Losses caused to India by extreme weather events more than doubled in the 10 years to 2017 from the previous decade (1998-2007), with the farm sector bearing the brunt, according to a new report published by Action on Climate Today (ACT), a UK-based initiative that works with South Asian governments to build resilience against climate change.
The report, titled ‘Assessing India’s Mounting Climate Losses to Financial Institutions’,published on January 18, warned that the count of extreme weather events has been continuously increasing in India.
ACT used data from Emergency Events Database (EM-DAT) which records natural disasters on a continuous basis, to suggest that economic losses to India from extreme weather events climbed to $45 billion in 2008-2017 from $20 billion between 1998 and 2007.
The decadal data shows that about 16 extreme climate events took place on average every year between 1998 and 2017 compared to 10 events annually between 1978 and 1997.
Among the 328 events listed in the EM-DAT database between 1998 and 2017, almost half were floods, which were responsible for the highest economic losses ($45.7 billion), more than losses resulting from storms, landslides, drought and natural disasters.
The agriculture sector bore a major share of the economic losses, according to the report, which said that despite the existence of crop insurance schemes, banks absorbed the brunt of the losses.
Less than 30% of the total crop area in India is covered by insurance. So banks are often obligated to restructure existing loans and provide fresh loans to farmers in disaster-hit areas.
“During FY 2012-2017 agriculture non-performing assets (NPAs) grew almost 2.5 times to reach INR602 billion(Rs 60,200 crore), with one of the likely reasons being crop failure from extreme weather events,” the report said.
The report comes at a time when Indian farmers are reeling under a spell of agrarian distress caused by bumper harvests coupled with declining prices of farm commodities, after suffering the impact of inadequate and uneven rainfall in previous years.
“The government made changes to the Pradhan Mantri Fasal Bima Yojana in 2016 like providing a higher premium subsidy to farmers to increase insurance coverage, but there were issues with implementation and estimation of losses which is why farmers didn’t take up the insurance scheme on a large scale,” said Charanjit Singh, lead author of the report.
“So whenever there is an extreme weather event, banks have to restructure existing loans in affected areas leading to NPAs. Our recommendation is that financial institutions in India develop a strategy to manage climate change-led risks,” he added.
Extreme weather events are also leading to significant losses in non-agricultural sectors.
ACT said Germanwatch, which works for the preservation of livelihoods, in its Global Climate Risk Index 2018 ranked India as the sixth more vulnerable country to extreme weather events. It trails five much smaller economies -- Haiti, Zimbabwe, Fiji, Sri Lanka and Vietnam.
“Both globally and in South Asia, the frequency and intensity of floods and droughts is increasing. In the coming years, the bulk of extreme weather events in India will be floods and heat stress.
“Agriculture will be badly affected. In Karnataka about 70% of crop is rain fed and more than half of the talukas have been affected by regular droughts. The situation is similar in Maharashtra. Farm distress will increase. Farmers need an insurance scheme that is implemented properly and which they can trust.
“They don’t trust the current schemes,” said NH Ravindranath, climate scientist from Indian Institute of Science (IISc).