The Indian Monsoon and the Economy: how a changing climate could turn the waltz into a danse macabre

The Indian monsoon was late by more than two weeks this year, and steadily decreasing rainfall estimates for the rest of the season have raised the specter of drought in India for the first time since 2002. In mid-June, water levels in India's 81 major reservoirs were at 10% of their usual capacity. Even after the monsoon finally arrived, the unsteady rains that fell intermittently on India's West Coast were 51% below normal for first-week rains, according to the Indian Meteorological Department.

When the monsoon failed in 2002, economic growth slumped to 4%, highlighting the direct impact of monsoon rains on the economy.  This year, the economy is once again beginning to show tremors, even early in the season. Moody's has already sounded the alert by forecasting that the delay in the monsoon would cause India's economic growth to suffer "significantly", albeit not "catastrophically". Indian shares erased gains as much as 1.1% and turned negative last Thursday, June 25, after the Indian government acknowledged that the delay will indeed affect food production this year. Predictions are being made that the delay might already have caused India's GDP growth rate this year to slip by 1 to 1.5 percentage points, and unless the monsoon demonstrates a significant revival in the next few months, GDP growth could slip as low as 5% this year, from the current 7%.

India's Chief Statistician Pronab Sen recently told media persons that the delay will affect crop output adversely. While the delay will have immediate and apparent effects in the farm business, which constitutes 18% of India's GDP, there will also be spillover effects in other sectors. Up to 70% of Indians depend on farm incomes, and 60% of India's farms depend on rains for irrigation. According to Moody's economist Sherman Chan, a slump in agricultural output will hurt the income of many businesses and households, especially the 742 million people who live in the countryside. This will in turn weigh on business investment and household consumption, thus service-related sectors may also feel a bit of the squeeze caused by the monsoon problem.

Food prices in India are already high this year, and reduced crop yields, especially for food crops, will raise prices higher still. Consumer prices paid by farm and rural workers rose 10.21% in May from a year earlier, after gaining 9.09% in the previous month. In a signal indicating how serious the situation may be, the Central Government is already stepping up preparations such as increasing the supply of drought-resistant varieties of seeds.

This is a decidedly worrying state of affairs, but even more so when one takes into account the dire predictions of how climate change will impact the Indian monsoon in coming years. While there is no evidence that climate change is the direct cause of the delay in the monsoon this year (El Nino effects are being cited as the primary reason), the impact of climate change on the Indian monsoon should still be a cause for concern, given how recent research indicates that El Nino occurrences could become more frequent and intense with global warming, as a result of more heat being trapped in the Pacific. Even divorced from El Nino effects, rising temperatures pose a significant threat to the Indian monsoon. The IPCC's fourth assessment report lays out how a rise in global average temperatures will cause more variability in the monsoon, leading initially to both an increase in precipitation in some areas, as well as a decrease in others, causing a rise in both floods and droughts. The predictions state that eventually the monsoon will bring less rain, over fewer parts of the country, with the rain concentrated in short but intense bursts. Due to more rainwater runoff, there will be a decrease in groundwater aquifers, leading to widespread water shortages for irrigation and human consumption.

Does India have to resign itself to a rise in extreme and anomalous weather events? And how difficult and expensive will it be for the country to continue adapting to the consequences of a changing climate - be it an errant monsoon, flash floods, widespread droughts, fall in agricultural productivity, higher food prices, food shortages, a rise in vector-borne diseases, higher temperature-related mortality and morbidity etc? Perhaps, spurred by the economic impact from the vagaries of the Monsoon this year, policymakers in India will not only assess all adaptation options, but will take a fresh look at nationally appropriate mitigation actions too, while there is still time.