Bri­tain Can’t Af­ford To Quit the EU In­dia Needs to Curb Its Ground­wa­ter Use

An OECD re­port fore­casts an an­nual long-term GDP loss of about $4,700 per house­hold The coun­try must set new stan­dards for ci­ties and en­cour­age ef­fi­cient agri­cul­tural meth­ods

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If it votes to leave the Euro­pean Union in next month’s ref­er­en­dum, Bri­tain will bear a sub­stan­tial eco­nomic cost: That’s the con­clu­sion of an au­thor­i­ta­tive new study. The Vote Leave cam­paign has cast the ref­er­en­dum mainly as a de­ci­sion about sovereignt­y, democ­racy, and im­mi­gra­tion—le­git­i­mate con­cerns. But the eco­nomic con­se­quences can’t be waved aside. The study from the Or­gan­i­sa­tion for Eco­nomic Co-op­er­a­tion and De­vel­op­ment con­cludes that leav­ing the Euro­pean Union would hurt trade, weaken Bri­tain’s vi­tal fi­nance in­dus­try, and re­duce in­ward for­eign in­vest­ment. There’d likely be knock- on ef­fects as well: less in­no­va­tion and slower growth in pro­duc­tiv­ity.

The OECD re­port puts the long-term an­nual cost be­tween 3 per­cent and 8 per­cent of gross do­mes­tic prod­uct. The cen­tral es­ti­mate of 5 per­cent is equiv­a­lent to a tax of about £3,200 ($4,700) per house­hold.

Against this and other sim­i­lar eco­nomic as­sess­ments, the exit cam­paign has fielded a pam­phlet ar­gu­ing that the econ­omy will pros­per more out­side the EU than in­side. The au­thors make a few good points—for in­stance, that Bri­tain could adopt uni­lat­eral free trade, rather than try­ing to ne­go­ti­ate agree­ments with all its trad­ing part­ners, as the other stud­ies mostly as­sume.

Yet it’s a stretch to think this im­prove­ment, even com­bined with other op­ti­mistic as­sump­tions, would be enough to turn a sub­stan­tial net eco­nomic cost into a sub­stan­tial net ben­e­fit. And the rad­i­cal poli­cies needed to yield this out­come—not only uni­lat­eral free trade but also root-and-branch dereg­u­la­tion—are po­lit­i­cal no-hop­ers.

In­deed, some of the worst-case sce­nar­ios men­tioned in the stud­ies seem quite plau­si­ble by com­par­i­son. The prospect of lower in­ward in­vest­ment is dis­turb­ing. Bri­tain is run­ning a big cur­rent ac­count deficit, at 7 per­cent of GDP. If Brexit leads for­eign in­vestors to pull their cap­i­tal out, or even to re­duce their rate of new in­vest­ment, Bri­tain might have to re­duce its In­dia is go­ing thirsty. After two bad mon­soons in a row, wells are run­ning dry, and now tem­per­a­tures are soar­ing above 105F. It’s one of the worst droughts in al­most half a cen­tury, hurt­ing some 330 mil­lion In­di­ans. With luck, in a month or so, rain­fall will bring some re­lief. But to pro­tect it­self in the long run, In­dia will need to fo­cus less on the skies above than on the cracked, dry earth be­low.

In­dia is the world’s big­gest user of ground­wa­ter, draw­ing more an­nu­ally than the U.S. and China com­bined. More than 60 per­cent of the wa­ter used in ir­ri­ga­tion—more than 80 per­cent of its to­tal wa­ter use—is drawn from be­low ground. The wa­ter table is fall­ing an av­er­age of 0.3 me­ter (1 foot) a year, and in some ar­eas, as much as 4 me­ters (13 feet). As wells are drilled deeper and deeper, farm­ers are find­ing wa­ter that con­tains el­e­vated lev­els of harm­ful chem­i­cals, such as ar­senic and flu­o­ride.

The gov­ern­ment should work to in­crease the sup­ply of sur­face wa­ter. It’s also es­sen­tial to re­duce de­mand. Right now, farm­ers can tap as much ground­wa­ter as they like from land they own, at al­most no cost. Sub­si­dies, flat rates for elec­tric­ity, and other in­cen­tives en­cour­age the plant­ing of thirsty crops such as rice and sug­ar­cane in drought-prone ar­eas.

The coun­try will need to be­come far more ef­fi­cient in the way it uses wa­ter by set­ting strict stan­dards for new ap­pli­ances and build­ings. In the coun­try­side, farm­ers will need help and en­cour­age­ment to switch to drip ir­ri­ga­tion and crop in­ten­si­fi­ca­tion schemes, and to plant drought-re­sis­tant crops ap­pro­pri­ate to lo­cal cli­mate and soil con­di­tions.

It’s im­por­tant that this tran­si­tion hap­pen grad­u­ally so as not to over­bur­den In­dia’s farm­ers, who are al­ready suf­fer­ing from years of bad har­vests and high debts. In due time, wa­ter prices will need to be ad­justed and elec­tric­ity sub­si­dies slashed, to re­flect the full cost of di­min­ish­ing ground­wa­ter. <BW>

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