Interrupted growth: on economic activity, climate-related events

The Hindu

3 days ago

The Index of Industrial Production (IIP), the nation's monthly barometer of goods output, revealed a 10-month low growth rate in June, at 1.5%, largely due to the sharp contraction in mining activity, by –8.7% (10.3% in June 2024), and electricity output, by –2.6% (8.6% in June 2024). The early onset of the southwest monsoon, with its erratic and uneven distribution, led to water logging in large parts of the mining belts in Odisha, Jharkhand and West Bengal, hampering a key economic activity. Ranchi's regional meteorological office has said that Jharkhand recorded 504.8 mm (against a normal of 307 mm) between June 1 and July 12 — but five districts were categorised as rain deficient. The resultant damage to the power distribution infrastructure and disruptions to supply chains may have contributed to the sluggish growth in industrial output at 3.9% in June, up from 3.5% a year ago. This in turn, is likely to have led to subdued power demand. While mining and power production collectively make up for almost a quarter (22.3%) of the IIP's weightage, the rest is apportioned for manufacturing activities. The robust growth in capital (3.5%), intermediate (5.5%) and infrastructure (7.2%) goods output, indicates that much of industrial growth continues to hinge on the government's infrastructure spends.
There has been a general reluctance, both institutionally and in public economic discourse in India, to explicitly correlate disruptions in economic activity with climate-related events, especially in official narratives such as the IIP or GDP data releases. The Ministry of Statistics and Programme Implementation and the Reserve Bank of India (RBI) tend to frame industrial and economic under-performance in terms of 'high base effects; supply chain bottlenecks; input cost fluctuations; global demand softening; and domestic consumption contraction'. Climate-related disruptions, such as in mining belts, are rarely mentioned in IIP or national accounts commentary. Economic data agencies in India have been slow to integrate climate risk frameworks into routine macroeconomic reporting, unlike institutions such as the European Central Bank or the Bank of England which have begun mapping climate risk to output and financial stability. True, climate attribution is complex: linking a specific event such as waterlogging in a coal mine to broader climate change involves scientific rigour and probabilistic modelling. Policymakers often avoid this due to fear of politicising economic data. Indeed, the RBI's Financial Stability Reports now include climate-related risks. But this has not yet filtered into production-side metrics such as the IIP. The time has come for India to make a systemic shift to integrate climate attribution to economic activity.