The City of London’s attention is momentarily diverted from gilt yields this morning to the alarming scenes unfolding in Delhi, where a brutal heatwave has claimed scores of lives. The British consulate has issued an emergency health warning, urging UK nationals to take precautions as temperatures soar past 50 degrees Celsius.
For those of us accustomed to tracking capital flows, this is more than a weather story. It is a stark reminder of the external shocks that can destabilise emerging markets. When a heatwave of this magnitude strikes a major economic hub like Delhi, the consequences ripple through energy markets, agricultural output, and ultimately, fiscal balances. The state government has already reported a surge in power demand, straining an already creaking grid. Expect a spike in coal imports and a widening of India's current account deficit if this persists.
But the immediate concern is human. The British consulate’s warning, while standard diplomatic procedure, underscores the severity. For the expatriate community and business travellers, this is a liquidity event. They will be scrambling for air conditioned refuge, bottled water, and flights out. The local health system, already underfunded, is facing a surge in heatstroke cases. Hospitals are reporting fatalities that the official death toll may never fully count.
From a macroeconomic perspective, India’s policymakers now face a dilemma. Do they subsidise electricity to prevent more deaths, blowing out the fiscal deficit? Or do they let market forces ration power, risking further casualties? The Reserve Bank of India may have to weigh inflationary pressures from food and energy costs against a growth slowdown. This heatwave is a stress test for Modi's economic model.
For British investors with exposure to Indian equities or bonds, the message is clear: factor in climate risk. The market hates uncertainty, and a heatwave of this scale introduces a new variable. I would be looking at insurance stocks, cold storage logistics, and renewable energy plays. But for the average Londoner reading this over their morning coffee, spare a thought for those in Delhi. The bottom line is that some costs cannot be monetised.
This is a tragedy unfolding in real time. The consulate’s advice is sound: stay hydrated, avoid the sun, and check on vulnerable neighbours. But for the broader economy, the heat is on.”
