Climate change threatens growth, India’s central bank warns
Climate change has increased the frequency and ferocity of weather shocks, posing challenges for monetary policy and economic growth, the Reserve Bank of India (RBI) is warning.
The RBI’s Monetary Policy Report April 2024 said that with global average temperatures on the rise, and the accompanying increase in extreme weather events (EWE), the economic and social impact of global warming is becoming increasingly evident.
The report said that climate change has increased the frequency and ferocity of weather shocks, posing challenges for monetary policy.
It said that climate change directly impacts inflation through adverse weather events affecting agricultural production and global supply chains. It added that climate change could impact the natural rate of interest, and the after-effects of climate change might weaken the transmission of monetary policy to financing conditions faced by households and firms.
“For these reasons, central banks are increasingly incorporating climate risks explicitly into their modelling frameworks,” the report said.
In the absence of any climate mitigation policies, long-term output will be lower by around 9% by 2050, the report added.
“Lower productivity may lead to a fall in the natural rate of interest. Frequent shocks to inflation will, however, necessitate tighter monetary policy even with a lower natural rate of interest,” the RBI said.
The report also stressed that frequent weather-related disturbances due to climate change pose a considerable risk to long-term economic growth.
It said that “further escalation in geopolitical tensions and geoeconomic fragmentation; unexpected spurts in global commodity prices; increased volatility in international financial markets; deceleration in global trade and demand; and frequent weather-related disturbances due to climate change pose downside risks to the baseline growth path.”
India increases digital services exports by 17%
India’s digital service exports reached $257 billion in 2023, making the country the world’s fourth-largest exporter of digitally delivered services, contributing more than a fifth to the global trade in services.
This growth outpaced that of Germany and China, which saw 4% growth each.
The recent Global Trade Outlook and Statistics report by the World Trade Organisation (WTO) found that, globally, exports of digitally delivered services surged to $4.25 trillion in 2023, marking a 9% year-on-year increase. This accounted for 13.8% of world exports of goods and services.
While global trade in goods declined across all regions, exports of digitally delivered services continued to flourish. Europe and Asia, holding a combined global share of 76.2%, witnessed export increases of 11% and 9% respectively.
In 2023, business, professional, and technical services dominated the world exports of digitally delivered services at 41.2%, followed by computer services (20.5%), financial services (16%), intellectual property related services (10.9%), insurance and pension services (5.2%), telecommunications services (2.6%), audio-visual and other personal, cultural, and recreational services (2.1%), and information services (1.5%).
The report also showed a rise in the use of artificial intelligence (AI) technologies, including AI models capable of generating various types of content such as text, images, music and videos.
This rapid adoption is expected to revolutionise several aspects of the economy, leading to increased efficiency, innovation, cost savings, personalisation opportunities, job creation, and economic growth, further boosting trade in digitally delivered services.
Looking ahead, the WTO anticipates improvements in the global economy and trade. Following a 1.2% decline in goods trade volume, the organization forecasts a 2.6% increase in 2024. In terms of value, world goods trade fell to $24 trillion in 2023, while commercial services expanded to $7.5 trillion, marking a 5% decrease and 9% increase, respectively.
Digitally-deliverable services encompass a wide range of services that can be delivered over information and communications technology (ICT) networks. These include ICT services, sales and marketing services, financial services, professional services, and education and training services, among others.
