How India can be a $11 trillion economy by 2070 from positive climate action
Global emissions would continue to rise if no significant action is taken to mitigate climate change, and such inaction would be the baseline path for the economies of India and the world, negatively impact economic growth.
India can gain $11 trillion in economic value over the next 50 years by limiting rising global temperatures and realising its potential to ‘export decarbonisation’ to the world, a new study by Deloitte Economics Institute shows.
The study infers that if India doesn’t act now to mitigate the effects of climate change, it could lose $35 trillion in economic potential, which could be 12.7% of its gross domestic product (GDP), by 2070.
The report, titled, India’s turning point: How climate action can drive our economic future, shows that no action taken on climate change, the average global temperatures could rise by 3°C or more by the end of this century. This will make it harder for people to live and work, as sea levels rise, crop yields fall, infrastructure is damaged, and other challenges emerge, threatening the progress and prosperity that the nation has enjoyed in recent decades.
Deloitte India chairperson Atul Dhawan said India has about a decade to make decisions that can help change the trajectory of climate change. Even as Dhawan acknowledged that no one is immune to the impact of climate change, he called it a “window of opportunity” for India to lead the way and show how climate action is not a narrative of cost but one of sustainable economic growth.
“As India aspires to be a $5 trillion economy, it is not just foreign and domestic investments that will be key in driving growth but we must also take this opportunity to align our ambitions with climate choices,” Dhawan said.
Over the next 50 years, the top five most impacted industries in terms of economic activity are expected to incur a significant share of climate-related loss. These industries —services (government and private), manufacturing, retail and tourism, construction, and transport — currently account for more than 80% of India’s GDP. Together, they form the basis of the country’s contemporary economic engine. According to an estimate by Deloitte, these five industries alone could experience an annual loss in the value-added to GDP of more than $1.5 trillion per year by 2070.
However, if governments, businesses, and communities act rapidly in the next decade to address climate change, average global temperature rises can be limited to around 1.5°C by 2050, a scenario that will minimise the impact of climate change for India and the rest of the world. At the same time, India can achieve significant economic growth by supplying the products, services, and financing that the world would need to limit a rise in temperature.
India is home to many enterprises that are already world-leading producers of the advanced solutions countries would need to address climate change. These include green hydrogen and negative-emission solutions, both natural and technological.
“We need to transform the world’s economies towards new, low-emission pathways and India is well-positioned to play a leading role in this process globally. By making the right choices now, India could chart a more prosperous path towards a low-emission future, accelerating progress in the rest of the world by exporting key technologies, processes, and know-how,” says Viral Thakker, a partner and sustainability leader at Deloitte India.
Accelerated decarbonisation could bring significant benefits to India and the world. India could use the transition to a low-emission footing to restructure its economy towards growth in advanced industrial sectors, leveraging lower-cost clean energy export markets, as the region experiences a rapid increase in energy demand over the coming years.
As a developing nation, India’s transformation to a low-emission footing is likely to be more complex and challenging than much of the rest of AsiaPacific. It will have to strike a delicate balance between the need for sustained economic development—and the corresponding rise in energy demand—and investing in and transitioning to emerging, low-emission technologies. The structural adjustment costs associated with reducing India’s emissions profile are expected to be significant, but the cost of inaction will be greater.
Rapid decarbonisation through broad changes in its energy mix and industrial base will significantly transition India away from fossil fuel sources, falling to 5% by 2070. This transition would see India restructure its economy toward growth in advanced industrial sectors, leverage clean energy global export markets with affordable clean energy technologies.
The modelling used in the report shows that rapid decarbonization could yield economic gains of almost $11 trillion (in present value terms) for India’s economy by 2070. Compared to a world of climate inaction, India’s GDP would grow by an average of 1% per year over the modelled decades to 2070.
The report sets out four key stages for India’s climate transition. According to the forecast made by Deloitte, economic benefits would be observed from the first year that positive climate policy decisions start delivering rapid investment and technology development. In 2070 alone, this would equate to a GDP growth of 8.5%.
The transition to a cleaner world:
2021 to 2030—Bold climate plays: The next few years set the stage for rapid decarbonization. The decisions by government, regulators, business, industry and consumers would reinforce initial progress and create the market conditions to deliver decarbonization at pace and scale. This would send price signals, transform supply chains, and lay the foundation for a structural shift that limits global average warming to 1.5°C. During this first phase, India would need to forgo some short-term economic development in favour of significant investment in sustainable technologies.
2030 to 2040—Coordinated change: The hardest shifts in industrial policy, energy systems, and consumer behaviour would occur in this period. Businesses and economies would begin to see the consequences of bold climate plays, with different industries and countries transforming at different paces. India would continue to undergo significant structural changes during this decade, and net economic gains of the transformation would still be on the horizon.
2040 to 2055—Turning point: The decarbonization of high-emitting industries should be nearly complete by this period. The cost of new low-emission technologies would be decreasing and net economic gains would be shared more widely. Efforts to curb emissions would begin to manifest in the lower global average. India would enter a net positive economic position by 2051, with gains gradually increasing towards the end of the century—a direct benefit of decarbonization and the avoided cost of climate change.
2055 onwards—A low-emission future: By the end of the century, India’s economy would be near net-zero emissions and the world’s economic systems of production would be keeping global average warming to around 1.5°C. Economic structures would be radically transformed, underpinned by a series of interconnected, low-emission systems spanning energy, mobility, manufacturing, and food and land use. The energy mix would be dominated by low- or zero-emission sources across every market, with green hydrogen and negative-emission solutions, both natural and technological, playing prominent roles. India would now be rapidly accruing the economic dividends of global decarbonization, in a low-emission future that benefits the Asia Pacific and the world.
Mainstream economic theory and models assume unconstrained emissions do not have negative consequences for economic growth potential. This view of the world has now come up against the overwhelming scientific consensus—and our own experiences—telling us that the current system of economic production is generating untenable changes in the climate. These changes put at risk India’s hard-earned economic growth and prosperity.
India’s climate, as well as its large population and economic dependence on agriculture, mean it is particularly exposed to the effects of unchecked climate change. As average global temperatures continue to rise, extreme weather events—such as flooding and heatwaves—would become increasingly common and devastating throughout the region.
Rising sea levels would impact a large number of communities in coastal areas, particularly through damage to capital infrastructure. With about a quarter of India’s rural population currently living in poverty, their capacity to swiftly recover from future climate events would likely be very limited.
Agriculture remains a key sector in the Indian economy, accounting for about 16% of GDP in 2019. However, climate change is expected to reduce the reliability of seasonal output, impacting revenue. One study found that rising temperatures reduced some Indian crop yields by about 5.3% between 1981 and 2009.15 India clearly has a strong incentive to act swiftly and limit the extent of any future impacts of climate change.