We are almost through five months in the current financial year (2019-20) and discussions on the slowdown of growth of the Indian economy do not cease, with every new economic indicator providing a tainted view. From achieving the tag of the “fastest growing economy” in the exact corresponding quarter a year ago (Q1-FY19: 8.2%), India is now undergoing a period of “growth recession” – growth has slumped to 5% in Q1-FY20, and is at a 6-year low.
High frequency indicators and the corporate performance of listed companies also paint a gloomy picture. The consumption cylinder of India’s domestic economic growth has lost its pace while the investment activity (both private and government) is gasping due to fund crunch.
Moreover, weaknesses in the external surroundings are putting pressure on our exports as well. Global economic indicators also do not assure a sanguine position and outlook. IMF’s World Economic Outlook has continued to revise its forecast of global growth downwards. In July 2019, it forecasted GDP growth to be sluggish at 3.2% in 2019, 0.4% lower than 2018. The Economist’s weekly update (for the week ended 6thSeptember) on gross domestic product (year-on-year GDP growth) shows that 23 out of the 44 countries have recorded its recent growth numbers less than 2%.
Additionally, 11 countries have their GDP numbers estimated between 2-3%. In recent times, the temporary inversion in the US yield curve has spooked investors who believe this to be an indicator of foreseeable recessionary concerns. The underlying rationale revolves around the trade war between the two largest economies of the world, USA and China. Also, recent idiosyncratic economic and geo-political concerns in Argentina, Hong Kong and United Kingdom (thanks to Brexit) have frightened investors and driven them to more safe-haven assets.
On one hand, domestic analysts are assessing the nature of India’s slowdown i.e. whether it is of a structural or cyclical nature and immediate policy responses, both fiscal and monetary. On the other hand, global macro analysts are delving on the revival of the global economy in the light of renewed developments on the trade front. However, amidst the economic slowdown, there is an imminent and indispensable challenge of an “environmental meltdown” which needs some immediate attention, both at the level of individual governments as well as of international, multilateral institutions.
Numerous recent instances have accentuated the fury of nature, making one realise that the Earth is blatantly injured and, if not handled with care, could be pushed onto a ventilator. Prior to the commencement of monsoons in India, meteorological predictions focused on El Nino factors which would weaken monsoon throughout the country. However, the situation turned out to be exactly opposite with floods destroying infrastructure and severely affecting the geographical landscape of the country.
Monsoon continues to ravage India with at least six states, namely Gujarat, Kerala, Karnataka, Maharashtra, Uttarakhand and Himachal Pradesh reporting floods. The issue of climate change has become palpable and has not only led to a rise in average temperatures across India but also disrupted rainfall patterns and higher frequency of extreme events, which has further led to losses of human lives, infrastructure and biodiversity.
Apart from the fury of the nature, India is also facing one of its most serious water crises. The Composite Water Management Index (CWMI) report released by NITI Aayog in 2018 highlighted 21 major Indian cities on the verge of reaching zero groundwater levels by 2020. New Delhi and Mumbai have fallen in the Global Liveability Index for 2019 derived by the Economist Intelligence Unit, thanks to, inter alia, worsening air quality.An article in Business Standard also reported that nearly 30% of India’s land area has been degraded by desertification, over-cultivation, soil erosion and depletion of wetlands.
India is not the only nation facing environmental challenges. The recent catastrophic disaster of forest fires in the Amazon rainforest – the world’s largest, covering 40% of South America and producing about 20% of earth’s oxygen – has woken up the globe to the dire realisation that it’s high time to bring about some change.
The World Economic Forum’s Report on Global Risks, 2019 highlighted that 50% of the top 10 risks, as well as the top three risks, in terms of likelihood, are “environmental”.
Natural disasters are the 3rd highest risk in terms of likelihood and 5th in terms of impact. Also, “failure of climate change mitigation and adaptation” is ranked 2nd in both likelihood and impact.
The work of 2018 Nobel laureate in Economics, Dr William Nordhaus, focuses on interaction between economic activities in the global economy and its ramifications on climate change. This needs urgent implementation for a sustainable future. While the tone of policy change for a more sustainable growth must be set at the top-institutional level, policy frameworks will be better implemented not only with a decentralised approach, but also through attitudinal and behavioural change among individuals.
Lionel Robbins’ definition of economics, that “Economics is a science which studies human behaviour as a relationship between ends and scarce means which alternative uses” is felicitous in the current scenario. To meet ends, policy makers are going full throttle on averting an economic slowdown, but the alarming concerns about limited natural resources and environmental challenges of climate change and degradation are falling on deaf ears.
Both domestically and globally, economic slowdown is certainly a challenge. However, the current “environmental meltdown” holds scarier prospects for the present and future generations. Simply focusing on fast-paced economic growth and addressing only the current economic slowdown without addressing the environmental concerns is, clearly, like fighting a losing battle. It is high time to also turn the focus towards more sustainable economic growth!
The views and opinions expressed in the article are those of the authors and do not necessarily reflect the official policy or position of The Tilak Chronicle and TTC Media Pvt Ltd.