Climate Change One Of Biggest Downside Risk To India's Outlook, Says IMF's Gita Gopinath
"The costs of the climate disasters from 1980 has been around half a percentage point of the GDP per year," Gopinath said
In India, the outlook that the International Monetary Fund sees is fairly balanced, but one of the biggest downside risks is climate change, Deputy Managing Director Gita Gopinath said.
The risk is already evident in terms of the volatility of rainfalls and their implication on harvest and rural income, Gopinath said in an interview with NDTV.
The IMF has observed Asia as a region as a whole. The increase in temperature is higher than the average. For India, if one looks at the period from 1950 to 2018, the temperature has gone up by half a degree centigrade, which has real consequences.
"The costs of the climate disasters, from 1980 onwards, have been around half a percentage point of the GDP per year," Gopinath said. "Our expectation is that over the next decade the cost will be 0.3%. This is as serious as the trend that the world faces."
Last month, the IMF lifted India's GDP growth projection to 7% for fiscal 2025 in its latest outlook, citing improved prospects for private consumption, particularly in rural areas. In its April review, the agency had projected 6.8% growth for the year. The multinational lender also retained the country's fiscal 2026 growth outlook at 6.5%.
India is also looking to grow and increase its per capita income. So, with subsidised renewable energy, an excise on coal energy, and carbon points scheme, if the country does this combined package, it will be able to achieve the transition required without compromising growth too much, Gopinath said.
There is a requirement for huge investment to shift from fossil fuel energy to green energy, Gopinath said. The majority of it has to come from the private sector, as it's not possible for the public sector to do so, she said. However, the government can help direct private investments towards climate-related goals.
"Therefore, having the right climate policies in place to be able to signal the private sector about the direction and also ensure that public infrastructure goes along with it will help," she said.
India has done well in delivering headline numbers for growth and is the fastest-growing major economy in the world. However, it's story is a little different. "In the last decade, the growth has averaged around 6.6%, but the employment growth has been lower than 2%," she said.
India's growth is much more capital-intensive, which means the country has seen improvements in productivity but much less in hiring workers.
To change that, in the near term, India can improve the ease of doing business. It's seen in Gujarat and Tamil Nadu, Gopinath said.
For the labour market, India can implement labour market codes. Removing trade restrictions and investing in public infrastructure will also support India in increasing jobs.
To make it a long-term growth story, investment should be made in human capital and the skilling of workers. India's workforce has fewer years of education compared to other peer nations, Gopinath said.
The IMF sees less impact on India's workforce due to artificial intelligence growth-related threats, she added.
