India is burning up.
A brutal heatwave continued to haunt parts of the country for the seventh straight day Friday.
The India Meteorological Department (IMD) has issued a red alert in several northern and northwestern states, including Delhi, Rajasthan, Gujarat, Punjab, and Haryana, until 28 May.
Rajasthan’s Barmer, with 48.8 degrees Celsius, recorded the country’s highest temperature thus far this year.
Over 16 places in Punjab, Haryana, Rajasthan, Uttar Pradesh, Gujarat, and Madhya Pradesh also recorded temperatures of 45 degrees Celsius or above.
While the human suffering from heatwaves has been documented, what about the economic cost?
How do heatwaves impact India’s economy? And what could be the fallout in the future?
Let’s take a closer look:
On workforce
First, it stands to reason that people’s productivity suffers in a heatwave.
High night temperatures are considered dangerous because the body doesn’t get a chance to cool down.
Increasing nighttime heat is more common in cities because of the urban heat island effect, in which metro areas are significantly hotter than their surroundings.
For a country like India, this is devastating.
According to Moneycontrol, this is because 45.76 per cent of the workforce is employed in agriculture.
Meanwhile, 83 per cent of the workforce are under the unorganised sector (the International Monetary Fund puts that figure even higher, estimating that 92.4 percent of workers are in the informal sector).
Severe and frequent heat waves are further burdening low-income households in the country, which often have poor access to water and cooling, and testing the endurance of outdoor workers toiling in the searing sun, forcing them to take frequent breaks.
Experts say outdoor workers, the elderly, and children are at higher risk of heat exhaustion and heatstroke. According to the World Health Organization, more than 1,66,000 people died as a result of heat waves between 1998 and 2017.
Chandrabhushan, from not-for-profit organization International Forum for Environment, Sustainability and Technology told Moneycontrol that construction activities are being halted when it gets too hot.
Heatwaves can also impact India’s GDP growth.
Al Jazeera quoted a 2023 study from Cambridge as warning that extreme heat could result in a 15 per cent loss in “outdoor working capacity.”
This could bring down the quality of life of up to 480 million people and result in a loss of 2.8 percent of gross domestic product by 2050.
Economic Times reported that around 50 per cent of India’s GDP is already dependent on heat-exposed work mainly due to vulnerable sectors such as agriculture, mining, construction and, to a considerable extent, manufacturing.
On farmers, vegetable prices and inflation
The punishing heat is straining power grids and drying up water bodies, triggering drought-like conditions in parts of the country.
According to the Central Water Commission, water storage in 150 major reservoirs in India plunged to their lowest level in five years last week, exacerbating water shortages in many states and significantly affecting hydropower generation.
According to Moneycontrol, water levels are down to 35 per cent of their storage capacity.
In the first week of April, 61.801 billion cubic metres of water was available.
That figure was 17 per cent down from the same period last year.
Things are even worse in South India where 42 reservoirs are at 23 per cent capacity.
Madan Sabnavis, chief economist, Bank of Baroda, told the outlet, “Lower water reservoir levels impact access to drinking water, access for farming activity. Heatwaves impact fodder cultivation, horticulture, vegetable prices. This could also be inflationary with ramifications for the monetary policy.”
The outlet quoted the RBI as saying it was worried about food inflation as a result of the heatwave.
It quoted Vivek Kumar of independent research firm QuantEco as saying that vegetable prices could go up in a month.
“A heat wave could potentially slow the disinflation process and keep prices of vegetables elevated,” Teresa John, an economist at Nirmal Bang Institutional Equities Pvt, told Bloomberg.
Heatwaves also impact other areas.
Chandrabhushan said farmers are becoming more impoverished in areas that receive more extreme weather.
Heatwaves can also burden India’s healthcare system.
According to India Today, conditions such as heat exhaustion, heatstroke, and other heat-related illnesses can be life-threatening.
This may results in hospitals being overrun by patients during heatwaves.
On electricity grid
India could also require more power.
According to Economic Times, the power ministry says peak demand in the country could reach 260 GW this summer.
That figure was at a record high 243 GW last September.
Due to an all-time high expected in power demand, Union power minister officials are holding review meetings on the anticipated situation of extreme heat wave in the country with other ministries like railways and coal and power companies, PTI reported.
According to Economic Times, India being unable to meet its demand for power could lead to cuts in parts of the nation.
This, of course, would reduce productivity of workers as well as halt production in industry.
Studies show India also faces food losses worth $13 billion per year, with only four per cent of fresh produce covered by cold chain facilities.
On businesses
But some businesses are set to benefit.
Some businesses including AC and refrigerator manufacturers could do really well.
Economic Times reported that AC manufacturers expect to sell over 1.15 crore units this year.
“Favourable weather forecast of a scorching summer” and spike in disposable income are likely to increase sales, they said.
Top brands such as Daikin, Panasonic, LG Electronics, Blue Star, Godrej Appliances and Lloyd say they think they will see 25 per cent growth this year.
Tier-III towns and smaller centres will massively contribute to this.
This, in turn, is expected to create more jobs.
“Whenever demand for cooling products increases, it does lead to higher demand for workforce across the value chain – whether it’s manufacturing, retail, installation or after-sales,” Kamal Nandi, business head and executive vice president at consumer durables and appliances maker Godrej Appliances, told Economic Times. “We are prepared to ramp up the temp workforce across the value chain.”
Future impact
Studies show things could get far worse in the future.
According to a World Bank report, India could account for 34 million of the projected 80 million global job losses from heat stress-associated productivity decline by 2030.
With 75 per cent of workers in India experiencing heat-related stress, lost labour from rising heat and humidity could result in a loss of up to 4.5 per cent of India’s Gross Domestic Product (GDP) (equivalent to approximately $150-250 billion) by the end of this decade, according to a report by the McKinsey Global Institute.
Experts say India needs to prepare itself.
“India has already done quite a bit in terms of heat mitigation – they actually now recognise heatwaves as part of their disaster relief package,” University of Cambridge’s Ramit Debnath told Reuters. “But there’s a need to optimise the pace of these plans.”
“The adaptation measures that are being put on paper are quite substantial… and I think they have a very strong solid plan, but it’s how they are implemented.”
With inputs from agencies
