India lost 33.9 million hectares of crops due to excess rains, says WEF report

India lost 33.9 million hectares of crops due to excess rains and an additional 35 million hectares due to drought between 2015 and 2021, a World Economic Forum (WEF) report has said.  

The impact of extreme climate events in India touches on nearly every aspect of its economy and society, but is more pronounced in particularly exposed sectors such as agriculture, which comprises 15  per cent of India’s GDP and employs around 40 per cent of its population – 70 per cent among its rural households, it said.

The report “Income Protection and Early Warning Systems: How India is Building Climate Resilience” said India has seen unparalleled growth and development in recent decades. But it risks losing ground due to heightened exposure to climate perils including heat waves, floods and earthquakes.

Growing insurance gap

Several Indian sectors including agriculture suffered $159 billion in economic losses in 2021 due to lost working hours from extreme climate impacts. “By 2030, India is projected to see a substantial 5.8 per cent decline in working hours – equivalent to 34 million full-time jobs – due to heat stress,” it said.

However, a growing insurance coverage gap is preventing many of these people from protecting their livelihoods from extreme weather events and climate change, said the WEF.

Sandeep Katiyar, Co-Founder & CFO, Finhaat, said drastic climate change is affecting agriculture in several ways and there is a clear need to build in measures to increase the resilience of farmers to absorb these shocks.

He said small and marginal farmers, who have landholdings of less than one hectare of land, make up 86 per cent of the 65 per cent of the population engaged in agriculture and allied activities.  

Govt leading way

Katiyar said the Government is leading the way for innovations in this sector through policy intervention at the government level that includes the introduction of insurance not only for crop insurance but also weather-based products through Pradhan Mantri Fasal Bima Yojana (PMFBY) and Restructured Weatber-based Crop Insurance Scheme (RWBCIS).

The WEF report said the impact of extreme weather is disproportionate  on the shoulders of low-income Indians. But the significant barriers in accessing adequate insurance cover have created a coverage gap. 

“Insurance companies and allied institutions working with this segment are creating path breaking weather-based insurance products that are relevant to specific geographies, industry sectors; and complement existing traditional insurance,” said the Finhaat co-founder. 

The report said government agencies and business leaders are working on several effective sector-specific local and national strategies to address the challenges. 

‘Replicate initiatives’

“These initiatives could be replicated to help the vulnerable communities in other parts of the world,” it said.  

The Sandbox for Agricultural and Rural Security, Technology and Insurance (SARATHI) can be pivotal in helping farmers to become more resilient while also shielding them from the volatility of climate change, the WEF report said.

Recently, the government introduced the Women’s Climate Shock insurance and Livelihoods initiative (WCS), which is first-of-its-kind income replacement product. This will prevent female outdoor workers from being forced to work during extreme heat waves. “This product is already being introduced to other at-risk communities in India and beyond,” it said.

India was the first country in South Asia to create a heat action plan after an extreme heat wave in the city of Ahmedabad in 2010 led to a 43 per cent increase in mortality compared with 2009. This is also helping the agriculture sector, it said.

Forum’s caution

Insurers could work more closely with policy-makers and government officials to use the industry’s leading risk analytics, predictive tools and climate data to inform more heat action plans and direct capital towards high-impact adaptation interventions, the WEF report said.

Katiyar said warehousing is another sector in focus for agriculture. “Corporates are availing these products to mitigate risk of warehouse occupancy (eg. taking high rainfall cover in target geographies) to cover themselves as well. These measures will further help safeguard livelihoods and strengthen the agrarian economy,” he said.

The WEF report cautioned that if, as expected, 45 million people are forced to migrate from their homes by 2050 as a result of climate change, it would have “cascading effects on local economies, for example by reducing tax revenues”.