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

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>