Global GDP Growth 2007-2010
6.2.2 India rides out the global recession
India, notwithstanding its large internal markets, had relied on global trade integration to drive its growth rates in previous years, and thus could not remain isolated from world pressures for long.
The precipitous dip in 2008 – seen in Figure 39 – was linked to the global economic recession brought on by the collapse of the sub-prime mortgage market in the USA. Despite initial expectations that China and India might act as global “shock absorbers” because their decoupled
Figure 38: Estimated annual incremental climate costs required for a 2°C trajectory compared with current resources Source: World Bank (2010: 23)
economies were internally driven, these countries were not immune to the global meltdown (Ghosh
& Chandrasekhar, 2009) and India’s trade did indeed decline, although not as precipitously as that of western, developed countries.
Figure 39: India’s GDP growth between 1987-2013 with 2005 – 2010 highlighted in white Source: Own graph based on data from World Development Indicators, World Bank (2015)
Thus after impressive GDP growth – hovering around 9% for several years – the Indian economy experienced a decline in industrial growth, double-digit inflation, depreciation of the rupee and an expanding current-account deficit as the global crisis began to affect India’s trade flows, exchange rates and financial markets (Ghosh & Chandrasekhar, 2009; Walia, 2012). In addition, a stream of non-resident Indians from hard-hit Persian Gulf states, many of whom worked as labourers and sent home remittances, had to return to India. In so doing they simultaneously reduced India’s foreign income and swelled the numbers of the unemployed (Rahman, 2009; Raman, 2009). In India, all economic sectors were affected, but those most affected by the 2008 global recession were the electricity, gas and water supply, manufacturing and construction sectors (Walia, 2012). By late 2009, however, when much of the world was still struggling to regain its economic footing, several of these sectors were already showing signs of strong recovery. The Mining and Quarrying sector, for instance, had regained its 2006-07 growth levels of 8.7% by 2009-10, despite a precipitous slump in growth to 1.6% in 2008-9 (Walia, 2012). The Indian government had deployed approximately $80 billion in tax cuts and other benefits in the final quarter of 2008 and the first quarter of 2009, providing much-needed stimulus to the economy - the success of this move was borne out by India’s relatively early resurgence in comparison to much of the developed world (Srivastava, 2009).
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This resurgence notwithstanding, India’s scoring on the global Multidimensional Poverty Index (MPI) - 0.283 - was higher than its relatively poorer eneighbours. The MPI replaced the UN’s Human Poverty Index from 2010 and is an assessment of individual poverty (instead of the HDI’s country aggregates) by “capturing how many people experience overlapping deprivations (incidence) and how many deprivations they face on average (intensity)” (Oxford Poverty & Human Development Initiative, 2015). Table 4 below is an extract of UNDP’s MPI data and it shows an intriguing story:
India, ostensibly by now economically better off than its contiguous neighbours (except China)32, has the highest incidence of poverty and the second highest intensity of deprivation. The table also shows mixed fortunes in comparison to its neighbours, with India having lower overall living standards than Pakistan and a worse state of healthcare than poorer Bangladesh (UNDP, 2015c).
There was, however, evidence that the government of Manmohan Singh was taking steps to address these inequalitites: for example, in 2005 a US$1.5 billion National Rural Health Mission was launched targeting approximately 300,000 villages and focusing initially on the poorest states in the north and north-east, like Rajasthan, Uttar Pradesh, Bihar and Madhya Pradesh (UNDP, 2005).
Table 4: Multidimensional Poverty Index – figures for India in comparison to contiguous countries Source: UNDP (2015c)
The story of large-scale, multidimensionsal poverty and underdevelopment told by the statistics in Table 4 underscores the legitimacy and necessity of India’s ongoing insistence on poverty alleviation as a policy priority. A very clear indication of the lack of redistributional change is encapsulated in World Bank data on the share of income earnings by quintile of the population. At the beginning (2005) and end (2010) of this phase the income earned by the quintiles had hardly changed: in fact the income earned by the bottom 80% of earners had actually all slightly decreased, while that earned by the top 20% had slightly increased (World Bank, 2015). The
32 Note that no MPI calculations are available for India’s neighbours Sri Lanka and Myanmar.
Contribution to overall poverty of deprivation in
Education Health
Living standards Year /
Survey
Specifications (2010)
Intensity of deprivation
Population below income poverty line % near
multidim- ensional poverty
in severe poverty
Population
MPI value
Head count
PPP $1.25 a day
National poverty line
Value % (%) (%) (%) (%) (%) (%)
Bangladesh 2011 0.253 51.2 47.8 18.8 21.0 43.25 31.51 28.4 26.6 44.9
Bhutan 2010 0.119 27.2 43.7 18.0 8.8 1.66 12 40.3 26.3 33.4
China 2009 0.036 8.8 43.4 19.0 1.3 11.8 n/a 21.0 44.4 34.6
India 2005/2006 0.283 53.7 51.1 18.2 27.8 32.68 21.9 22.7 32.5 44.8
Nepal 2011 0.217 44.2 47.4 18.1 18.6 24.82 25.2 27.3 28.2 44.5
Pakistan 2012/2013 0.230 44.2 52.0 14.9 26.5 21.04 22.3 36.2 32.3 31.6
Education Health
Living standards Year /
Survey 2002-2012
Specifications (2010)
Intensity of deprivation
Population below income poverty line % near
multidim- ensional poverty
in severe poverty
percentage of people with access to improved sanitation had increased from 29.9% in 2005 to 34.2% in 2010 - finally creeping over 1/3 of the population (World Bank, 2015).
The preceding paragraphs have outlined the scale of India’s continued development challenge despite the extraordinary growth of the Indian economy. Clearly the benefits of India’s growing economy have yet to trickle down to the poorest people and lift them out of of poverty or ameliorate the intensity thereof. The following two graphs – Figure 40 and Figure 41 – show the extent of India’s growing predicament. India’s rapidly growing economy was driving increased demand for energy and for transport. For example, in the short space of five years, per capita electricity consumption increased nearly 40% as graphed in Figure 40, however, over half of the population (56%) still lacked access to electricity (TERI, 2009). Coal was (and remains) a central part in India’s energy story as it was used in the generation of more than 60% of electricity and accounted for over half of the total commercial33 energy supply (TERI, 2006: 18–19).
Figure 40: Kilowatt Hours (KWh) consumed per capita Source: World Bank (2015)
Thus even though the increase in electricity consumption was from a low base rate of KWh per person, the rate of increase and the fossil-fueled nature of India’s energy provision are cause for alarm in realtion to its GHG emission profile. Indeed despite its low per capita emissions (as seen in
33 Commercial energy supply is energy that is bought and sold (as opposed to collected, for instance)
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Figure 31 above on page 106) India’s total GHG emissions had increased to the extent that it was ranked 7th in the world34 in 2005 – up from 9th place in 1990 (World Resources Institute, 2015).
By 2007/8 coal and oil together accounted for 89% of the total primary energy supply, and renewables only 5% (TERI, 2010: 4). Net energy imports (energy use minus domestic production) accounted for 23.8% of all the energy used in India (International Energy Agency, 2014); import dependency in oil alone was 71% (TERI, 2007) as graphed in Figure 41 below . Of continued concern were Planning Commission projections that in order to continue to grow at 8% GDP annually until 2031/2, total primary commercial energy supply (TPCES) needed to increase by almost a factor of 4 from 2006/7levels, while electricity supply needed to increase by just over five and a half times (Planning Commission, 2006: 20). These numbers highlight the steadily growing tension between the dictates of energy security and the global atmospheric carbon constraint.
Figure 41: Type of energy used and net energy imports as percentage of energy use
Source: Own graph based on data from World Development Indicators, World Bank (2015); and International Energy Agency (2015)
34 When GHG emissions are calculated including LULUCF & assuming EU28 is considered as a single entity
In addition to India’s energy security concerns, Figure 40 and Figure 41 also point to the key elements of India’s growing cumulative CO2 emissions profile, as depicted in Figure 42 below. As stated above, India’s electricity was (and remains) predominantly generated by coal-fired power plants. These were frequently inefficient, aging plants that used coal of a low calorific value and high ash content with losses of about a quarter of the generated electricity through transmission and distribution (Amjath-Babu & Kaechele, 2015). The other main driver of emissions – as outlined in Figure 42 – was India’s growing use of fossil fuels, in particular petroleum for transport. These factors combined to make India particularly adamant that CBDR remain a guiding principle of the climate regime to prevent developing countries from having to take on mitigation targets.
Figure 42: CO2 emissions profile of India in 2005 Source: Amjath-Babu & Kaechele (2015)
The range of energy efficiency measures and policies the government had put in place over the years continued to pay dividends in terms of the improved emissions intensity of the economy.
Whereas the economy was producing 484 tCO2e / Million $ GDP in 2005 this had declined to 435 tCO2e / Million $ GDPin 2010 (World Resources Institute, 2015).
These government measures included the Bachat Lamp Yojana (BLY), a nation-wide programme of exchanging incandescent bulbs for CFLs in households and the country’s first CDM Programme of Activity (PoA) (Ministry of Environment and Forests, 2010), as well as the reformation of energy markets through the Tariff Policy of 2003, Electricity Act of 2005 and the Petroleum & Natural Gas Regulatory Board Act of 2006. Other measures were the promotion of the use of renewables
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through the New and Renewables Energy Policy in 2005 as well as the Rural Electrification Policy of 2006 and the introduction of an Energy Conservation Building Code in 2006 applicable to new buildings over a specified floor space (Ghosh, 2009c; Prime Minister’s Council on Climate Change, 2009).
All these indicators show a picture of a relatively robust emerging economy that is highly dependent on fossil fuels (despite the decreasing emissions intensity), and increasingly dependent on fossil fuel imports, but that has done little to address the internal disparities or eliminate poverty. A continued high level of dependence on fossil fuels as the driver of the economy would make India’s insistence on not taking on emission reductions increasingly difficult to justify.