May 28, 2021 12:45:58 am
Written by Sugandha Srivastav and Tim Dobermann
The scars of a pandemic, much like war, are deep and enduring. Yet, as India galvanises an unprecedented amount of fiscal stimulus estimated at Rs 915,000 crores, the government has an opportunity to “build back better”.
Directing large sums of money for economic recovery involves a high degree of discretion: Which sectors should receive help? A guiding principle, which seems especially prescient in light of the ongoing COVID-19 wave and Cyclone Tauktae, is to put resilience at the heart of India’s “once-in-a-century” budget. This involves a re-invigorated focus on (a) healthcare and sanitation, (ii) climate resilient infrastructure in transport and power (iii) modernised agriculture and (iv) disaster risk reduction tools like advanced weather forecasting and early warning systems.
An economic recovery package must follow three simple principles: “Do no harm”, “do good” and “focus on long-term efficiency”.
The “do no harm” component asks if there are elements of India’s current economic recovery package that unconditionally support businesses that advance any form of systemic risk. Sectors like steel and white goods, which are part of the current proposal, contribute to carbon emissions. These sectors should receive conditional stimulus which requires manufacturers to become more energy efficient, meet higher quality standards, and invest in R&D to help decarbonise their operations, as a part of the T&Cs of receiving government assistance.
The “do good” component requires building an economy that is resilient to future crises. The recovery package’s R&D grant of Rs 900 crore to the biotechnology sector for the development of COVID-19 vaccines helps create a nation that is more prepared for the next pandemic. Similarly, the introduction of production-linked incentives for solar photovoltaic cells and batteries helps decarbonise the economy.
Looking forward, much more emphasis is needed on climate change adaptation. Cyclone Tauktae is the fifth-strongest cyclone on record in the Arabian Sea, according to Yale Climate Connections. It has already affected nine states, led to unprecedented levels of rainfall, and harmed crops. A glimpse at India’s future climate reveals more such concerns: Sea level rise, coastal flooding, severe droughts, scalding days, simmering nights, and an erratic monsoon. Higher temperatures are also linked to potentially new disease outbreaks. Livelihoods and lives will be damaged, be it in urban Kolkata or rural Punjab.
All these risks will not manifest at once but appear in steady, unpredictable waves. The pandemic has forced dramatic adjustments in the daily lives of Indians; so too will climate change. As a result, significant economic returns can be expected from climate-proofing the economy. Sensible investments include those in coastal defence; resilient agriculture (including flood and drought resistant seed varieties, precision irrigation and low-cost stubble removal); early warning systems; wastewater treatment, desalination, and water purification; and prevention of infectious disease. The climate crisis must not blindside India. It is time we create a “Marshall Plan” for climate adaptation.
Finally, a focus on long-term efficiency is key. India should not fall into the trap of reverse engineering short-term GDP growth rates through ill-conceived investments in infrastructure that support a high-carbon paradigm. Green technology is now cheaper, more efficient and the posterchild of global international finance. Honest and good economic policy will support sectors that are poised to grow and address the most critical problems facing society today.
In the global race towards a green transition, countries which move first – and most emphatically – may reap the biggest rewards. Ensuring India is a key manufacturer and adopter of green technologies is both economically and strategically attractive. China has already played these cards and demonstrated success by capturing the global market for solar photovoltaic cells. With policies and foresighted investments that promote efficiency, India can also serve global markets in upcoming technologies.
The opportunity of today’s recovery is preventing tomorrow’s disaster. Our intricately connected web of economic activity can collapse like a house of cards in the face of systemic risks such as the COVID-19 pandemic, the 2008 financial crisis and the increasing frequency of extreme weather events. Policymakers can prevent the worst impacts of future disasters by embedding climate change mitigation and adaptation as core pillars of the economic recovery package. The COVID-19 pandemic has shown that the cost of inaction can exceed the cost of action by several orders of magnitude. The tragic irony is that it is literally and metaphorically time for a rain-check: Will we use our once-in-a-century stimulus to build an economy with people, planet and prosperity at its heart?
Srivastav is a Dphil candidate at Oxford University and is affiliated with Smith School of Enterprise & Environment. Dobermann is a Phd candidate at London School of Economics
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