The Heat Tax: India, South Asia, and the New Economics of Heat Readiness

Extreme heat is no longer just a seasonal hardship in South Asia. In India alone, it cost an estimated 247 billion potential labor hours in 2024, according to the Lancet Countdown. The World Bank projects it could erase 34 million jobs by 2030, and that heat-related spoilage already destroys close to $13 billion in food each year. Heat has become a structural economic constraint—and a test of whether governments, firms, philanthropies, and development finance institutions can fund prevention before the losses become unavoidable.

Across the region, rising temperatures are reducing safe working hours, raising electricity and cooling demand, straining water systems, disrupting schools and caregiving arrangements, and weakening agricultural and urban productivity. In one of the world’s most populous and economically dynamic regions, heat is emerging as a hidden tax on labor, cities, food systems, water security, and competitiveness.

The 2026 heat season has made this harder to ignore. From mid-April into May, India and Pakistan experienced extreme pre-monsoon heat, with daily maximum temperatures exceeding 46 degrees Celsius, or nearly 115 degrees Fahrenheit, in many Indian cities. The heat drove record-high electricity demand as cooling needs surged and coincided with agricultural drought conditions affecting more than 1 million square kilometers. As of late June, India is facing a delayed and uneven monsoon, with rainfall about 43 percent below average and the government preparing contingency plans for more than 300 districts vulnerable to low rainfall and irrigation shortages. Monsoon patterns may shift as the season progresses, but the structural point holds: Heat, rainfall volatility, water demand, power stress, and food production are converging.

While many South Asian governments are doing more on the issue than they were a decade ago, heat is still too often treated as an episodic hazard rather than a chronic operating condition. Episodic hazards require warnings, emergency protocols, hospital preparedness, school closures, and public health messaging. Chronic heat requires something more demanding: heat-safe work, heat-resilient schools, passive cooling in housing, water and crop planning under hotter baselines, grid readiness for cooling demand, and financing models that favor funding prevention rather than response.

India as the Bellwether: Lost Labor and Uneven Burdens

India is one of the world’s fastest-growing major economies, with a young workforce, expanding cities, rising manufacturing ambitions, and growing demand for power, transport, housing, and digital infrastructure. But many of the sectors that anchor its economy and employ the bulk of its workers are highly exposed to heat: agriculture, construction, logistics, transport, small manufacturing, and other labor-intensive services. A large share of the workforce remains informal, outdoor, or inadequately protected from high heat and humidity.

The damage runs deeper than any single number. Of the 247 billion potential labor hours lost to extreme heat in 2024, agriculture—India’s largest employer—accounted for roughly two-thirds, and construction, one of its fastest-growing sectors, for about one-fifth. By the World Bank’s projection, India could absorb 34 million of 80 million global job losses tied to heat stress-related productivity decline by 2030. These numbers should shift the policy conversation. Extreme heat is not simply making life uncomfortable; it is reducing potential output, lowering incomes, raising costs, and constraining growth.

South Asia’s growth model depends heavily on labor-intensive sectors, and extreme heat threatens the number of safe, productive labor hours available to the economy. That makes heat a competitiveness issue. If workers cannot safely work during large parts of the day, output falls, wages decline, health costs rise, and firms absorb new costs from delayed projects, absenteeism, cooling, and turnover. India’s manufacturing, infrastructure, and logistics ambitions will increasingly depend on whether workplaces, construction sites, warehouses, transport networks, and industrial zones can function under higher temperatures.

The burden will not fall evenly. Outdoor and informal workers, women, small farmers, construction crews, delivery and domestic workers, and people in dense low-income urban settlements will bear disproportionate costs. In a hotter South Asia, cooling access will increasingly determine who can work, learn, move, store food, and stay healthy. Heat resilience is therefore not only a climate issue, but also a new frontier of economic inclusion.

Recent heat-related school closures in India reveal one of the least visible economic channels. When classrooms become too hot to use, caregiving burdens rise, women’s paid work becomes harder to sustain, and children lose learning time. Closures across Delhi and many Indian states are pushing more unpaid care work onto women, forcing some to reduce paid work or leave jobs altogether. Current heat planning tends to miss this type of cascading cost.

Heat Action Plans: What Works and What Doesn’t

There is important work underway. India has made real progress through heat action plans, early warning systems, and city-level adaptation. Ahmedabad’s heat action plan—developed with the Ahmedabad Municipal Corporation, the Indian Institute of Public Health Gandhinagar, and the National Resources Defense Council—remains a widely cited model. Organizations including the Council on Energy, Environment, and Water (CEEW); World Resources Institute India; Mahila Housing Trust; the Sustainable Environment and Ecological Development Society; National Resources Defense Council India; the Global Heat Health Information Network; and the Coalition for Disaster Resilient Infrastructure (CDRI) are advancing heat risk mapping, cool roofs, school resilience, infrastructure planning, and community preparedness. For example, CDRI’s Heat Smart Schools framework treats schools not only as education assets but as infrastructure that must remain usable under extreme heat.

These efforts matter, but they also reveal the next challenge. Too much heat work remains focused on alerts, awareness, and emergency response, while too little funding reaches implementation, infrastructure, enforcement, and economic adaptation. Heat action plans often lack dedicated budgets, legal authority, ward-level data, worker protections, or clear accountability. A CEEW assessment found that many of India’s first-generation heat action plans lack detailed risk assessments, making it difficult to identify high-risk areas and allocate resources effectively.

The accountability gap is central, but government systems are rarely organized around cross-cutting risks. Health departments issue advisories, meteorological agencies provide warnings, disaster authorities coordinate response, city governments run cooling centers, schools close, and employers adjust hours. Yet no single institution is usually accountable for whether workers are protected, classrooms stay usable, water points function, cool roofs are installed, or heat plans are funded and enforced. This is a familiar governance problem: Everyone owns a piece of the heat agenda, but no one owns delivery.

The Global Financing Gap

That accountability problem now sits inside a far harsher financing environment. Foreign aid is contracting sharply. Official development assistance fell 23.1 percent in 2025, the largest annual decline on record, with bilateral grants falling fastest of all. The CSIS Global Development Department has detailed how U.S. foreign assistance cuts have reshaped the development landscape, including the loss of billions in funding. Heat readiness is the kind of prevention agenda that falls through the cracks when aid budgets contract.

The funding gap is not only about volume, but also about what kinds of resilience are considered financeable. Early warning systems, climate analytics, and pilots are easier to fund than the infrastructure that keeps people cool. Air conditioning has a market; shade, rest, hydration, ventilation, and public water often do not. Some of the most equitable and productivity-enhancing solutions remain underfunded precisely because they are preventive.

Making Prevention Investable

Heat is not a problem any country can solve alone. Hotter baselines disrupt the same supply chains, food markets, labor flows, and migration patterns that connect South Asia to the global economy, which makes heat readiness a shared economic interest rather than a question of aid or outside intervention. India does not need rescuing—it is positioned to codesign and export the financing models a warming world will need. The opening is for the United States, India, philanthropy, multilateral development banks, and private capital to build that architecture together. With grant budgets shrinking, prevention cannot depend on traditional aid alone. It will require financing models that make avoided losses investable, and South Asia—with India at the center—is well placed to build them.

India is already pioneering heat-specific versions of this financing framework. Blended structures (e.g., pooled facilities, first-loss philanthropic capital, guarantees, viability-gap funding, and pay-for-performance) have long been used to draw private and concessional money toward outcomes that markets alone would not fund. The Self Employed Women’s Association, India’s largest union of informal women workers, partnered with the nonprofit HERA (formerly Climate Resilience for All) and the reinsurer Swiss Re to build a parametric heat-income insurance that pays members automatically when temperatures cross dangerous thresholds, with philanthropic capital seeding a commercial product that has scaled from 21,000 women in Gujarat in 2023 to roughly 225,000 across seven states in 2025. Enterprise-capital pairing has been proven at scale in adjacent sectors, where the U.S. Agency for International Development–backed Sustainable Access to Markets and Resources for Innovative Delivery of Healthcare facility assembled some $300 million in blended capital for market-based health solutions. The same architecture can finance heat readiness. A worker rest station, a school retrofit, or a cool-roof program rarely generates commercial returns on its own, but each one reduces lost workdays, prevents hospitalizations, protects learning time, lowers energy demand, and sustains household income. Those benefits can be measured, aggregated, and used to justify outcome-based payments or concessional finance.

Pooled municipal or state heat-resilience facilities could finance these interventions in packages rather than one at a time. A single state-level facility could bundle school cooling retrofits, cool roofs, passive cooling for affordable housing, shaded markets, worker rest stations, cold-chain upgrades for small producers, and ward-level heat risk data into one investment package. Public and philanthropic capital could absorb the early risk, with outcome payments tied to measurable results such as reduced school closures, lower indoor temperatures, or fewer heat-related work disruptions. Public, philanthropic, and concessional finance are poised to make the most socially valuable interventions deliverable at scale, and to prove models the wider region can adapt.

The Strategic Stakes

This also carries strategic weight. Adaptation finance is becoming part of geopolitical competition. Infrastructure choices in South Asia will shape resilience, debt, supply chains, energy demand, and political alignment for decades. If the United States and its partners retreat from prevention finance, other powers—China foremost among them—will help define the region’s adaptation infrastructure. For the United States, supporting India and South Asia’s heat readiness strengthens economic resilience, deepens strategic partnerships, supports more stable supply chains, and demonstrates that democratic partners can deliver practical solutions to the climate stresses now shaping daily life.

A heat readiness agenda should therefore prioritize three moves:

First, assign delivery accountability. Heat action plans need named lead agencies, dedicated budgets, measurable targets, public reporting, and clear triggers for action. Cities should know which wards are most exposed, which schools are unsafe, which workers are most vulnerable, which water points are operational, and which agencies are responsible before, during, and after heat events. National governments should track heat-related potential labor losses, school closures, hospitalizations, water stress, power demand, and food losses as economic indicators, not only disaster statistics.

Second, finance what prevention actually requires. Development finance institutions, philanthropies, and governments should move beyond pilots and advisories toward pooled implementation vehicles for passive cooling, school retrofits, heat-safe workplaces, cold chains, urban water access, and local data systems. Many of these interventions will never be bankable on their own; they are worth financing because they prevent losses.

Third, treat India as a heat readiness test case for the region. Bangladesh offers a warning: In 2024, heat-related physical and mental health conditions led to an estimated 250 million lost workdays and cost the economy up to $1.78 billion, about 0.4 percent of GDP. Pakistan faces severe heat risk alongside water stress, agricultural vulnerability, and power constraints. Nepal and Bhutan confront glacier loss, hydropower dependence, and downstream water security. India’s scale, financing ecosystem, digital capacity, and federal structure make it the most important place to test models that could inform the broader region.

Extreme heat will not stop India or South Asia’s growth. But it will change the terms of growth. The countries that adapt fastest will be better positioned to protect workers, manage water, stabilize food systems, attract investment, and sustain productivity. Those that treat heat as a seasonal inconvenience will face rising costs, deeper inequality, and avoidable economic losses.

The heat economy has already arrived, and its bill is coming due—the 247 billion potential labor hours India lost to heat in 2024 is only the first installment. The question is whether South Asia’s governments and cities, together with the United States, multilateral development banks, philanthropies, and private capital, will price the risk, assign responsibility, and finance readiness before the hidden tax becomes impossible to ignore.

Anjali Kaur is a senior associate (non-resident) with the India and Emerging Asia Program at the Center for Strategic and International Studies in Washington, D.C.