India's catch-22

How to balance adapting to extreme temperatures, slowing the growth in emissions, while also alleviating poverty

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It’s been a momentous week in India where incumbent prime minister Narendra Modi won a third term in office, but his party, the BJP, fell short of maintaining its parliamentary majority. The election pollsters, much of the voting public, and the financial markets were clearly taken by surprise at the unexpectedly slim margin of victory. The risk is that as the BJP get bogged down in coalition politics, the speed at which the economy is reformed will naturally begin to slow.

Capital Economics for one believe that Modi is still in a strong position to introduce reforms and maintain a strong economic growth rate (India’s GDP grew 8.2% in 2023-24, up from 7% in 2022-23), “The next Modi administration still has enough of a mandate to enact reforms that will keep potential growth at 6-7%. That would fall short of the double-digit growth rates that the very best-performing EM economies have managed to sustain. But growth of 6-7% would nevertheless still place India among the top third of performers at its stage of development.”

India needs to maintain a strong rate of economic growth. Last year it became the most populous country in the world, overtaking China, and the only way to drag hundreds of millions of people out of poverty is to grow the economy, and ensure as broad a share of the population as possible are able to share in that prosperity. That growth comes at a cost however. India is at a much earlier state of development than China, and the likelihood is that energy consumption and hence emissions have significant room to grow.

In contrast to India, there are encouraging signs emerging that China’s greenhouse gas (GHG) emissions at least may have now peaked. China’s emissions from fossil fuels and cement production finally dropped in March (down 3%), ending a 14-month consecutive increase, with wind and solar generation reportedly meeting 90% of the country’s power demand growth in March. If the trend towards lower emissions in China is confirmed over the rest of the year, global attention will begin to shift towards India, and the pressure on the government to reform the economy towards a low-carbon future will grow.¹

The urgency with which to act is likely to come from within too. The staggered, six-week long election was marred by extreme high temperatures and gave a snapshot of what could become a more common occurrence. More than 37 cities in parts of northern and central India have been sweltering under temperatures in excess of 45°C (113°F). Average temperatures in the capital New Delhi have been some 15% above the long-term average since the start of April.

India is the seventh most climate-vulnerable country with nine of its states among the top 50 most vulnerable regions globally, increasing the risk of flooding, disease, and crop failure. As the country’s leaders worry about how to maintain a strong rate of economic development, extreme heat should also be a concern due to its adverse impact on human productivity, risk of power outages, etc.

Whatever happens, mitigating the risk of climate change and adapting to warmer and more volatile weather conditions is likely to become a more pressing issue for the next government to address. Lets dive in and see what the trends say about the challenges facing India as it seeks to mitigate climate risk, while also supporting economic development.