POTENTIAL IMPACT ON EL NIÑO ON INDIAN SECTORS IN 2023
Friday, Mar 3, 2023
El Niño is a weather phenomenon that occurs in the Pacific Ocean and has ripple effects across the globe. It affects India by disrupting the monsoon, which can lead to drought and reduced agricultural output. Agriculture contributes to roughly 20% of India’s GDP, and 40-60% of India’s cultivated land depends on the monsoons. The two main crop seasons in India are kharif and rabi, and both are impacted by El Niño. The reduced output of crops can also lead to reduced rural incomes, affecting discretionary spending and sales of consumer goods. El Niño can also put pressure on India’s electricity grid, leading to power shortages and inflation. However, studies show that only around 30% of the monsoon vagaries in India are explained by ENSO, and other factors such as the Indian Ocean Dipole also have a bearing on the rains. Thus, while El Niño is a cause for concern, it is not the only factor that determines the monsoons in India.
Source: Sky Met Weather
Anyway, we’re not certain yet that 2023 will indeed be the year of El Niño. The Institute of Climate Change Studies (ICCD) says that it’ll be a drought-like year. But the India Meteorological Department (IMD) says that we’ll only have a clear picture by April.
If you’re expecting this past month’s electricity bill to burn a hole through your pockets thanks to all the air conditioning you used, you’re not alone. Throughout February, we saw record-breaking temperatures in several Indian cities, while most states, especially in the Northwest and Central parts, witnessed daytime mercury levels easily breaching the normal by 5-10°C.
But to subjugate any hopes of having a serene and beautiful summer, the El Nino weather phenomenon is also likely to bring a hotter summer. El Nino and La Nina are climate patterns in the Pacific ocean that influence climate conditions worldwide. While La Nina benefits India, the El Nino creates warmer winters, dryer and hotter summers, and a deficient monsoon.
And NOAA has predicted a re-emergence of El Nino with a high probability of 55-60% in June-December 2023 — the highest in many years.
However, the extreme heat accompanying this weather phenomenon won’t just mean having to deal with sweat or dehydration. It would also have more far-reaching consequences on our economy. Let’s see how!
The return of El Nino conditions in India is a cause for concern for the economy, with potentially far-reaching effects on several sectors. One of the most significant impacts could be on the food sector. The Finance Ministry’s monthly economic review warns that deficient monsoonal rains resulting from El Nino conditions could lead to lower agricultural output and higher prices, potentially leading to food inflation and a fall in rural incomes.
The recent rise in temperatures threatens Rabi crop yields, especially for wheat and mustard, and if the El Nino reduces rainfall, it could impact Kharif crops as well, further worsening the situation. Additionally, India lacks a cold chain infrastructure, so the extreme heat could cause significant losses during the transport of fresh foods. Crisil, a research agency, has also predicted that cereal prices will remain high in the next fiscal year.
Source: Business Insider
The power sector is also likely to be impacted by the return of El Nino. Higher temperatures will mean higher usage of electrical appliances like air conditioners and refrigerators, resulting in increased electricity demand. Demand for electricity peaked at 211 gigawatts in January, and experts predict an increase in electricity demand by 20-30% compared to the previous year, which could lead to an electricity shortage across the country.
The impact of El Nino on labour and GDP could be significant. According to a World Bank report, nearly 75% of India’s workforce relies on heat-exposed labour, meaning that a rise in temperatures could lead to a significant dip in labour productivity. The report also predicts that India may account for 34 million of the projected 80 million global job losses from heat-stress-associated productivity decline by 2030. The extreme summer could also mean a loss in daylight hours, which could further hurt India’s already troubled GDP, as around 50% of it is dependent on heat-exposed work like agriculture, mining, and construction.
The emergence of El Nino is not good news for India’s economy, which is already struggling to recover from various domestic and global challenges. As Sabnavis, the chief economist of Bank of Baroda, warns, even a drop of 1 million tonnes in wheat production could have a ratcheting effect on inflation, affecting farm income and, hence, rural spending. The Ministry of Agriculture has projected a record wheat production of 112.18 million tonnes in the 2023-24 crop year, but rising temperatures pose a significant threat.
One potential positive effect of El Niño on the infrastructure sector in India is increased water availability. During El Niño, the southern parts of India typically receive above-average rainfall, which can help to alleviate water shortages and improve water availability for infrastructure projects, such as hydropower projects and irrigation systems. This can in turn help to increase agricultural productivity, which is an important component of the Indian economy.
Additionally, El Niño can lead to reduced flooding and rainfall in some regions of India, making the working conditions much more suitable for infrastructure develeopment. For example, during the 2015-2016 El Niño event, the state of Tamil Nadu experienced below-average rainfall, which helped to reduce flooding and related infrastructure damage. This can help to reduce the need for costly infrastructure repairs and can free up resources for other projects.
However, it’s important to note that El Niño can also have negative effects on infrastructure in other regions of India. For example, El Niño can lead to reduced monsoon rainfall in the northern parts of India, which can lead to drought conditions and negatively impact infrastructure projects such as irrigation systems and hydroelectric power generation. Additionally, El Niño can increase the risk of extreme weather events such as heat waves, which can lead to power outages and infrastructure damage.
In conclusion, the return of El Nino conditions in India could have severe economic consequences, impacting the food and power sectors, labour productivity, and GDP growth. As the Finance Ministry warns, if recent forecasts come true, the country could see lower agricultural output and higher inflation, further adding to the country’s economic challenges. It is crucial for policymakers and stakeholders to closely monitor the situation and take proactive steps to mitigate the potential negative impacts.
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