Heatwaves may not hinder India’s growth

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The ongoing heatwave in unlikely to affect India’s growth prospects, according to a few experts. While agriculture fields may suffer and construction activity may be effected by the heatwave, experts believe that various other factors could mitigate these challenges. The heatwave is expected to have its effect on several fronts, including health issues, mortality rates, social consequences, environmental repercussions, and economic implications, all of which are well-documented.

India, being a country accustomed to various weather extremes, has developed resilience in many sectors to cope with heatwaves. While a heatwave can certainly pose challenges, India’s resilience, diversified economy, technological advancements, and adaptive strategies in various sectors can collectively help minimise its impact on overall growth.

According to a report in The Economic Times, the construction sector played a significant role in India’s economy, contributing approximately 9% to the gross domestic product (GDP) in the fiscal year 2023-24. Economists have pointed out that a slowdown in construction activity could have ripple effects on ancillary sectors such as cement and sanitary-ware, which collectively contribute another 8-9% to the GDP.

According to the experts impact of the slowdown might be confined to regions experiencing severe heat conditions. In areas where the heatwave is less severe or where preventive measures are in place, the construction sector and its ancillary industries may not experience as significant a slowdown. This localised impact underscores the importance of regional factors and adaptive strategies in mitigating the broader economic effects of the heatwave on specific sectors.

As per the recent report by the World Bank, it forecasts that the economy of South Asia will expand by 6% in 2024, with India expected to achieve a growth rate of 7.5%. This outlook suggests a relatively lower hindrance to growth for India. However, the report also notes a concerning trend: a 15% decrease in labor participation during hot days in India. Nevertheless, this decline could be mitigated if factories implement climate control technology.

A report published by the Reserve Bank of India (RBI) last year highlighted the risk of up to 4.5% of the country’s GDP being at stake by 2030 due to lost labour hours caused by extreme heat conditions. In 2021, heat exposure in India led to the loss of 167 billion potential labour hours, another report revealed that India faced the highest earnings losses resulting from heat-related reductions in labor capacity among G20 nations in 2021. This emphasizes the significant economic impact of extreme heat on labour productivity and highlights the urgency of implementing measures to mitigate its adverse effects on the workforce and the overall economy.

The India Meteorological Department (IMD) has forecasted that the country is expected to encounter “above normal heatwave days” during the period between April and June. This prediction is attributed to the prevailing El Niño conditions.

So, One of the significant economic impacts of heatwaves is the reduction in labour capacity. High temperatures can lead to heat stress, exhaustion, and even heat-related illnesses among workers, reducing their productivity and ability to work efficiently. This decline in labour capacity can directly affect industries reliant on manual labour, such as agriculture, construction, and manufacturing.