Weather shocks and economic growth in India

This study examines the effects of weather shocks on the economic growth in the Indian context. By using state and district level data on weather variables (viz., temperature and rainfall) and growth rate of per-capita real GDP, the study evaluates the short-run as well as medium-run effects of changing weather on the growth. We use a fixed-effects model on state- and district-panel data sets spanning across several decades. The results based on the state-level analysis are suggestive of negative effects of the increasing temperature on the growth during 1980–2019. These aggregate results are further reinforced by the results from the district-level analysis. We find that higher temperatures have a significant negative impact on poorer districts, with a 1°C increase in temperature leading to a nearly 4.7% fall in the growth rate of district per-capita income. Moreover, higher temperatures not only have level effects but also have growth effects, especially for richer districts. Further, to propound tangible climate adaptation policy discussion, we use some developmental characteristics like credit access, electrification, urbanisation, and improved roads and market network in our analysis. The results suggest that such developmental characteristics may play a significant role in mitigating the negative impacts of climate change.