India, with its tropical monsoon climate, faces heightened vulnerability to natural disasters, particularly floods and cyclones, which not only disrupt daily life but also exert significant financial strain on state budgets. According to research conducted by Ms. Nandini Suresh and her colleagues at the Indian Institute of Technology Bombay, the financial impact of these disasters on Indian states has been severe and growing.
The study, published in the International Journal of Disaster Risk Reduction, evaluates the economic toll ambushed on 25 Indian states over 24 years, from 1995 to 2018. Each year, India typically encounters five to six tropical cyclones, out of which two or three are deemed severe — with disastrous effects proliferated across agriculture, infrastructure, and livelihoods.
Traditionally, financial assessments following disasters relied on estimating damages based on the direct economic losses suffered, including fatalities and the number of individuals affected. This, as highlighted by Ms. Suresh, often leads to inconsistent and biased evaluations. Instead, the researchers developed a Disaster Intensity Index (DII), incorporating data from the Indian Meteorological Department to accurately gauge the strength of cyclones and the severity of floods.
“We relied on data from weather and geographic sources to accurately measure cyclone strength and flood severity,” Ms. Suresh noted, emphasizing the clarity this method brings to evaluating disaster impacts.
Findings from the study indicate disasters lead to increased state expenditures for relief efforts and reconstruction initiatives, coupled with reduced revenues as agriculture and local businesses struggle. This creates cyclical budget deficits, significantly affecting state financial health.
Disasters like floods and cyclones have been responsible for approximately 80% of disaster-related losses within the evaluated period. Coastal states such as Odisha, Andhra Pradesh, and West Bengal, predisposed to cyclones, incur considerable expenditure and revenue losses, often relying on external funding sources. Less disaster-prone areas, like Madhya Pradesh and Chhattisgarh, manage to absorb losses without severe financial repercussions.
The National and State Disaster Response Funds (NDRF and SDRF) are intended to provide financial support during such crises. Still, inefficiencies exist due to burdensome regulations, such as the 25% cap on SDRF allocations for relief operations. Simplifying these processes could greatly amplify the effectiveness and timeliness of disaster relief operations.
Looking forward, the researchers advocate the implementation of innovative disaster risk financing instruments such as resilience bonds, disaster insurance, and catastrophe bonds. These mechanisms can facilitate quick funding during emergencies. “These provide quick funds during emergencies and reduce the need to take external loans after disasters,” Ms. Suresh stated, highlighting the urgency of having such frameworks.
While the uptake of these financial instruments remains sluggish due to low public and governmental awareness, it’s clear there is significant potential for their application. Presently, many states are already taking steps to bolster their disaster resilience. For example, Tamil Nadu recently introduced sophisticated cyclone monitoring systems, and Kerala is adopting climate-responsive urban planning.
The challenges posed by climate change continue to escalate the frequency and intensity of natural disasters, thereby amplifying financial vulnerabilities for many states. The study concludes with the assertion, “By adopting these measures, India can mitigate long-term financial risks…,” reiteration of the importance of preparedness.
With timely investment in infrastructure, early warning systems, and disaster-resilient strategies, India can work toward safeguarding both lives and its economy. These necessary improvements not only provide immediate impacts but also project the nation toward sustainable futures as climate challenges loom ever larger.