Biodiversity loss to raise India’s bankruptcy risk 29%

What is the News?

According to a study by British economists, loss of biodiversity will downgrade the Sovereign credit ratings of several countries including India increasing their bankruptcy risk.

What are Sovereign credit ratings?

Sovereign credit ratings are an independent assessment that determines the creditworthiness of a country.

It can give investors insights into the level of risk associated with investing in the debt of a particular country, including any political risk.

What is the link between Sovereign credit rating and Biodiversity loss?

Loss of Biodiversity will downgrade the sovereign credit ratings of several countries, increasing their bankruptcy risk.

China and Malaysia would be the worst affected with downgrades of more than six notches.

India, Indonesia, Ethiopia and Bangladesh can expect downgrades of four notches while a third of the countries studied would experience more than three.

The downgrades to four notches for India and other countries means that they will be burdened with billions of dollars in interest. 

The study has estimated that repercussions to the situation would result in additional interest costs between $28 billion and $53 billion per annum on the global capital markets.

How will this impact ordinary people?

As nature loss reduces economic performance, it will become harder for countries to service their debt, straining government budgets and forcing them to raise taxes, cut spending, or increase inflation. This will have grim consequences for ordinary people.

Source: The post is based on the article “Biodiversity loss to raise India’s bankruptcy risk 29%” published in DTE on 24th June 2022.