The Indian economy is in danger of suffering a heatstroke

As it rolls out the world’s biggest-ever election, there’s a bigger challenge confronting India’s governance systems: Heat

Archana Chaudhary

[Image from Unsplash]

By Archana Chaudhary and Kartiki Negi

India’s 969 million voters are battling testing summer temperatures in the ongoing national polls. Parts of peninsular and central Indian plains have already breached the 46°C threshold. States like Kerala have already reported deaths at the polling booths. According to the Indian Meteorological Department, a heatwave is when temperatures cross a maximum of 40 degrees Celsius in India’s plains and 30 degrees in hilly areas.

The IMD has predicted more than average heatwave days from April through June this year. That translates to a 22% probability that 2024 could surpass 2023 as the hottest year on record globally, with a 99% chance of being in the top five hottest years ever, according to the US’ National Oceanic and Atmospheric Administration. For those of us who have to step out daily, it’s evident that we are headed in this direction.

The Election Commission has ordered additional preparations for drinking water, ORS and lemon water mixed with salt and sugar at selected booths and more health department workers on standby. Heatstroke caused a federal minister’s collapse and a TV anchor to faint on air. The alarm was also sounded in the Prime Ministers office, reflecting the pressure that extreme weather events like heat waves are putting on India, while posing a risk to lives and livelihoods in the world’s fastest growing major economy.

If confirmed, 2024 will mark the seventh consecutive year of heat stress in India, highlighting a significant and concerning pattern of rising temperatures. This makes managing heat-related economic risks one of the biggest challenges to India’s ambitions of becoming the worlds third-largest economy by 2030. 

A 2020 McKinsey study estimated that outdoor working hours lost to heat may cost India up to $250 billion or 4.5% of its GDP by 2030. Heat stress is expected to affect each of the nine major economic activities listed by India’s 2021-22 Periodic Labour Force Survey, in addition to farming and construction. Each year nearly 740,000 excess deaths in India can be attributed to abnormal hot and cold temperatures related to climate change, according to a 2021 study by the Lancet Planetary Health journal.

Over 90% of the country lies in the “extremely cautious” or “danger zone” of heatwave and their impacts. Yet, media coverage linking heatwaves with climate change and the rising risks they pose to India, remains tenuous, as Climate Trendsrecent study with Universities of Oxford and Queensland showed.

Heat stress is a significantly underestimated risk in an economy where about 81% of the approximately 594 million Indians work in the informal sector, according to government and International Labor Organization estimates. The highest number of people at risk includes 45.5% in farming, between 9-12% in construction and about 9% working as street vendors.

And while precautions and alerts have helped cut the number of deaths in recent years, heat stress on mining, textiles, electricity, water works, transport, hospitality and warehousing may well force companies to change their entire economic model and rejig supply chains.

Protecting Employees

Workers in the country's extensive informal labour market routinely face dangerously high temperatures for long stretches. Extreme heat, especially in areas with high wet bulb temperatures, not only causes related illnesses, it disrupts employee focus, hampers decision-making and risks revenue losses. Annual plant output at Indian factories falls by about 2% per degree Celsius rise in temperature, a 2021 study showed.

This means companies will have to invest in more cooling for factory floors, ensure better ventilation, hydration and insulation and train people on handling emergencies. Already, companies are looking at adjusted work hours, such as starting earlier in the day or implementing night shifts, to avoid peak heat times. And are trying to find ways to protect delivery workers.

In the near future every Indian company will have to consider putting in place comprehensive heat action plans and increase green cover around their units. In the long run, industries may have to respond by increasing automation and shifting away from labour-intensive sectors in hot areas of the country, the study by University of Chicago’s Energy Policy Institute said.

Energy Costs

Heat will widen risks for Indian industries already bracing for higher energy costs in an economy that’s expected to average 6.7% GDP growth from fiscal 2024 to fiscal 2031. The Ministry of Power expects this year’s peak summer demand estimate of 260 GigaWatts to surpass last September’s record 243GW, PTI reported.

That has driven expensive coal imports to 42.79 million tons, up 23.8% from the 34.57 million a year ago, Reuters reported. Heat is also a factor in India’s willingness to risk price and supply volatility, and higher carbon emissions, from using natural gas to meet power demand, in spite of geopolitical upheavals in West Asia and Ukraine that have threatened LNG supply chains.

Industry accounts for around 22% of India’s greenhouse gas emissions and is less efficient than equivalent sectors in other countries. Companies will have to invest in captive energy sources including renewable energy plants, which currently make up more than 40% of India’s installed capacity.

One way to cut costs and emissions will be to ensure commercial buildings comply with energy efficiency standards announced in 2021, which could save about 300 BU electricity by 2030. And to ensure cool roofing for factories and offices. This translates to 15GW peak demand reduction and 250mtco2 abetment, according to an IMF report.

They will have to factor in costs of higher fuel demand for cooling, improve energy efficiency and invest in battery storage, pumped storage hydropower, captive renewable energy generation for the collective use of one or many corporate buyers and hydrogen, as part of adaptation.

Water Security

In addition to higher energy costs, Indian companies will increasingly need to adapt to and mitigate heat related risks such as water shortages and higher costs for maintaining and cooling infrastructure.

Hindustan Unilever Ltd., in its 2022-23 annual report, flagged climate change-related risks to its India operations including high temperatures, uncertain weather patterns and water scarcity, among others.

Among others preparing for infrastructure risks is Wipro Ltd., which estimated its cumulative financial impact of physical, regulatory, and chronic climate-change risks over five years to be around 1.5% of expenses. This includes increased insurance premiums, water recycling, and rainwater management infrastructure, energy efficiency programmes and higher costs of cooling and employee relocation. 

While this may represent rising awareness, corporate India will need to ramp up heatwave preparedness this year to include adjusted work hours, hydration stations, and cooling areas to protect workers' health and maintain productivity.

Manufacturers will have to invest in increasing the green cover around their units in coming years. And devise heat stress management techniques including regular drills and trainings sessions to ensure employee preparedness in case of emergencies.

Heat Insurance  

India does not have sufficient protection against financial impacts of climate-induced disasters like heat. Closing this protection gap may drain state and national budgets by diverting funds away from critical areas but this risk can be managed through insurance companies. As it is, India’s total insurance penetration for life and non-life was 4.2% in 2021, as against global rate of 7%.

Sector regulator Insurance Regulatory Authority of India has identified ways to help the domestic insurance industry increase penetration so that by 2047, most citizens and businesses can have appropriate insurance solutions and coverage. Yet, Indian industry will have to work closely with financial institutions to create new insurance products to protect employees, especially for delivery workers and businesses dealing in perishables including food and milk products.

Challenging Future

While India has put in place a National Action Plan on Climate Change, in addition to programmes like the National Clean Air Programme, Nagar Van Scheme and is pushing for ideas like Lifestyle for Environment (LiFE), the country will have to prepare for a rise of between 1.2 degrees Celsius and 3.5 degrees Celsius by 2050, according scientific estimates.

A recent study revealed that as global warming intensifies, the likelihood of heatwaves would increase dramatically for all Indian districts. But will disproportionately affect India’s Eastern and Central Indo-Gangetic plains and Malabar region that are rich in minerals and food production.

The study lists Andhra Pradesh, Bihar, Chhattisgarh, Delhi, Gujarat, Haryana, Himachal Pradesh, Jharkhand, and Madhya Pradesh, Maharashtra, Punjab, Orissa, Rajasthan, Uttar Pradesh, Uttarakhand, Telangana and West Bengal as what it defined as a Core Heatwave Zone, most vulnerable to severe heatwaves, with maximum heat incidence in the month of May. This poses significant risks to India’s highest industrial investments.

The risks to most of these regions were also highlighted in a 2019 study by Tata Centre for Development at the University of Chicago, which estimated that more than 1.5 million deaths each year were due to climate change in 2100, of which 64% may be concentrated in these same states.

So while a National Disaster Management Plan and Policy may provide frameworks for heatwave mitigation and coordinate emergency responses, companies will have to build financial, technology and management resources to tackle the economic and social health challenges of future warming. The country is yet to recognise excessive heat as a major health problem.

And that will be a bigger challenge for India’s incoming government and its leaders.

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About the author

Archana Chaudhary
Archana Chaudhary

Associate Director

Climate Trends

Archana Chaudhary is a multi-award winning journalist and climate policy adviser. In the last twenty five years, she has closely followed and written on climate change, energy, economics, trade and foreign policy. She has won multiple awards for her work in her last assignment, a 17-year-stint with Bloomberg News. 

She is currently Associate Director at New Delhi-based Climate Trends, a research-based consulting and capacity building think tank.

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