Hedging the harvest: Why India needs a COP30 push for weather risk markets
India stands at a crossroads where weather volatility is no longer an occasional nuisance but a structural threat to incomes, food prices and supply chains. The Economic Survey notes that agriculture provides livelihood support to roughly 42 per cent of the population while contributing about 18 per cent of GDP, which means systemic weather risk has direct distributional and macroeconomic consequences.
If climate diplomacy is to be judged by its ability to protect lives and livelihoods, the 30th Conference of the Parties (COP30) to the United Nations Framework Convention on Climate Change should be used to convert high-level pledges into a pragmatic market architecture that ensures cash flows across the agrifood value chain. The Intergovernmental Panel on Climate Change (IPCC) Sixth Assessment Report, Working Group II, makes plain that agricultural systems are highly vulnerable to temperature extremes, erratic rainfall and compound events, and that adaptation must incorporate financial instruments as well as physical measures.
There are encouraging building blocks to work with. In July 2025, the National Commodity & Derivatives Exchange (NCDEX) and the India Meteorological Department (IMD) signed a memorandum of understanding to develop parametric weather products, which demonstrates that exchange-traded weather instruments are now feasible in India. At the same time, the Climate Policy Initiative’s Global Landscape of Climate Finance 2024 documents persistent shortfalls in adaptation finance and the need for innovative instruments to crowd in private capital to climate resilience. These two realities should be combined, not treated separately.
Policymakers must be blunt about two truths: first, the economy already pays a high price for extreme weather; the Economic Survey and other government assessments have estimated annual climate-related losses in the order of US$9-11 billion, most of which remains uninsured; second, conventional indemnity insurance alone cannot absorb these losses at scale. Together, these findings argue for a layered approach that pairs certified, audit-grade weather indices with exchange-traded parametric contracts and a public or multilateral backstop for catastrophic layers.
Design and governance matter more than slogans. Index methodology should be certified by a trusted public agency and made fully transparent so that payout triggers are indisputable. Contract specifications on exchanges must map to the real cash-flow rhythms of farmers, processor working capital and trader exposure, while clearing houses should set margin and settlement rules that do not amplify stress in crisis. Blended finance vehicles seeded at COP30 can de-risk early flows, making weather markets investible for institutional investors that now view climate exposure as unbankable. The Food and Agriculture Organizations’s State of Food Security and Nutrition reports underscore the financing gap for resilient food systems and strengthen the case for targeted climate-financial instruments that protect food security as well as balance sheets.
Regulatory clarity is urgent. SEBI, the insurance regulator and the Union Ministry of Finance should issue a joint roadmap on tax treatment, capital charges and eligible participants, including farmer-producer organisations and small processors. Clear rules would reduce counterparty risk, broaden participation and deepen liquidity, which in turn lowers hedging costs. Industry must be nudged to treat hedging as a sound working capital strategy rather than a compliance exercise or philanthropic gesture. When agribusinesses actively manage climate risk, supply chains stabilise and smallholders gain predictable markets and incomes.
COP30 is a diplomatic window that should yield not just declarations but a time-bound operational plan to standardise indices, list credible parametric contracts, clarify regulation and seed a sovereign-backed blended finance bridge. If India can pursue that agenda, it will protect millions of livelihoods, reduce volatility in food prices and create a scalable template for other emerging markets. It will also signal that global climate diplomacy can translate into concrete frameworks for financial resilience rather than rhetorical ambition. A decisive Indian initiative on weather risk markets would position the country as a regional hub for climate finance innovation, linking domestic exchanges with global adaptation funds. That is how climate diplomacy turns from negotiation to implementation and from pledges to protection.
Sushanta Mahapatra teaches economics at ICFAI School of Social Sciences, IFHE
Madan Meher (PhD in Economics) is a former Senior Research Fellow at GMU
Views expressed are the authors’ own and don’t necessarily reflect those of Down To Earth