RISING URBAN HEAT AND ECONOMIC VULNERABILITY IN INDIA

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Context

Indian industry leaders and financial institutions warned that rising urban heat poses a major economic threat.

What are  the Economic Impact of Rising Urban Heat

Direct GDP Loss: India faces a potential GDP contraction of 2.5% due to unmanaged heat stress. This is amplified by productivity losses.

Labour Productivity Collapse: The International Labour Organization (ILO) projected that by 2030, India could lose 5.8% of its working hours due to heat stress, equivalent to 34 million full-time jobs.

• Sectors like agriculture, construction, and manufacturing are most vulnerable, as manual labour capacity drops above 35°C.

Supply Chain Disruptions:

• Textile Sector: Employing over 45 million people, faces "heat-exposed supply chains." High temperatures increase fire risks, damage worker health, and cause production halts.
• MSMEs: Micro, Small, and Medium Enterprises often lack the capital to invest in cooling infrastructure (like air conditioning), making them susceptible to operational shutdowns during heatwaves.

Heat as a "Material Financial Risk" in the Banking Sector

• Evolving Credit Risk: Banks like the Union Bank of India have identified heat as a critical climate hazard. 
• If a business (e.g., a factory) cannot operate due to extreme heat, its ability to repay loans is compromised, increasing the risk of Non-Performing Assets (NPAs) for the bank.
• RBI's Climate Framework: The Reserve Bank of India (RBI) is developing a comprehensive climate risk framework. The RBI has estimated that without adaptation, climate change could reduce India's GDP by up to 4.5% by 2030.
• Increased Insurance Liability: According to the Centre for Science and Environment, India experienced environmental disasters on 331 out of 334 days in 2025, increasing the financial burden on insurers.

What is the "Urban Heat Island" (UHI) Effect?

The Urban Heat Island (UHI) effect occurs when cities become warmer than surrounding rural areas. This phenomenon exacerbates the heat crisis in urban centres.

Key Causes of the UHI Effect

Concretization: Urban materials like concrete and asphalt absorb and retain more heat than natural landscapes, releasing it slowly at night and preventing cities from cooling down.

Loss of Green and Blue Cover: A study by the Indian Institute of Science (IISc) in Bangalore showed an 88% loss of vegetation and a 79% loss of water bodies between 1973 and 2017, leading to a sharp rise in local temperatures.

Anthropogenic Heat: Waste heat released from air conditioners, vehicles, and industrial processes creates a feedback loop, further increasing ambient temperatures in cities.

Socio-Economic Consequences of the Heat Crisis

Gender Disparity: Women form a large part of the workforce in heat-exposed sectors like agriculture and brick kilns, making them more vulnerable to heat-related health issues, including adverse effects on pregnancy.

"Thermal Apartheid": A growing divide exists between those who can afford cooling (ACs) and the urban poor, who often live in homes with tin roofs where temperatures can be 4-5°C higher than outside.

Constitutional Right: Inequity links directly to the Right to Life (Article 21). The Supreme Court, in the M.K. Ranjitsinh vs Union of India case, recognized the right to be free from the adverse effects of climate change as part of Article 21.

Way Forward 

A multi-pronged approach to climate resilience is essential because it is economically sound, with every dollar invested potentially returning up to $19 by preventing losses. (Source: WEF)

Urban Planning and Governance

• Mandate "passive cooling" designs in building codes (like the Eco-Niwas Samhita) to reduce dependence on ACs.
• Protect and restore urban wetlands and green spaces to act as natural coolants.
• Implement hyper-local heat monitoring at the ward level to enable targeted interventions instead of relying on city-wide averages.

Financial and Industrial Reforms

• Banks should adopt Green Deposits and conduct climate-risk stress tests for loan portfolios.
• Introduce Parametric Insurance for labourers, which provides automatic payouts when temperatures cross a pre-defined dangerous threshold.
• Amend the Factories Act, 1948, to mandate "heat breaks," access to water, and cooling shelters in industrial units during extreme heat.

Conclusion

To achieve the $5 trillion economy goal, economic planning must shift from reactive disaster management to proactive integration of heat resilience.

Source: DOWNTOEARTH