How Rising Heat Is Worsening Regional Inequality in India

For years, climate economists have warned that rising temperatures would shave off fractions of economic growth. The damage, at least in mainstream models, often appeared manageable, an erosion of output here, a decline in productivity there.

But a new paper by Naveen Kumar of Centre for Social and Economic Progress and Dibyendu Maiti of Delhi School of Economics argues that India’s economic growth losses due to temperature shocks may be significantly deeper than previously believed.

Their paper, published in the journal Economic Modelling, attempts to reframe the debate on climate change and economic growth by shifting the focus from national averages to the subnational geography of India’s federal economy. The study’s central finding is that a 1°C annual rise in temperature variation reduces India’s economic growth by 3.89 percentage points on average, nearly double that of earlier estimates.

In a country that has long depended on rapid growth as the political and economic answer to poverty, unemployment and welfare, such a figure suggests how deeply entangled climate change is with the mechanics of growth.

The paper arrives at a moment when India is witnessing increasingly violent heatwaves and prolonged dry spells. But unlike many climate-growth studies that rely on pooled national data, Kumar and Maiti descend into the unevenness of India’s states, seasons and sectors.

Their argument is deceptively simple. Climate damage is not distributed evenly because India itself is not economically or institutionally even. Tamil Nadu and Bihar do not possess the same fiscal resilience. Kerala and Rajasthan do not experience the same climatic exposure. Nor do all sectors react identically to rising heat.

The paper, therefore, pushes against the comforting illusion embedded in national averages. Aggregate GDP numbers, it suggests, conceal the differentiated vulnerabilities underneath.

Productivity Weakens First

Instead of treating temperature as an external “shock”, the authors locate climate change inside the production process itself. Their conceptual framework argues that rising temperatures weaken three forms of productivity simultaneously, which are labour efficiency, capital efficiency and ecosystem services.

Workers become less productive under heat stress. Machinery and infrastructure lose efficiency. Ecological systems degrade and reduce their contribution to economic activity. Together, these losses erode total factor productivity, the invisible engine behind long-term growth.

This is where the paper subtly departs from much of earlier Indian climate economics. Previous studies largely examined contemporaneous effects, like what happens to output during a hot year. Kumar and Maiti instead focus on long-run trends. That matters enormously as economies can usually absorb short-term shocks, but persistent declines in productivity are harder to reverse.

They also challenge the econometric assumptions behind earlier climate-growth studies. Most previous models treated states as isolated units and overlooked how climate shocks spill across regions via migration, trade, supply chains and shared weather systems. In a country as interconnected as India, this can significantly understate the economic impact of rising temperatures.

To address this, the paper uses a more sophisticated model, which captures both long-term temperature trends and interdependence across states. Beneath the technical complexity lies a larger argument that India’s climate vulnerability has likely been underestimated because earlier models were too simplistic for the realities of the Indian federation.

And the findings repeatedly point toward asymmetry. Southern and already hotter states appear more vulnerable. Winter temperature changes generate surprisingly large effects. Industrial sectors suffer alongside agriculture, complicating the older assumption that climate damage is primarily a rural problem.

Construction and services also decline, reinforcing a now-growing global literature that heat affects cognitive work, logistics and urban productivity as much as crop yields.

State Capacity Play

The paper’s most politically important contribution may lie elsewhere, in its emphasis on state capacity. It argues that climate adaptation is not only about exposure to temperature but also about the institutional ability to respond. States with stronger fiscal systems, better governance and greater adaptive capacity can mobilise resources to mitigate damage. Those with weaker institutions fall further behind. Climate change, in this reading, becomes a force that widens regional inequality. This transforms climate economics into a question of federalism.

The paper repeatedly returns to the idea that adaptation requires localised governance capacity. Without this, climate shocks translate directly into productivity shocks. In effect, heat punishes weak states more severely.

That insight feels particularly relevant in contemporary India, where interstate inequality has increasingly shaped political discourse. Wealthier southern states already complain about fiscal redistribution and demographic penalties.

Poorer states continue to struggle with low industrialisation and weaker public infrastructure. Climate change, the paper implies, may intensify these tensions by altering growth trajectories unevenly.

There is also a quiet but significant challenge here to India’s national climate narrative. Much of New Delhi’s climate diplomacy focuses on aggregate commitments, such as net-zero targets, renewable capacity. Such macro-level ambitions, however, will remain incomplete unless sub-national adaptive capacities improve.

The paper is not without limitations. Its theoretical model occasionally feels overextended. Some may also question whether long-run econometric projections can isolate climate effects from India’s broader structural transformations over four decades. While it diagnoses vulnerability, its policy prescriptions are relatively broad.

Yet, the paper’s greatest strength lies in how it forces climate economics back into the terrain of institutions and governance. Heat is more than a mere meteorological variable here. It is a force that reorganises development. Climate change may now be reshaping the very possibility of growth.