On August 9, Cailian Press reported (Editor: Liu Rui) that India seems to be facing a fierce 'roadblock' to its economic growth: high temperatures.

High temperatures are affecting the growth of Indian companies.

So far this earnings season, 46 out of the 50 companies included in the NSE Nifty 50 Index have released their quarterly results as of June 30.

Of these companies, about half of them have reported earnings lower than the average analyst expectations, a significant increase from Q1 2019 when only 39% of Nifty 50 companies performed worse than expected.

One reason behind this could be the high temperatures.

In the 500 companies included in the Nifty 500 Index, at least 80 have mentioned the topic of 'heatwave' in their earnings conference calls, a record high compared to only 7 companies during the same period last year. This increase indicates the significant challenge that high temperatures are posing to business operations this year.

This summer, India experienced near-record high temperatures with devastating heatwaves hitting most parts of the country, including financial center Mumbai and the capital, New Delhi. The temperature in New Delhi once surpassed 52 degrees Celsius, causing dozens of deaths due to heatstroke.

Evidently, extreme heat is having a negative impact on various industries in India: retail stores are experiencing a sharp drop in customers, construction companies' labor productivity is declining, and loan institutions are finding it harder to collect loans.

For instance, Indian food delivery company Zomato Ltd. has said that the heatwave is one factor contributing to the continuous decline in its profit margins. Infrastructure giant Larsen & Toubro Ltd. has also said that due to the impact of high temperatures, it has to let workers shift in the morning and evening to reduce the risk of heatstroke.

Of course, there are also beneficiaries under extreme heat conditions. For example, home appliance manufacturer Whirlpool India Ltd. and voltage stabilizer manufacturer V-Guard Industries Ltd. have benefited from the surge in demand caused by the heatwave. In addition, power companies, including India's state-owned NTPC Ltd., have said that their second-quarter power income was better than expected, partially due to record summer demand.

Jonathan Garner, Morgan Stanley's chief stock strategist for Asia and emerging markets, said that when investors ask about the biggest risk to the Indian stock market's rebound, 'I tend to mention one risk, which is climate change.'

The situation for India's future will only become more severe.

In fact, high temperatures have always been one of the important reasons that have plagued India's development. Aanandita Sikka, an analyst at international climate policy organization Climate Policy Initiative, wrote in a report:

"Between 2001 and 2020, India lost 259 billion hours of labor due to heatwaves. In 2022, the heatwave reduced India's wheat production by 15-20% and milk production by 15%. At the same time, because high temperatures make chicken more perishable, farmers are rushing to sell their surplus chicken and the price of chicken has fallen by 50%...In addition, a study by Cambridge University found that the 2022 heatwave increased the likelihood of health problems and deaths for nearly 90% of Indians."

Moreover, due to the expected surge in extreme weather events, the future for Indian enterprises will only become more severe.

According to the 'Climate Risk Map' released by the G20, India's heatwave duration will increase by 25 times in the next 30 years, and the number of deaths related to high temperatures will be 25 times higher than in 1990.

The heatwave will also destroy rice and cereal crops in India. By 2050, it will cost INR 7 trillion (about RMB 598.1 billion) to destroy crops, resulting in a 15% loss of farmers' income.

In addition, as over 64 million people live in low-lying coastal areas, extreme flooding will cause over INR 6 trillion (approximately RMB 512.7 billion) in losses.

Despite the fact that half of the companies' quarterly earnings were lower than expected, the recent decline in India's Nifty 50 Index has been limited. Since the beginning of the year, the index has accumulated a total increase of 12.12%.

India's Nifty 50 index performance since the beginning of the year.

"We have found that the market prices climate risks inconsistently," said Vlad Byalik, emerging markets value investment portfolio manager at Ariel Investments LLC. "The market often overreacts to short-term events and has insufficient understanding of long-term trends -- and long-term trend risks are to some extent caused by climate problems."