Topic 1 : The hottest year
Introduction: 2023 was one of the hottest years for the planet. Various agencies have predicted the likely increase in the global temperature.
COP 21 and the limit of global temperature rise
- At COP 21 in Paris eight years ago, countries agreed to “hold global temperature increase to well below 2 degrees Celsius above pre-industrial efforts and strive to limit it to 1.5 degrees Celsius above pre-industrial levels”.
- The increasing frequency of extreme weather events after the Paris Pact led to an unwritten concord on the 1.5 degrees Celsius limit as the defence line against climate change.
What is the situation on the ground?
- In 2023, the world came perilously close to this threshold.
- On average, till November, global temperatures rose by 1.46 degrees Celsius above pre-industrial levels.
- Every month since June was the hottest such month on record, and in November, two days were even warmer than 2 degrees Celsius above pre-industrial levels.
- The World Meteorological Organisation’s (WMO) provisional State of the Global Climate Report confirms that 2023 is the warmest year on record.
- The WMO has forecast that the planet will get hotter in 2024.
- “The warming El Niño event, which emerged during the Northern Hemisphere spring of 2023 and developed rapidly during summer, is likely to further fuel the heat in 2024 because El Niño typically has the greatest impact on global temperatures after it peaks,” the report says.
The silver lining in the dark cloud
- The jury is out on whether climate change has reached a point of no return.
- But what is clear is that the next seven years will be pivotal in reducing emissions.
- On the positive side, the International Energy Agency predicts that more than 35 per cent of the world’s electricity will be generated from renewables in 2025.
- The biggest challenge, however, is generating electricity when the sun isn’t shining or the wind is not blowing.
The green technology innovation, mitigation and adoption is the way forward
- Experts agree on the need for technologies that can cost-optimally store RE anywhere from half a day to a week, even months.
- At the COP26 in Glasgow, two years ago, countries agreed to set up a Long Duration Energy Storage (LDES) Council to facilitate the commercialisation of technologies — many of them are at the pilot stage — that can stock up RE.
- However, a market for such solutions is still in the works and most LDES solutions are not cost competitive yet.
- Scientists agree that along with reducing GHG emissions, the imperative for policymakers should be to build people’s resilience against inclement weather.
- Such measures could include building sea walls, improving weather alert systems, overhauling urban drainage systems, installing irrigation systems to combat water scarcity or making crop choices suited to the changed climate.
What more can be done to reduce global temperature?
Reducing Greenhouse Gas Emissions:
- Transitioning to renewable energy sources: Replacing fossil fuels (coal, oil, gas) with solar, wind, geothermal, hydroelectric, and nuclear power significantly reduces greenhouse gas emissions.
- Improving energy efficiency: Implementing energy-saving measures in homes, businesses, and industries, like using LED bulbs, weatherizing buildings, and upgrading appliances, can cut down on energy consumption.
- Transforming transportation: Opting for electric vehicles, public transportation, walking, cycling, and carpooling reduces emissions from the transportation sector.
- Protecting and restoring forests: Trees absorb carbon dioxide, a major greenhouse gas, so preserving existing forests and planting new ones are crucial.
Exploring Carbon Removal Technologies:
- Direct air capture and storage (DACs): These technologies capture carbon dioxide directly from the atmosphere and store it underground or use it for other purposes.
- Enhanced weathering: Spreading crushed rock like basalt on farmland accelerates natural weathering processes, locking away atmospheric carbon dioxide as carbonate minerals.
- Biochar: Producing and applying biochar, a charcoal-like substance made from organic materials, to soil can help sequester carbon.
Individual Actions:
- Reduce your own carbon footprint by adopting energy-saving habits, using low-carbon transportation options, and consuming sustainably.
- Support and advocate for climate-friendly policies and businesses.
- Raise awareness about global warming and its solutions within your community.
Conclusion: As the planet gets hotter, the challenge will be to address vulnerabilities without compromising on people’s developmental needs and lifting large sections out of poverty.
Topic 2 : On the cusp of take-off
Introduction: 2024 will be a critical year for India. The national elections will be held in April-May. Its results will be closely watched as the outcome will influence the policy framework. 2024 could also be the third year in a row that the country emerges as the fastest-growing large economy in the world.
What do we need to watch out for?
1. The trajectory of interest rates.
- Going by the RBI’s forecasts, inflation would be around 5 per cent till the first quarter of 2024-25.
- This would make it hard to lower rates.
- Perhaps space will open up when inflation falls to less than 5 per cent, which as per the RBI’s forecasts is likely in the second quarter after the new government is sworn in.
- However, the average repo rate over the past decade has been around 6-6.5 per cent.
- The reduction to 4 per cent was due to abnormal circumstances, and hence easing rates now will simply mean going back to trend.
- Further, with the inflation rate likely to be around 5 per cent, maintaining a real repo rate of 1 per cent will mean that there can be at most 50 bps cuts in the policy rate.
2. The statistics and projections of the Union Budget
- The Union budget tabled on February 1 will be a vote on account.
- Hence, no significant decision can be taken. Of interest would be the route taken once the new government is in place.
- The growth projection will be the first number that will be tracked, followed by the fiscal deficit.
- A deficit of 5.9 per cent is still very high compared to the goal of 3 per cent, which has been a mirage even in the best of times.
- A 4.5 per cent target is a compromise at best for 2025-26.
- Also keenly tracked will be the quality of expenditure. The question is whether the capex momentum sustains.
3. The amount of rain and its impact
- The monsoon will also be critical.
- More so, when there is a constant lament from corporates that while urban demand is up, the same cannot be said for rural demand.
- While agriculture employs a sizeable labour force but accounts for a lower share of value-added, there are linkages between the farm and the non-farm sector.
- If the kharif harvest is better than that in 2023, it will be good news for the industry as well as GDP growth.
- The two-wheeler, FMCG and tractor industries would in particular be tracking the progress of the rains.
4. The momentum of growth and its forecast
- Considering the performance of the economy so far, forecasts for 2023-24 have been revised upwards.
- While there is a tendency to understate projections, to begin with, considering that the global economic situation has improved and with the shocks of the war being absorbed by nations, there is no reason for growth to be dramatically lower.
- Sustaining the current growth momentum will be good news, but crossing the 7 per cent level will be a psychological boost.
5. The private investments
- So far while the government has been seeing green shoots, CEOs have only been talking of making investments.
- The investment rate appears to be stagnant going by the fundraising pattern.
- Further, investments have been in a narrow band of industries like aviation and hospitality in the services space and infrastructure-related industries like steel and cement in the manufacturing segment.
- People have been talking for years now about higher government capex crowding in private capex.
- But there has not been much to show.
6. The performance of the corporate sector
- The performance of the corporate sector is hard to predict.
- Last year, firms’ sales grew due to pent-up demand.
- But profits came under pressure as input costs rose sharply.
- This year, the trend so far shows that while firm sales have gone down, profits have risen with input prices cooling.
- On a conservative basis, one can assume that both variables will be stable next year. This will have implications for the stock market.
Conclusion: Considering that the economy is said to be on the cusp of a take-off, it will surely be an interesting year to watch.