Temperatures have been as much as 11 degree Celsius above normal in some regions in the past week. Though current elevated temperatures aren’t necessarily a signal of extreme weather to come this summer, a meteorologist told Bloomberg, the unusually high February heat does raise an alarm.
If you also consider the possibility of the El Nino weather phenomenon disturbing the monsoon rains this year, as flagged by America’s weather experts recently, this summer could be very hot and dry.
The food economy
Crop yields are threatened by the sudden rise in temperatures in February in different parts of India. At risk are the rabi crops of wheat and mustard. These crops still need lower temperature to mature. If heat spoils these rabi crops and El Nino reduces rainfall this year which can impact kharif crops such as rice and millets, expect inflation to rise. Heat waves also impact transportation of fresh produce. As India lacks sufficient cold chain infrastructure, extreme heat often causes big food losses in transportation.
The fall in crop yields will be a challenge for FMCG companies that produce food products as well as those whose products have a large rural exposure. If heat waves keep inflation high, the RBI’s pivot, when it takes a turn from its rate-hike cycle, may take more time to come. Overall impact on the rural economy may hit prospects of companies that sell products in rural areas such as tractors and motorcycles.
Research agency Crisil has already predicted that cereal prices would remain high in the next fiscal year.
Power sector
The possibility of extreme hot weather also threatens India’s power sector. Rising temperatures mean more use of appliances such as ACs and motors to pump out groundwater which makes electricity scarce which, in turn, hits the working of industry too which needs power to operate.
Peak demand for electricity touched 211 gigawatts in January, close to an all-time high last summer when heavy industry emerged from pandemic curbs and the population contended with sweltering conditions that saw a 122-year-old heat record breached, according to a report by news agency Bloomberg. The electricity demand may rise 20% to 30% compared to last summer.
More demand for electricity strains thermal plants. All hinges on supply of coal. which accounts for more than 70% of electricity generation in India. Stockpiles at power stations are currently well below a target of 45 million tons that the government asked to be met by the end of March, according to the Bloomberg report.
Labour
A less visible impact of extreme heat is on labour productivity. And it’s not just construction labour that has to work in the open. Nearly 75 per cent of India’s workforce depends on heat-exposed labour, at times working in potentially life-threatening temperatures, says a World Bank report.
That means a big dip in labour productivity across various sectors of the economy. India may account for 34 million of the projected 80 million global job losses from heat-stress-associated productivity decline by 2030, the report says.
Long-term impacts of heat waves on public health, which is a vital asset for the economy, manifest in major economic losses and missed opportunities.
GDP
Extreme heat is responsible for huge loss of daylight working hours in India. As heat is projected to increase in future, it can slice off a big portion of India’s GDP by bringing down productivity. Due to extreme heat, the average number of lost daylight working hours in India could increase to the point where between 2.5 and 4.5 percent of GDP could be at risk annually, shows an analysis by global management consulting firm, McKinsey & Company.
If you add to the loss of working hours, the strain on various sectors of the economy and the resultant loss of productivity, heat waves can pose a major challenge to India’s GDP growth and derail India’s dream of emerging as an advanced economy which requires a consistently good GDP growth.
About 50% of India’s GDP is already dependent on heat-exposed work mainly due to sectors such as agriculture, mining and construction. Even a small dip in GDP growth due to extreme heat in the next fiscal year, just when the Indian economy is trying to emerge from various domestic and global challenges, will mean a serious setback.