to property, climate change has implications on food security as the immediate impact of climate change is on food production and its prices.
 
Agriculture — which accounts for about 15% of India's gross domestic product (GDP) and 43% of employment—is the most vulnerable to climate change. Frequent heatwaves, extreme rainfalls, water scarcity and soil degradation directly impact the agriculture output and incomes in India. Decreased output, in turn, results in weaker rural income and, consequently, lower demand. Heatwaves also reduce labour productivity, the report says.
 
According to CRISIL, climate change is primarily a fiscal challenge for the governments. "At a broader level, going beyond agriculture, the government should encourage move to cleaner technologies and clean technology industries through targeted tax incentives."
 
In addition, given its inflation-targeting mandate, the Reserve Bank of India's (RBI's) monetary policy committee (MPC) will also have to take heed of the increasing role of climate change-led weather disturbances in influencing consumer price inflation. 
 
"As inflation faces upside risks and higher volatility due to climate change, there is a greater need to maintain credible monetary policy, to keep inflation expectations under control. Policymakers not only need to work together to reduce long-term effects of climate change, but also need to respond to the short-term effects of climate change on the economy," the rating agency concludes.
Comments
VN KULKARNI
6 days ago
Bring all agricultural activities under INCOME TAX. Let there be reports of all the agricultural activities in the country.Then decide the compensation,deduct TDS ask them to file returns and issue refunds,if any. This will help us to understand the-exact loss which will be helpful to decide exactly the amount of compensation.
yerramr
1 week ago
Indian Agriculture is in transformation mode. Several startups stepped into the soil. Many a Software engineer are vying to create climate assessment apps consistent with the crop profile. Digital agriculture is making fast inroads. However, speed of investments and credit to the sector proliferated only in irrigated and semi-arid zones covering around twelve to thirteen states. India has all the types of soils and climate that existed in the world. It also grows almost every crop and fruit that is available elsewhere in the world. Exports from the sector have also increased, notwithstanding the phytosanitary restrictions in the globe. Yet, Indian farmer does not have complete independent access to the markets in his own country! Market reforms in the farm sector are thwarted by the hurried farm bills and the retreat on reforms by the government. It is time that serious thought is given to this sector which is fully federal in structure and consensus of states is imminent to move ahead with farmer-friendly and sector-benefit approaches.
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