NCDEX and IMD form alliance for the introduction of India's premier weather derivative product
The National Commodity & Derivatives Exchange Limited (NCDEX) and the India Meteorological Department (IMD) have joined forces to develop India's first weather derivatives, aimed at enhancing risk management in agriculture and other climate-sensitive sectors.
The collaboration, announced on June 26, 2025, marks a significant step towards creating market-based tools to manage risks from irregular rainfall, extreme heat, and unpredictable weather events.
### Details of the Weather Derivatives
The instruments, which will include rainfall-based derivatives, will be developed using historical and real-time weather data sourced from IMD. These datasets are rigorously graded and quality-verified, allowing for high-precision insights that statistically mimic actual weather conditions.
The derivatives will be seasonal and location-specific, tailored to align with crop cycles, particularly considering India's southwest and eastern monsoon patterns. This tailoring enhances accuracy and relevance for farmers and allied sectors.
### Benefits of the Weather Derivatives
The weather derivatives are expected to offer several benefits. Firstly, they will provide farmers and agribusinesses with a market-based tool to hedge against adverse weather impacts, such as crop failures or income losses, thereby improving income stability and resilience.
Secondly, by integrating precise weather data into financial products, these derivatives will support the development of climate-resilient agri-markets, helping stakeholders adapt to increasingly volatile climate conditions.
Thirdly, the derivatives are expected to benefit not only agriculture but also transport and other weather-sensitive allied industries by providing mechanisms to manage weather-related risks.
The partnership also includes capacity-building initiatives, joint research, and training programs targeted at farmers’ producer organizations (FPOs), agri-traders, policy think tanks, and analysts, enhancing the overall ecosystem for weather risk management in India.
Lastly, this collaboration marks the introduction of India’s first weather-indexed futures, a pioneering step to leverage precision meteorological data in financial markets for climate risk mitigation.
In summary, the NCDEX-IMD alliance is a significant innovation designed to empower Indian farmers and climate-sensitive sectors with effective tools to hedge against weather risks, thereby fostering a more resilient and sustainable agricultural economy in the face of climate variability.
farmers can use these weather derivatives as a tool to hedge against adverse weather impacts, such as crop failures or income losses, in the finance sector
the development of these weather derivatives will support the creation of climate-resilient agri-markets and help stakeholders adapt to increasingly volatile climate conditions in the business sector.
