The resurgence of El Niño conditions coupled with record-breaking heatwaves, extreme rainfall, and recurring floods have underscored a new reality – climate change is not just an environmental challenge but also an economic risk. Across India, businesses are increasingly grappling with disruptions caused by rising temperatures, erratic rainfall, and extreme weather events. While much attention is given to the impact of climate change on agriculture and infrastructure, a critical pillar of India’s economy is often overlooked.

Micro, small, and medium enterprises (MSMEs) form the backbone of India’s manufacturing supply chains, connecting local production systems to national and global markets. Currently, MSMEs contribute nearly 31 percent of India’s Gross domestic Product and support over 32.8 crore people. Yet, these enterprises remain among the most vulnerable to climate risks.

What the Evidence Suggests

A recent WRI India report, Resilience of Micro, Small, and Medium Enterprises to Climate Risks, examines how extreme heat and flooding are affecting more than 300 MSMEs across Surat, Chennai and Coimbatore. The findings point to a growing reality of climate affecting productivity, supply chains, worker well-being and long-term competitiveness.

Floods and extreme rainfall are increasingly disrupting business operations, damaging inventory and equipment, and causing production delays. More than 90 percent of enterprises directly affected by flooding reported operational disruptions, while nearly three-fourths experienced temporary business closures. However, climate impacts are no longer limited to physical damages alone. Even facilities untouched by floodwaters can suffer substantial losses when transport networks become impassable, power supply is interrupted, supply chains are disrupted, and workers are unable to reach their workplaces. These indirect impacts create ripple effects across entire industries, amplifying economic losses.

Extreme heat presents an equally pressing challenge for 92% of the surveyed MSMEs. Rising temperatures increase energy costs, reduce operational efficiency, and affects machinery and production........

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