What Happens to an Economy When It’s Too Hot to Work?

AKI Chief Executive Officer Asad K. Iraqi has his 100 workers drink oral rehydration salts solution twice a day, and he recently invested in additional cooling systems. But it’s not enough. Some workers are falling sick, while others are returning to their villages.

“My productivity is down 40%,” Iraqi says, his brow glistening with sweat. “Workers can’t survive in this heat without proper hydration and cooling.”

It’s a scene playing out across India as summers become increasingly unlivable. Heat and humidity have been rising for years, and on any given day last month, the vast majority, sometimes all, of the world’s 50 hottest cities were in India. The impact is showing up across the economy, from operating costs to inflation and power demand.

In April, the federal government issued a heat advisory directing businesses to reschedule working hours, provide hydration breaks and rest areas, and slow the pace of work. Schools, most of which don’t have air conditioning, closed for summer vacations weeks earlier than usual in several states or revised timetables and shifted classes online.

India is emerging as one of the clearest examples of how extreme heat can become a structural economic constraint, particularly for developing economies dependent on physical labor. Unlike richer countries where growth is increasingly driven by services and indoor work, large parts of India’s economy — from construction and manufacturing to agriculture and logistics — still rely on millions of workers spending long hours outdoors or in poorly cooled environments.

Lost labor from rising heat and humidity could jeopardize 2.5% to 4.5% of India’s gross domestic product by 2030, according to a 2020 study by the McKinsey Global Institute. A University of Chicago study published in 2021 found factory output in India fell by about 2% for each 1C rise in temperature amid reduced worker productivity and increased absenteeism. The Lancet Countdown on Health and Climate Change estimated that 247 billion potential labor hours were lost in India due to heat exposure in 2024, an increase of 124% from the 1990-99 annual average.

For Mumbai-based labor contractor Taposh Dey, soaring temperatures are reshaping construction work schedules. Outdoor work is routinely pushed to early mornings or late evenings, while developers who once planned mainly for monsoon disruptions are now also accounting for heat.

While the impact is especially severe for small firms operating from tin-roofed workshops and poorly ventilated factories, larger companies are also having to adapt.

Hyundai Motor India Ltd. has installed air conditioning on the shop floor of its Pune plant and aims to do the same at its Chennai facility by early 2027. The company has introduced shuttle buses to carry people around the plant, installed cooled drinking-water stations, covered walkways and heat-resistant roofing, and structured work-rest cycles to reduce heat stress, says Chief Manufacturing Officer Gopalakrishnan C.S.

Almost half of the global population will be living with extreme heat by 2050 if the world reaches 2C of global warming above preindustrial levels, according to a University of Oxford study published in January. India will have the largest affected population, says urban climatologist Radhika Khosla, an associate professor who co-authored the study.

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