chapter 4 general and financial impacts of disasters...

Chapter 4

General and Financial Impacts of Disasters

(Analysis of Data)

4.1 Introduction

A disaster is an extreme disruption of the functioning of a society that causes widespread

human, material, or environmental losses that exceed the ability of the affected society to cope

with its own resources. Some of the definitions of disasters encompass the impacts of disasters.

World Health Organisation (WHO) defines disasters as “any occurrence that causes damage,

ecological disruption, loss of human life, deterioration of health and health services on a scale

sufficient to warrant an extraordinary response from outside the affected community or area.”

According to the Centre for Research on the Epidemiology of Disasters, generally, a disaster is

defined as an unforeseen event that causes great damage, destruction and human suffering, which

overwhelms local capacity, necessitating a national or international level assistance (CRED,

2010).

Disasters are sometimes classified according to whether they are “natural” disasters, or

“human-made” disasters. For example, disasters caused by floods, droughts, tidal waves, earth

tremors, land-slides are generally considered “natural disasters.” Disasters caused by chemical,

transportation or industrial accidents, environmental pollution, political unrest, conflicts between

nations, terrorist activities and fires are classified as “man-made” disasters since they are the

direct results of human action or inaction and social and economic structures. Many a time

natural disasters such as landslides or urban flooding etc. are also caused due to people’s

actions such as environment degradation, developing and over populating urban areas etc.

In order to understand the impacts of disasters, it is necessary to understand the nature of

various types of disasters.

4.2 Natural Disasters

A natural disaster is the occurrence of an abnormal or infrequent geophysical,

atmospheric or hydrological event that affects vulnerable communities or geographic areas,

causing substantial damage, disruption, and perhaps casualties and leaving the affected

communities unable to function normally. Natural disasters include earthquakes, floods,

cyclones, landslides, tsunamis, famines and droughts, volcanoes etc. The Figure 4.1 shows major

disaster instances in India from 1980 to 2010. The Figure 4.2 depicts multi hazard map of India.

From an economic perspective, however, a natural disaster can be defined as a natural

event that causes an obstruction to the functioning of the economic system, with a significant

negative impact on assets, production factors, output, employment, consumption and human

resource.

This chapter focuses mainly on the major impacts caused by the major and representative

instances of the following natural disasters in the period 2001 to 2010:

Tsunami: It is a Japanese term which means "harbour wave". Its derived from the characters

"tsu" meaning harbour and "nami" meaning wave, to describe a system of ocean gravity waves

having a long wave length and period (time between crests), formed as a result of large-scale

disturbance of the sea caused by an earthquake. Figure 4.3 shows tsunami inundation map of

Nagapattinam.

Floods: It is a situation where a normally dry land becomes inundated with water. Floods can be

slow or fast rising but they generally develop over a number of days. Floods can be coastal flood,

river floods or flash floods. The Figure 4.4 portrays various flood prone areas in India.

Earthquake: It is a sudden, violent shaking or movement of part of the earth’s surface caused by

the abrupt displacement of rock masses usually within the upper 10 to 20 miles of the earth’s

surface. The Figure 4.5 gives a picture of earthquake prone regions in India.

Drought: Drought is a condition of abnormally dry weather within a geographical region where

some rain might usually be expected. The Figure 4.6 highlights drought-prone zones in India.

The impacts of disasters have been studied here mainly with a focus on incidences in India. The

statistics at international level has been additionally elicited in order to understand the trends at

global and national level.

Long term as well as short term impacts of natural disasters

In case of cataclysmic disasters, one large scale event causes most of damage or

destruction. Following this event, there may be tremendous amount of suffering and chaos but

things soon begin to improve. This category of disasters includes:

a) Earthquakes

b) Floods

c) Cyclones

In case of long term or continuing disasters, the situation after the event remains constant or may

even deteriorate as time passes. These mainly include:

a) Droughts

Drought impacts crop growth, food grain availability and development at different levels

including soil moisture uptake, root growth, shoot growth, various plant processes such as

photosynthesis, respiration, plant water uptake and final yield. The impacts of drought become

more severe as a result of development processes and population rise. Droughts often stimulate

sequences of actions and reactions leading to long-term land degradation.

Major Disaster instances in India from 1980-2010

(Source: NIDM)

Figure 4.1

Multi Hazard Map of India

Figure 4.2

Tsunami Inundation Map of Nagapattinam

(Source: NDMA Guidelines - Management of Tsunamis)

Figure 4.3

Flood Hazard Map of India (Source: BMTPC)

Figure 4.4

Figure 4.5

Figure 4.6

4.3 Manmade Disasters:

Manmade Disasters are caused due to actions of human beings. Therefore these disasters can

be prevented by building awareness, alertness and overall resilience level of masses. Manmade

disasters include fires, conventional wars, biological wars, chemical wars, nuclear wars,

communal riots, and activities of terrorists such as bomb blasts etc. In this chapter, the focus is

on the impacts of major instances of the following disasters that occurred within the period 2001

to 2010:

1) Fire

2) Terrorism

The impacts of both natural and manmade disasters have been studied mainly with a focus on

incidences in India in order to understand the general and economic impacts caused by such

types of disasters. The statistics at international level has been additionally elicited at some

places in order to know the trends at global and national level.

Fire:

Fire is a chemical process in which substances combine chemically with the oxygen in the air, in

the presence of suitable temperature. This process is capable of producing heat, light and flame.

Fire can also be caused due to earthquakes, volcanic eruptions or lightening. Industrial or

chemical fires are generally caused due to the errors of human beings or machines. According to

Mr. Manohar Bidaye, Director, Unicef India, it is expected that loss of assets due to fire is almost

$100 billion per year, with an increasing tendency.

Terrorism:

Terrorist activities are basically carried out to threaten citizens and thereby weaken the social,

economic and political base of a particular country. The terrorism is India is mainly due to the

religious differences (which have an international reach) and naxalite activities. Terrorism aims

to create maximum loss to the target city or region in terms of human resource, material and

infrastructure. It affects the economic development by diverting the productive and monetary

resources to the preventive measures and security related aspects. The Figure 4.7 depicts the

areas affected by conflicts/terrorism all over India:

(Source: South Asia Terrorism Portal)

4.4 Vulnerability and Disaster Impacts

Vulnerability is a main deciding factor for the impact of disasters. It is the potential to

suffer harm or loss, expressed in terms of sensitivity and resilience or of the magnitude of the

consequences of the event. Disasters become catastrophic events only when they combine with

vulnerability factors such as geo-physical exposures, human settlements in risky areas, lack of

infrastructure and facilities, high population density, low community resiliency level and other

demographic factors such as low education level, poverty, income disparity etc. E.g. an

earthquake occurring in a deserted area or in a deep sea will cause lesser ill effects; but if it

occurred in a mega city, the consequences would be ominous. Also, the communities and

population settled in areas susceptible to the impact of a raging river or the violent tremors of the

earth are placed in situations of high vulnerability because of their socio-economic conditions.

Droughts often stimulate sequences of actions and reactions in the concerned areas or nearby

Figure 4.7

localities leading to long-term land degradation. The terrorist attacks and bomb blasts are carried

out in crowded and important areas of the city to cause more loss of lives and property and to

create panic and fear. The impacts of disasters many a times depend on when the disastrous

event takes place. E.g. if an earthquake occurs at day time when many people are awake and

alert, it has lesser ill-effects. In case of manmade disasters like bomb blasts, the more the

frequency, more is the feeling of panic. Thus the vulnerability as a main deciding factor is

compounded by every aspect of nature being subject to seasonal, annual and sudden fluctuations

and also due to the unpredictability of the timing, frequency and magnitude of occurrence of the

disasters.

4.5 General Impacts of Disasters:

These can be broadly classified as follows:

1) Environmental impacts

2) Medical Impacts

3) Administrative and Managerial Impacts

4) Social Impacts

5) Demographic impacts

1) Environmental impacts:

These impacts vary considerably from disaster to disaster and largely depend on the severity of

the disaster as well as the vulnerability of the concerned locality as follows:

Natural Disasters

• EARTHQUAKE: This causes tremors as a result of which there is a liquefaction of soil,

ground rupture, landslide, salination and alteration of flow of streams, flooding of

shoreline structures and damage to buildings, bridges, dams and crops. It also causes

tsunamis which causes flooding and destruction.

• FLOOD/TSUNAMI: This may cause erosion of top soil, change in the course of streams

and rivers and damage to human settlement and property.

• DROUGHT: It causes reduced cloud cover, increased daytime temperature, increased

evaporation rate, increased likelihoods of dust and sandstorms. There is dramatic

reduction in the surface water causing crop losses, food grain shortage, increased hunger

and malnutrition, and losses to livestock.

• CYCLONE: It causes rapid flooding, landslides, soil erosion and damage to houses and

crops which may increase salinity in sub surface water table.

Manmade Disasters

• FIRE: Pollutants emitted from the fire are harmful for the health of living beings and the

smoke affects the air quality. It also affects the soil properties and results in soil erosion.

It also causes loss of wild life habitat, loss of biodiversity, loss of natural regeneration

and loss to water and other natural resources. Due to fires the vegetation and crops get

damaged. Fires not only affect human being, they have a severe impact on the wild life,

fishes, insects etc.

• TERRORISM/BOMB BLASTS: The environment gets affected due to the toxic gases

and fumes. When the Twin Towers were attacked on September 11th, all of lower

Manhattan was enveloped in toxic dust clouds rising almost 1000 feet into the air. These

dust clouds slowly moved south, choking the inhabitants of Brooklyn and Staten Island,

slowly depositing an unknown mixture of gases and airborne particulate pollutants all

over everything (people, other buildings etc.).

• NUCLEAR WARFARE: This causes contamination of air, water and soil. The effect of

fallout impacts the environment adversely in the nearby regions or countries as well.

• BIOLOGICAL WARFARE: Due to the micro organisms which are used as weapons of

mass destruction, there is an ill effect on human being, crops, plants and live stock.

• CHEMICAL WARFARE/DISASTER: Under this, a liquid, gaseous or solid chemical

substance gets released which is harmful for human being, plants and animals.

2) Medical Impacts:

These are broadly classified as:

a) Traumatic injuries: Immediate medical help and even surgical assistance are needed

in case of such injuries. The effects may be in the form of severe injuries, burns, effects or

fractures etc. depending on the type of disaster. E.g. In case of injury due to nuclear

weapon, the severity of impact depends on the weapon size, height of burst, time of day,

weather conditions etc.

b) Epidemic diseases: Even though disasters may not cause immediate threat of epidemic,

the source of outbreak as an after effect needs to be identified quickly. The natural disaster

such as flood or manmade disasters such as biological warfare can be a cause for this.

c) Indigenous diseases: Indigenous diseases increase as a result of environmental

degradation and pollution/ contamination of food, water and air. E.g. Poor sanitation and

garbage disposal as well as water contamination in flood-hit regions may result in an

outbreak of diseases such as leptospirosis.

d) Emotional stress and Psychological impacts: These depend on the age, education

level, financial conditions, physical health and coping skills of the affected population.

These include psycho-physiological effects such as fatigue, gastrointestinal upset, and tics

as well as cognitive signs such as confusion, impaired concentration, and attention

deficits. Psychological impacts include emotional signs such as anxiety, depression, and

grief. They also include behavioral effects such as sleep and appetite changes, ritualistic

behavior etc.

In case of manmade disasters such as terrorism, bomb blasts and riots, the emotional stress

and panic can go up due to the feeling of fear and insecurity for a while but soon the

morale goes up with the assurance of appropriate counter terrorist actions and security

measures by Government authorities.

3) Administrative and Managerial Impacts:

• Effects on Community Leadership: The loss of leaders due to death or injury can impair

disaster response especially when disasters isolate communities and require them to rely on

local leadership. Intensity of post disaster conditions, loss or delayed availability of resources

and lack of factual information makes it difficult for the leaders to decide about courses of

actions and priorities for relief.

• Disruption of formal organizations: When a disaster strikes, large formal organizations are

most disrupted due to breakdown of clear lines of authority. Disasters have impact on their

premises, other assets, data and human resource.

• Damage to critical facilities and lifelines: Among these are communication installations,

electrical generating and transmission facilities, water storage, purification and pumping

facilities, sewage facilities etc. Loss of communication facilities can cause lack of

information for decision making.

• Disruption of transportation: During the initial stages of a disaster, almost all the surface

means of transportation within a community are disrupted. Bridges are knocked out and

roads can be cut off by earthquake, tsunami or floods etc. The destruction of the public

utilities may be caused due to terrorist activities. This restricts the movement of rescue

materials and other resources.

4) Social Impacts of Disasters:

The disasters like nuclear/biological/chemical warfare, terrorist attacks or riots lower the

morale and create panic among the affected people. These manmade disasters as well as severe

natural catastrophes like earthquake or tsunami disturb the social fabric. A disaster makes it very

evident that the poor are vulnerable because they are poor and this can lead to profound political

and social changes in the society. There is substantial evidence that disaster impacts can cause

social activism resulting in political disruption, especially during the period of disaster recovery.

5) Demographic impacts:

The demographic impact of a disaster can be assessed by adapting the demographic

balancing equation, Pa – Pb = B – D + IM – OM, where Pa is the population size after the

disaster, Pb is the population size before the disaster, B is the number of births, D is the number

of deaths, IM is the number of immigrants, and OM is the number of emigrants (Smith, Tayman

& Swanson, 2001). The magnitude of the disaster impact, Pa – Pb, is computed for the population

of a specific geographical area and in respect of two specific points in time. Ideally, the

geographical area would correspond to the disaster impact area, Pb would be immediately before

disaster impact, and Pa would be immediately after disaster impact. In practice, population data

are available for census divisions (census block, block group, tract, or larger area), so a

Geographical Information System (GIS) must be used to estimate the impact on any area.

4.6 Overview of Financial Impacts of Disasters

The financial impacts of disasters cannot be totally segregated from the other general

impacts of disasters as there is a cost involved in every type of destruction, damage and their

after-effects. The catastrophic events such as Bhuj earthquake of 2001, hurricane Katrina in

2005, Mumbai flooding in 2005 and earthquake followed by tsunami in Japan in 2011 have

shown that poor as well as rich countries are vulnerable to these events, which have long‐lasting

consequences on welfare, and on human and economic development. According to the World

Bank, there are several factors that affect a country’s vulnerability to natural disasters: its

geographic size, the type of disaster, the strength and structure of its economy, and prevailing

socioeconomic conditions. In a globalized economy, all these factors, among others play into

how the world’s finances will be affected. The natural disasters cause damage to infrastructure

and loss of production. Climatic hazards may affect the growing manufacturing sector, as well as

the agricultural and livestock sectors. These impacts cause budgetary pressures and fiscal short

term impacts. They have long term implications for rehabilitation and development. They cause

impact on the rate and pattern of development, reduction in revenue and increase in expenditure

both during and after the disaster.

As regards manmade disasters it is observed that today every nation faces some or the

other economic, social or communal unrest. Further, globalization has enabled the impact of

these tremors to be felt even at remotest part of the world. Even if terrorism represents a small

fraction of the overall economic risk in India, it may have a large impact on the allocation of

productive capital across the country. In any part of the world terrorism is unwanted as it not

only kills the human life but also the infrastructure, industry ultimately shackling its overall

growth.

4.7 Financial Impacts of Disasters-Global Scenario

In 2009, natural disasters cost insurers about $ 27 billion. In 2010, the cost was double

that, at $48 billion as per the Sigma study of Swiss Re. While the trend for earthquakes, tsunamis

and volcanic eruptions is fairly stable, severe weather events are on the upswing, said Peter

Hoppe, who runs the Geo Risks Research/Corporate Climate Center of Munich Re, the biggest

reinsurer. Natural events like La Nina and El Nino, ocean cycles that alter weather systems, are

certainly factors as well, but warming temperatures appear to be adding a layer "on top" of that

natural variability, Hoppe said. He also cited a climate connection between Australia's severe

floods and rising ocean temperatures off the coast there. As per the data on disasters since 1980,

compiled by Munich Re, the Japanese quake of 2011 was the costliest disaster of all time, with

losses of $210 billion - not including the nuclear incident at Fukushima. The number of

earthquakes has remained stable since 1980 but their economic cost is rising - a reminder that

quake risk should be recognised by town planners, say Munich Re. The cost of extreme

temperatures, fires and droughts has remained stable, the Munich Re findings show, but floods

and storms cost us more today than they did 30 years ago. It is observed that there is a significant

rise in the financial losses due to disasters at world level from 1990 onwards. As per the study of

Swiss Re, $370 billion is the cost of natural disasters to the global economy in 2011, making it

the costliest year on record. The toll was driven by the earthquakes that struck New Zealand in

February and Japan in March.

Historically, catastrophe losses have been highly volatile, with a strong upward trend. In

US dollars, the historic upward trend for global insured losses is driven by higher income,

increasing wealth, a higher value concentration of wealth in loss prone regions and a trend

towards more insurance coverage. Global warming and the related higher risk of extreme

weather conditions also contribute to the trend. Figure 4.8 depicts the rising trend of disaster

related financial losses all over the world from 1900 to 2010:

(Source- EM-DAT: The CFDA/ CRED International Disaster Database)

Figure 4.9 shows economic losses versus insured losses for the period 1981-2011. It is observed

that the economic losses are much more than the insured losses.

Figure 4.8

The Asian and Pacific region is vulnerable to many types of disasters, including floods, cyclones,

earthquakes, drought, storm surges and tsunamis. The rising trend of economic damages in Asia

can be observed from the following figure 4.10 and Figure 4.11:

Figure 4.9

Average annual economic damage for natural disaster, world regions, 2001-2010

(Source: Statistical Yearbook of Asia and the pacific 2011)

Insured Losses in Asia

(Source: Swiss Re’s Sigma estimates)

Figure 4.10

Figure 4.11

The Asia-Pacific region consists of some of the world’s fastest growing economies

including China, Japan, India and Indonesia. During the past decade, in this region, on average,

more than 200 million people were affected and more than 70,000 people were killed by natural

disasters annually. These figures represent 90% and 65% of the world totals, respectively.

Overall economic losses from the 2004 Indian Ocean Earthquake and Tsunami disaster are

estimated at $10 billion, with 75% of the loss attributed to the damage in the Indonesia,

Thailand, Sri Lanka, and India. These losses include damage to residential and commercial

buildings and infrastructure, including roads, water supply systems, electric power systems,

schools, hospitals, and other healthcare facilities. The year 2010 was particularly bad in terms of

the number and severity of disasters in the region. The floods in Pakistan raised deaths due to

natural disaster to over 2,100 with over 18 million people affected. The record floods in Pakistan

contributed to the large economic damages and losses experienced by Pakistan in 2010 (US$7.4

billion) making it the most costly year with respect to natural disasters in at least 20 years. In

China, earthquakes, storms, floods, landslides and other disasters killed a total of over 7,000

people and affected 145 million people. In 2011 it had to face several natural disasters that

hampered development and disrupted trade. The Report of United Nations Economic and Social

Survey of the Asia Pacific say that Asia Pacific sustained damages and losses of $266.8 billion

out of $366 billion globally in 2011.

As far as manmade disasters are concerned, in 2010, there were 1,331,500 fires reported

in the United States. These fires caused 3,120 civilian deaths, 17,720 civilian injuries, and $11.6

billion in property damage. The terrorist attack in USA on September 11, 2001 was the worst

terrorist attack on record in terms of fatalities and insured property losses, which totaled about 23

billion U.S, dollars (in 2010 dollars).

4.8 Financial Impacts of Disasters-Indian Scenario

Natural Disasters

India is considered as one of the most natural hazard-prone countries in the world, 85% of its

land area being vulnerable to various types of Natural Catastrophes. 59% of its area is prone to

Earthquakes of various intensities. Dense Population & Old Construction adds to the problem.

India has 7516 km long coastline with large population that results in large destruction after a

cyclone. Tropical Cyclones generally strike both eastern coast and western coast. Thunderstorms

are common in NE, NW, Central & SW India. Cyclone associated strong winds & rains

compound the destruction. Floods & Coastal Inundations too are a risk. 15 cyclones have struck

the Indian coast in last 100 years. India is the 2nd most flood affected country after Bangladesh.

Its 40 mln hectares land mass is prone to floods; 8 mln hectares being affected annually. About

5,700 kilometers of India’s coastline is exposed to severe cyclones and approximately 40% of

India’s population lives within 100 km of the coastline. Analyzed data for the period 1980-2000

indicates that on an average, annually, 370 million people are exposed to cyclones in India.

Rising population and developmental activities in flood plains make impact of disaster severe.

Climate change also makes weather volatile leading to disasters. Average annual loss due to

flood is US$ 400 Mln. Urban Floods & Inundations are a new phenomena since Mumbai Floods

(2005). More than 68% of India is vulnerable to drought. In July 2002, rainfall deficiency

dropped to 51%, surpassing all previous droughts. The impact of the drought spread over 56% of

the land mass and threatened the livelihoods of 300 million people across 18 states. Researchers

have calculated that a major drought in the near future could affect up to 30 million people in

Maharashtra, one third of the population. Half of these are highly vulnerable, small or marginal

farmers. The current figure for expected annual loss from drought amounts to almost US$ 24

billion. In the event of a severe climate change scenario, this could rise to 139% by 2030. The

immediate visible impact of monsoon failure leading to drought is felt by the agricultural sector.

The impact passes on to other sectors, including industry, through one or more of the following

routes:

• A shortage of raw material supplies to agro-based industries.

• Reduced rural demand for industrial/consumer products due to reduced agricultural

incomes.

• Potential shift in public sector resource allocation from investment expenditure to

financing of drought relief measures.

Most major droughts in India have been followed by recession. Annual Gross Domestic Product

(GDP) growth was negative in 1957-58, 1965-66, 1972-73 and 1979-80. The 1990s, however,

reveal a different picture, unlike in the '50s when a decline in agriculture had a significant

bearing on both industrial and overall GDP. The World Bank studies indicate that natural

disaster losses equate up to 2 percent of India’s GDP. The natural disasters cause loss of Life &

Property on a large scale in India. The impact becomes severe with majority of the affected

uninsured. The economic loss caused due to earthquakes in India can be seen from the following

table 4.1 and figure 4.12.

Damage caused due to Natural disasters in India( 2001-2010)*

Disaster Date Damage (000 US$)

Earthquake 26/01/2001 2623000

Flood 20/06/2004 2500000

Earthquake 26/12/2004 1022800

Flood 28/06/2005 2300000

Flood 24/07/2005 3330000

Earthquake 8/10/2005 1000000

Flood 28/07/2006 3390000

Flood 25/09/2009 2150000

Flood 5/7/2010 447000

Flood 18/09/2010 1680000

(Source: Centre for Research on the Epidemiology of Disasters, CRED, EM-DAT, the

International Disaster Database)

Damage caused due to Natural disasters in India (2001-2010)*

Table 4.1

(Graph drawn by the researcher on the basis of data of Centre for Research on the Epidemiology

of Disasters, CRED, EM-DAT, The International Disaster Database.)

*The financial loss due to drought has not been considered in the above.

It is observed that India depicts a rising pattern of economic losses due to natural

disasters.

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

40000002

6/0

1/2

00

1

20

/06

/20

04

26

/12

/20

04

28

/06

/20

05

24

/07

/20

05

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0/2

00

5

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/20

09

5/7

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10

18

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10

EarthquakeFloodEarthquakeFlood FloodEarthquakeFlood Flood Flood Flood

Damage (000 US$)

Figure 4.12

Manmade Disasters

Fire

(Source: Wild Fire Statistic, http://www.statisticbrain.com/wild-fire-statistics/)

Some of the major fire incidences (other than wild fire) in India between 2001 to 2010 (ref:

http://saarc-sdmc.nic.in/pdf/fire.pdf)

1) In November 2002, at least 17 people were killed and 27 injured (five in critical conditions)

when two gas cylinders in a van carrying fireworks exploded, affecting several houses nearby at

Athur near Salem. Seven men, five women and five children died in this incidence. 15 houses on

either side of the street came down in the explosion. People inside them got trapped and killed.

Crackers, stored in one of the buildings, were being loaded into the van, which was already

carrying two gas cylinders. The van was gutted in the fire.

2) A blast occurred on 4/11/04 in Srikakulum, Andhra Pradesh as explosives stored unauthorised

by a cracker manufacturer in Chinna Bazar area caught fire. 13 people were killed and another

13 were seriously injured. Several other nearby houses have been badly damaged.

3) A fire breakout in a school at Kumbakonam on 16th July 2004. This resulted in deaths of 93

primary school children.

Wild Fire Disaster Statistics from 1980 – 2008 (India)

No of events: 294

No of people killed: 1,666

Average people killed per year: 57

No of people affected: 5,766,092

Average people affected per year: 198,831

Economic Damage (US$ X 1,000): 42,806,705

Economic Damage per year (US$ X 1,000): 1,476,093

4) In 2005, several hundred tsunami survivors at Nagapattinam, Tamil Nadu became homeless

due to the fire that gutted their temporary shelters. The blaze was started by fireworks being

used to celebrate Diwali. Around 90 families were affected in this incident.

5) Fire engulfed three illegal firecracker factories in Khusropur village (22 miles east of the state

capital Patna, eastern state of Bihar) on 15/9/05 accounted for at least 35 deaths and injured at

least 50 people. The fire was caused by an electrical short circuit and quickly spread to the

flammable material stored in the factories.

6) Fire in a fireworks plant in Tamil Nadu on 22.2.2006 killed 10 and seriously injured 19. The

fire was caused by an explosion at a stack of 'rockets'being dried, against rules, under trees.

Extremely hot climate and friction had triggered the explosion, the resultant fire spread instantly

to the shed were 'packed rockets'had been stored and from there, it spread to other sheds.

7) Fire breakout in a trade fair in Meerut, UP on 10.4.06 killed more than 57 people and injured

thousands.

Terrorism

As per the observations of the Global Terrorism Index, 2012, (GTI), after 9/11, global

terrorism as measured by the total number of attacks and fatalities remained below the late 1970s

trend. The subsequent increase in terrorist activity in Iraq was followed by further increase in the

terrorism in Afghanistan and then in India and Pakistan eighteen months later. Iraq and

Afghanistan accounted for 35% of the global total number of terrorist incidents from 2002 to

2011. Besides Iraq, three other countries, Pakistan, India, and Afghanistan influenced the steep

increase in terrorism from 2002 to 2009, accounting for 12%, 11% and 10% of global terrorist

incidents, respectively. Only 20 nations scored a zero for terrorist impact over the 2002-2011

period, indicating the impact of terror, while heavily concentrated in some places like Iraq,

Afghanistan, Pakistan, and India.

The five countries with most incidences reported between 2002-2011

(Ref: Global Terrorism Index Report 2012, Page 24, Institute for Economics and Peace,

www.economicsandpeace.org)

Figure 4.13

Types of targets for the five countries most affected by terrorism, 2002-2011



The train bombings in Mumbai, India on the 7th December 2006 ranks fifth in the GTI.

The GTI further observes that these attacks are suspected to have been carried out by the

Lashkar-e-Toiba group, one of the largest militant Islamic groups in south Asia. India’s

experience with terrorism can be roughly divided into foreign and ‘homegrown’ terrorism.

Foreign terrorism broadly covers the dispute over Kashmir with Pakistan. The communist

insurgency in north-eastern India is quite large. The Communist Party of India – Maoists (CPI-

M) by itself is responsible for nearly 45% of all attacks in India. Both foreign and home-grown

terrorism have underlying nationalist/ separatist aspirations although the ideological formulation

Figure 4.14

is religious in the case of Kashmir, and political in case of communists. The political nature of

both the conflict and terrorism is reflected in the numbers of kidnappings which constituted

almost 10% of the total attacks. Kidnappings often involve ransoms and other demands which

must be met in order to release the hostages – this is often used as a political tool.

India ranks 89th out of the 108 countries in the Positive Peace index of GTI. It performs

poorly on all the indicators of positive peace where it falls below the world average although the

well functioning Government indicator is close to the world average. It ranks third last in the

region in terms of having the necessary formal and informal institutions in place which can

create and sustain a peaceful environment.

The report further states that during the period between 2007 and 2009, Iraq continued its

trend with violent incidents increasing while at the same time incidents in India and Pakistan

began to rise steeply. In India, the most active organization was the Communist Party of India -

Maoist (CPI-M) and their violent struggles to overthrow the Indian Government accounted for

over 40% of all incidents recorded in India in this period. However there has been a sharp

decrease in incidents since 2009. Unknown perpetrators account for a third of these Indian

attacks.

Four of the 15 countries with the highest level of terrorist activity are ranked in the

bottom ten on the Corruption Perception Index with the rest being in bottom third and only

Thailand and India having mid-ranking scores on corruption. (Ref: GTI, 2012)

Top ten countries most affected by terrorism and their income group



From the above table it can be observed that the impact of terrorism is more on the countries

with low income or lower income groups. The poverty and unequal distribution of wealth in

these countries give rise to these activities.

Table 4.3

Top ten countries affected by terrorism and their region

(Source: Global Terrorism Index Report 2012, Page 30, Institute for Economics and Peace,


From the above table it can be observed that at least five countries out of the top ten countries

most affected by terrorism are from Asia Pacific region as per the report of Global Terrorism

Index, 2012. India till FY 2008 had seen a steady growth with its GDP shining as high as 9.3%.

Subsequently, the economy was hit mainly with US Sub Prime Crisis, & events such as the

Mumbai 26/11 Terrorist attacks. Many believe that terrorism can't hamper ones economic

activity as it only destroy a small fraction of the stock of capital of a country. However, a broader

look at the geo-political & economical scenario can easily erode this misconception. India has

been facing the terrorism threat as long as since 1970. Terrorism in India is primarily

Table 4.4

attributable to Islamic, Naxalite and various other radical movements. At least 232 of the

country’s 608 districts were afflicted, at differing intensities, by terrorism.

Mumbai’s economy, which contributes as much as 5% of India’s $1 trillion GDP and nearly a

third of its direct taxes, has its own importance. In the recent past, this has made the city a more

attractive target for terrorists that desire to affect India’s success. As a result of the global

financial meltdown, India’s economy had already started to contract prior to the attacks on 26th

November 2008. GDP growth rates had already fallen from 7.9% in the first quarter of the

current financial year to 7.6% in the second quarter. Moreover, the overall growth rate for the

first half of 2008 showed regressing figures (7.8%) when compared to the previous year (9.3%).

Fear had already spread in the city of Mumbai; fears of losing one’s job or home. Thus, the

terrorist attacks of Mumbai arrived at a time when fear was already prevalent in the city. Over a

period of time terrorism has severely affected Indian economy.

4.9 Opinion of Respondents on Whether Financial Losses Due to Disasters are on Rise

A survey of 50 citizens was conducted and they were asked the following question:

Do you think that the financial losses due to disasters are on rise?

The analysis revealed that 92% of the respondents feel that the financial losses due to disasters

are on rise and 8% of the respondents feel that there is no rise in financial losses due to disasters.

Following figure shows the responses.

(Pie Chart drawn by the researcher on the basis of data collected from respondents)

One Sample Proportion Test was used. Since sample size is 50, large sample test i.e. Z-test was

applied.

Let P denote proportion of people who feel that financial losses due to disasters are not rising.

The Null hypothesis to be tested was

H0: Financial losses due to disaster are not rising

Against the alternative hypothesis

H1: Financial losses due to disasters are rising.

We have in symbols as follows.

H0: P= 0.70 (P0) means Financial losses due to disaster are not rising

H1: P >= 0.70 i.e. Financial losses due to disasters are rising.

One Sided Test was used.

Opinion of respondents on whether financial losses due to disaster are on rise

yes

no

Figure 4.15

The level of significance used was 5% and 1% if required.

The Z Statistic = (P-P0)/ SQRT ((P0*Q0)/n)

Calculated value of Z = (0.92-0.70)/ SQRT ((0.70*0.30)/50)=3.394

The critical (Table) value at 5% level of significance: 1.64 and at 1% level of significance: 2.33

Decision: Since Calculated Z > Table value of Z, Null Hypothesis H0 was rejected. It means H1

was accepted.

Conclusion:

Accept H1:

Financial losses due to disasters are rising.

4.10 Respondents' Ranking of Financial Impacts in the Order of Significance

The following analysis shows findings of the respondents’ ranking of financial impacts in the

order of significance. Efforts have been made here to study these findings along with the

available secondary data for giving conclusions.

In the survey of the sample of 50 citizens, the respondents were asked to rank the following

financial impacts in the order of significance.

(Most significant will get rank 1 and so on)

a) Loss of lives

b) Loss of property

c) Loss of infrastructure

d) Loss of crops

e) Loss of production

f) Rising unemployment as a result of loss of jobs and business interruptions

g) Increase in the security

h) Stoppage/disruption of business

The ranking given by respondents has been shown in the figure 4.16.

Respondents' Ranking of Financial impacts in the order of significance

(Outcome and its interpretation)

(Graph drawn by the researcher on the basis of data collected from respondents)

a) Loss of Lives:

As per the responses received from the sample population, 64% of the respondents have

given first rank to loss of life as the most significant impact of disasters, followed by 12 % who

have ranked it as 2nd in the order of significance. 6% of the respondents have given it 3rd rank,

4% 4th rank, 8% 5th rank,4% 6th rank, 2% 7th rank and 0% 8th i.e. last rank.

Disasters cause impact on the human lives and have potential to affect communities for a

long time. The physical impacts of disasters such as loss of lives and injuries result in loss of

productivity, loss of income generation, loss of productive man days, delay in production cycle,

1st

rank

2nd

rank

3rd

rank

4th

rank

5th

rank

6th

rank

7th

rank

8th

rank

0

5

10

15

20

25

30

35

Loss of Lives

Loss of

Property

Loss of

Infrastructure

Loss of Crops

Loss of

Production

Rising

Unemploymen

t

Increase in

Security

Stoppage/Disr

uption of

Production

Figure 4.16

shortage of staff and reduction in consumption all resulting in economic loss. These losses affect

the composition of human resources of the country. They increase the requirement for allocation

of funds and resources towards relief assistance in the short run and towards rehabilitation and

development in the long run.

The following figure 4.17 indicates the rising trend of number of victims due to both natural as

well as manmade disasters.

Number of victims due to natural and manmade disasters (1970-2010)

It is observed that globally, the number of victims due to both natural catastrophes and

man-made disasters is showing a rising trend over the years. The loss of lives is high in case

of natural disasters as compared to the manmade disasters.

Average annual population affected and killed by natural disasters, world regions, 2001-

2010

Figure 4.17

(Source: Statistical Yearbook of Asia and the pacific 2011)

From the figure 4.18 it can be observed that maximum number of deaths due to natural

disasters have occurred in Asia Pacific region. Also maximum number of people affected

due to natural disasters is from Asia Pacific Region.

Figure 4.18

Top 10 countries by victims in 2010 and distributed by disaster type

(Source: CRED Annual Disaster Statistical Review

http://reliefweb.int/sites/reliefweb.int/files/resources/2012.07.05.ADSR_2011.pdf)

From the disaster distribution pertaining to India as shown above, it is observed that India

ranks 4th in the list of number of disaster victims among all the countries in 2010.

Maximum disaster related deaths are due to hydrological disasters followed by

Meteorological disasters in India.

Figure 4.19

Loss of Lives due to natural disasters in India

Year Lives Lost

(In number)

2001-02 *834

2002-03 898

2003-04 1992

2004-05 *1995

2005-06 2698

2006-07 2402

2007-08 3764

2008-09 3405

2009-10 1677

2010-11 2310

(Source: Ministry of Home Affairs (MHA), India)

*These figures apparently do not include 20,005 deaths due to Gujarat earthquake of 2001 (Ref:

Centre for Research on the Epidemiology of Disasters, CRED, EM-DAT, The International

Disaster Database and 10273 deaths due to 2004 tsunami (Ref.: Annual Report of MHA 2004-

05).

Loss of Lives due to natural disasters in India(2001-02 to 2010-11)

(Graph drawn by the researcher based on the data of Ministry of Home Affairs, India)

0

500

1000

1500

2000

2500

3000

3500

4000

Lives Lost(nos.)

Table 4.5

From the above diagrams it can be observed that the number of deaths due to natural disasters is

rising in India.

Human Exposure (INDIA) Modeled number of people present in hazard zones that are thereby subject to potential losses.

Hazard type Population

exposed

Percentage of population Country

ranking

Cyclone 7,607,821

4th out of 89

Drought 58,912,300

2nd out of 184

Flood 15,859,640

2nd out of 162

Landslide 180,254

2nd out of 162

Earthquake 3,349,237

8th out of 153

Tsunami 1,114,388

4th out of 76

(Source: 2009 Global Assessment Report) http://www.preventionweb.net/english/countries/statistics/risk.php?iso=IND

From the above diagram it is observed that majority of the population is exposed to

drought followed by flood with 2nd rank in the country ranking. Even though the country ranking

is 8th and 4th for exposure to earthquakes and tsunami respectively, the population exposure is

high.

As per the global trend seen today, even though reported natural disasters are up

dramatically since 1950, with more lives damaged by homelessness and injury, the modern

Figure 4.20

Table 4.6

medical care and improved disaster response have reduced the number of lives lost, as per the

authority on global disaster data. The result of these trends is that the burden of care on survivors

is increasing, according to the Brussels-based Centre for Research on the Epidemiology of

Disaster (CRED), which collects and maintains two major global disaster databases.

Manmade disasters

Fire

Number of people died in fire incidents (2001-2010)

Year Fire

2001 22449

2002 21004

2003 19278

2004 18445

2005 19093

2006 19222

2007 20772

2008 22454

2009 23268

2010 24414

(Source: National Crime Records Bureau, Ministry of Home affairs

http://ncrb.nic.in/adsi/data/ADSI2001/Accidental.htm)

Table 4.7

Number of people died in fire incidents in India

(Graph drawn by the researcher on the basis of data of National Crime Records Bureau, Ministry

of Home affairs http://ncrb.nic.in/adsi/data/ADSI2001/Accidental.htm)

It is observed that there is a rise in the number of deaths caused due to fire. These deaths

have been caused due to fireworks, crackers, short circuit, gas cylinder, stove burst and other fire

accidents. These incidents indicate that rising urbanization, population congestion, large number

of population residing in or near unsafe and industrial areas, unsafe practices of handling the

combustible and hazardous materials, carelessness, negligence and lack of awareness about fire

safety measures are the possible causes of high death toll due to fire.

0

5000

10000

15000

20000

25000

30000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Fire

Fire

Figure 4.21

Terrorism

Manmade disasters cause direct human and military loss. The recent 26/11 Mumbai

attack itself left 300 dead and 700 injured which includes police men and several high profile

individuals. However, the total terrorism and insurgency related fatalities have gone down. The

Pakistan-backed Islamist extremist insurgency in Jammu & Kashmir and the multiplicity of

ethnic extremist insurgencies in the country’s Northeast – appear to have reduced substantially

due to sheer exhaustion and the transformation of their proximate and enabling environments.

There has been a significant decline in Islamist terrorist incidents outside J&K since the peak of

2008, the year that also saw the 26/11 attack in Mumbai causing several deaths in the single

incident. There were no major (resulting in three or more fatalities) Islamist terrorist attacks

outside J&K in 2009, though 2010 recorded at least two such attacks, including the German

Bakery bombing at Pune, which killed 17.

Number of deaths in India due to terrorist activities

Year Civilians Security Personnel

2001 1693 721

2002 1174 623

2003 1187 420

2004 886 434

2005 1212 437

2006 1118 388

2007 1013 407

2008 1030 372

2009 721 431

2010 759 371

(Source: http://www.satp.org/satporgtp/countries/india/database/indiafatalities.htm)

Table 4.8

Number of deaths in India due to terrorist activities

(Graph drawn by the researcher on the basis of data of http://www.satp.org/satporgtp/countries/india/database/indiafatalities.htm)

Conclusion:

76% of the respondents have ranked ‘loss of lives’ as most significant financial impact by

giving 1st or 2nd rank.

Maximum number of deaths due to natural disasters has occurred in Asia Pacific region.

From the statistics of pertaining to India, it is observed that India ranks 4th in the list of

number of disaster victims among all the countries in 2010. Maximum disaster related

deaths are due to hydrological disasters followed by Meteorological disasters in India.

At the world level the number of deaths due to natural disasters is rising. As per the

records of Ministry of Home Affairs (MHA), India, even though the number declined in

2009-10, it has again started showing a rising trend. One reason for the intermittent

0

200

400

600

800

1000

1200

1400

1600

1800

Civilians

Security Personnel

Figure 4.22

declining trend in number of deaths in India could be due to the increase in the awareness

measures for drought, flood and tsunamis taken by the Government, NGOs and other

organizations. Another reason could be the non availability/ non compilation of data.

The number of fatalities due to Fire is showing an increasing trend. The number of civilian

fatalities due to terrorism is showing a decline in 2009 but a slight rise in 2010.

b) Loss of property:

8% of the respondents have ranked loss of property as most significant impact followed

by 40% who have given it as second rank. 18% of the respondents have given 3rd rank, 6%

4thrank, 20% 5th rank, 4% 6th rank, 2% 7th rank and remaining 2 % 8th rank.

The natural disasters such as flood, earthquakes cyclones and tsunamis etc. cause

destruction of property .The manmade disasters such as terrorist attacks, bomb blasts and

communal riots also have devastating effect on public and private property. The loss to property

becomes a very severe impact with rising number of population causing rising urbanization,

rising density of population and unauthorized constructions even on land fill areas and heavy

burden on insurance sector.

Loss of property due to Natural Disasters

Year Houses damaged

2001-02 346878

2002-03 462700

2003-04 682209

2004-05 1603300

2005-06 2120012

2006-07 1934680

2007-08 3527041

2008-09 1646905

2009-10 1359726

2010-11 1338619

(Source: Ministry of Home Affairs ( MHA), India)

The reconstruction and development activities result in additional pressures on the

Government treasury. Nearly one million homes were damaged or destroyed due to Gujarat

earthquake of January 2001.

The tsunami in 2004 caused huge loss of houses consisting of lashed Timber in villages

in India. Overall, more than 150,000 houses have been fully or partially damaged of these, nearly

80 percent of the families belong to fishing communities, and 70% of them lived in kachcha

(temporary and lightweight) structures.

Table 4.9

Loss in Tsunami 2004

(Source: Ministry of Home Affairs)

Country wise property losses due to tsunami in 2004

Country Economic Losses ($ million) Insured Losses ($ Million)* Indonesia 4500 500 Thailand 1000 500 Sri Lanka 1000 100 India 1000 100 Maldives 500 50 Other 2000 50 Total 10000 1300 (Source: indianoceantsunamireport.pdf

http://www.rms.com/publications/indianoceantsunamireport.pdf)

*This includes property insurance only; life and health losses are estimated at $250 million and travel losses at $50 million.

The Mumbai floods of 2005 caused heavy loss of houses, shops and business establishments.

As per the estimates of Indian Merchant Chamber, the losses to shops, commercial

establishments and warehouses amount to approximately Rs.5000 crores.

Table 4.10

Table 4.11

Flood in Mumbai in 2005

(Source: Maharashtra Government Flood Status Report

http://mdmu.maharashtra.gov.in/pdf/Flood/statusreport.pdf

Manmade Disasters

In 2002 a train was set on fire in Godhra and later in the Gujarat violence, 523 places of

worship were damaged. The property

Gateway of India, Mumbadevi

On 26 November 2008, in a series of terrorist attacks in Mumbai took place. The places

attacked were Chhatrapati Shivaji Terminus, the Oberoi Trident, the Taj hotel, Leopold Cafe,

Cama Hospital, Nariman House Jewish Community, and Metro Cinema etc. An expl

took place at Mazagaon, in Mumbai's port area, and in a taxi at Vile Parle.

occurred in hotel Taj due to fire including the destruction of the roof of the hotel in the hours

afterwards. It took around 12 months and

Flood in Mumbai in 2005-Damage to housing

ource: Maharashtra Government Flood Status Report

http://mdmu.maharashtra.gov.in/pdf/Flood/statusreport.pdf)


property worth Rs.1, 60, 00,000/- was damaged

Mumbadevi and Ghatkopar bomb blasts in 2006.


hatrapati Shivaji Terminus, the Oberoi Trident, the Taj hotel, Leopold Cafe,

Cama Hospital, Nariman House Jewish Community, and Metro Cinema etc. An expl

took place at Mazagaon, in Mumbai's port area, and in a taxi at Vile Parle. A material damage


It took around 12 months and 500 crore (US$99.75 million) to repair it.

Table 4.12


damaged in the


hatrapati Shivaji Terminus, the Oberoi Trident, the Taj hotel, Leopold Cafe,

Cama Hospital, Nariman House Jewish Community, and Metro Cinema etc. An explosion also

A material damage


to repair it.

Conclusion:

It has been observed that both natural as well as manmade disasters cause heavy property

loss. This fact is also evident from the feedback of respondents wherein 48% of them have

ranked it as most significant by giving first or second rank.

c) Loss of infrastructure:

4% of the respondents have ranked loss of infrastructure as most significant impact

followed by 18% who have ranked it as 2nd. 20% of the respondents have given it 3rd rank, 26%

4thrank, 8% 5th rank, 10% 6th rank, 8% 7th rank and 6% 8th rank.

Natural Disasters

Due to Gujarat earthquake of January 2001, losses in public sector assets are estimated to

total Rs. 2,500 crore ($0.5 billion), and include asset losses in health (Rs. 220 crore or $47

million), education (excluding private schools, almost 70 percent of the total, a loss of Rs. 470

crore or $101 million), municipal infrastructure (Rs. 140 crore or $30 million), public buildings

and monuments (Rs. 339 crore or $73 million), rural water supply (Rs 233 crore or $50

million), irrigation (Rs. 186 crore or $40 million), power (Rs. 186 crore or $40 million), roads,

bridges, railways, and airports (Rs. 321 crore or $69 million), ports (Rs. 98 crore or $21

million), and telecommunications (Rs. 51 crore or $11 million). In addition to the public and

private losses mentioned above, there are around $55 million of identified damages to the

environment.

The 2004 tsunami caused heavy impact on the infrastructure of the coastal areas. Numerous

electrical poles were broken or dislodged by the tsunami and many thousands of meters of line

were lost. These damages were assessed at Rs. 9.0 crore ($2.1 million). Hundreds of local

drainage channels, both manmade and natural, were partially filled/silted and/ or washed away

with damages assessed to be Rs. 13.0 crore ($3.00 million). As these areas did not have formal

sanitation/sewerage systems, damage was limited to loss of thousands of pit latrines, a few septic

tanks and public toilets, assessed at Rs. 3.5 crore ($0.8 million). The damage to water supply

comprises salination of thousands of shallow wells, sand damage to hundreds of pumps,

destruction of a few hundred public stand posts, and loss of a few thousand meters of small

diameter pipe. These damages were assessed to be Rs. 36.5 crores ($8.4 million).

Impact of tsunami of 2004 on transport infrastructure

The total damages to infrastructure due to 2004 Tsunami across the three states and Pondicherry

is estimated at Rs. 122 crores ($28.0 million).

The flooding in Mumbai in 2005 caused a loss of infrastructure worth Rs. 1000 crores as

per the Report of Concerned Citizens Commission on Enquiry into the Mumbai Floods, 2005.

For the first time ever, Mumbai's domestic and international airports (including Chatrapati

Shivaji International Airport, Sahar and Juhu aerodrome) were shut for more than 30 hours due

to heavy flooding of the runways, submerged Instrument Landing System equipment and

extremely poor visibility. Over 700 flights were cancelled or delayed. The airports reopened on

the morning of 28 July 2005. Again from early morning of 31 July, with increase in water

logging of the runways and different parts of Mumbai, most of the flights were indefinitely

cancelled. Rail links were disrupted, and reports on late evening of 30 July indicated cancellation

of several long distance trains till 6 August, 2005. A number of landslides occurred on the

Mumbai-Pune Expressway, which was closed the first time ever in its history, for 24 hours. Due

to the flooding 52 local trains, 900 BEST buses, 37,000 auto-rickshaws, 4,000 taxis and 10000

trucks and tempos were damaged.

Manmade disasters

The infrastructure of railways and roads get affected due to the terrorist attacks and bomb

blasts causing destruction. During riots, buses and railways are set on fire which causes heavy

loss and disruption to the activities. The impact of disasters not only destroys the infrastructure

but also affects the other sectors as a consequence.

Table 4.13

Cost of damage to Railway property due to serial bomb blasts on Mumbai Suburban

Railway on 11th July 2006

Amount (In Rs)

1. Rolling Stock 74,55,065.00

2. Signal & Telecommunication

3,48, 194.00

3. Overhead equipments 9,89,980.00

4. Station premises 73,000.00

Total 88,66,239.00

(Source Ministry of Railways, 25th August, 2006 file:///C:/Documents%20and%20Settings/Administrator/Desktop/railway%20press%20release%

202006%20bomb%20blasts.htm) Conclusion:

Disasters have a severe impact on infrastructure and as a result, cause heavy disruption to

the activities of people and various sectors of business. 22% of respondents have ranked it

as most significant financial impact by giving first or second rank. It indicates that the

majority of respondents have not treated it as most significant probably due to its indirect

impacts on other sectors. Another reason could be that the initiative to rebuild the

infrastructure is treated as the domain of Government and not of individual citizens. Hence

the Government is expected to make the necessary provisions.

d) Loss of crops

In a survey of sample size of 50 respondents, 6% of the respondents have ranked loss of

crops as most significant impact followed by 8% who have ranked it as 2nd. 18% of the

respondents have given it third rank, 14% 4th rank, 14% 5th rank, 20% 6th rank, 10% 7th rank and

10% as 8th rank.

The loss of crops is mainly attributable to natural disasters in India. Due to the flooding caused

by heavy rainfall in July 2005, more than 5.5 lakh hectares of land have suffered crop losses.

Almost the entire Kharif crop in the Konkan region was destroyed by the flooding. The loss to

Table 4.14

the sugarcane crop in western Maharashtra was also extensive, affecting production of local

sugar mills. More than 20,000 hectares of land became waste due to the top soil having been

washed away. The loss of crops due to this flooding was estimated to be Rs. 300 Crores as per

the Report of Concerned Citizens Commission on Enquiry into the Mumbai Floods, 2005.

Flooding and tsunamis cause damage to the standing crops and also to the food supplies

in the storage facilities. The land may be rendered infertile due to salt water incursion from the

sea. Crop losses due to extreme weather events are a common phenomenon in agriculture,

including losses in developing countries and emerging markets. The majority of these losses,

estimated at 70 to 80 percent, are attributable either to a lack of rain or excess of moisture due to

rain or flooding. In many developing countries, farmers operating all sizes of farms retain the

risk of crop losses. Their risk management mainly consists of diversifying their income sources

by planting a variety of crops and breeding cattle.

The tsunami of 2004 caused damage to the agricultural sector, though not significant in

overall terms, has had a great impact on the livelihoods of small and marginal agricultural

landholders, especially poor women. Damage is mainly confined to the destruction of standing

crops like paddy, groundnut, coconut, cashew, mango, banana, ragi (millet) and vegetables.

Crop area affected due to natural disasters in India (in Lakh hectors)

Year crop area affected

In lakh hectares

2001-02 18.72

2002-03 21

2003-04 31.98

2004-05 32.53

2005-06 35.52

2006-07 70.87

2007-08 85.13

2008-09 35.56

2009-10 47.13

2010-11 46.25

(Source: Ministry of Home Affairs (MHA), India)

Crop area affected due to natural disasters in India (in lakh hectors)

(Graph drawn by the researcher based on data of Ministry of Home Affairs (MHA), India)

0

10

20

30

40

50

60

70

80

90

crop area affected in

lakh hectres

Table 4.15

Figure 4.23

Conclusion:

Natural disasters such as floods and tsunamis cause a crop loss. 14% of respondents have

ranked it as most significant financial impact by giving first or second rank. It indicates

that the majority of respondents have not treated it as most significant financial impact.

The main reason for this may be attributable to the fact that the sample was taken from

people of urban area. If a sample is taken from rural/ predominantly agricultural area, the

feedback may be different.

e) Loss of production

8% of the respondents have ranked loss of production as most significant impact

followed by 4% who have given it second rank.16% of the respondents have given it a third

rank, 20% 4th rank, 24% 5th rank, 16% 6th rank, 8% 7th rank, 4% 8th rank.

Natural Disasters

The loss of production/output due to the Gujarat earthquake in Jan 2001 was around Rs.

3,000 crore ($491 to $655 million), or 2 to 3 percent of Gujarat’s 1999-00 gross state domestic

product in aggregate over three years. This is due to the fact that the area most affected by the

earthquake is not a major contributor to overall state output.

Agricultural production and income from farming is highly risky on account of natural disasters

like droughts, floods, cyclones etc. in India. It is estimated that the flood-affected area has more

than doubled in size from about 5 percent (19 million has) to about 12 percent (40 million has) in

the past five decades. Due to this, the productivity of arable crops is severely affected. This has

led to an increase in spending on varieties of flood protection programmes. The 2005 floods in

Maharashtra caused loss of raw material as the shops and godowns were submerged under water.

This resulted in loss of production.

Due to the all India draught in 2002, the food grain production dipped from 212 million

tonnes in 2001 to 183 million tones i.e.by 29 million tones. Small and marginal farmers were the

hardest hit on this front. Water and fodder shortages during a drought situation cause

considerable stress to this section of farmers, as they own a bulk of the bovine population. Over

150 million of the 296.49 million-strong bovine population across 18 states was affected by

2002's drought. Rajasthan recorded only 38% of the rainfall in 2009 which caused 70% to 100%

crop loss. During 2009, the country faced a rainfall deficit in South-West monsoon leading to

drought or drought like conditions in 338 districts in 14 States. It affected agricultural

production in approximately 300 lakh hectors across the country with widespread shortage of

drinking water, fodder, etc. In 2009-10, as a result of severe drought in various parts of the

country, the total food grains production sharply declined to 218.11 million tonnes from 234.47

million tonnes in 2008-09. In 2009, food inflation at the start of monsoon season was in single

digit, which rose to 19.5% by December 2009. (Ref: Business Standard, 31st July, 2012)

Impact of rainfall deviation on kharif production growth rate

(Source: Mishita Mehra, ET Bureau May 6, 2012, How normal monsoon could impact

agriculture, inflation, income & storage http://articles.economictimes.indiatimes.com/2012-05-

06/news/31588216_1_normal-rainfall-monsoons-food-grain-production)

Drought years with percentage area of the country affected by drought

Figure 4.24

Seasonal impact: Kharif output in drought years

Deficient rainfall years

Monsoon rainfall %departure from

normal

Kharif food grain production %decline

1972-73 -24 -6.9

1974-75 -12 -12.9

1979-80 -19 -19

1982-83 -14 -11.9

1986-87 -13 -5.9

1987-88 -19 -7

2002-03 -19 -19.1

(Source: DAC, Ministry of Agriculture)

Table 4.16

Table 4.17

Seasonal impact: Kharif output in drought years

(Graph drawn by the researcher based on data of DAC, Ministry of Agriculture)

Drought-related shocks and their adverse effect on the economy were limited to a mere

1% of GDP in 2002-03. This can be explained by the fact that the share of agriculture in national

income has gradually declined over the decades – from 57% in 1961 and 35% in 1987-88, to

22% in 2002. Even within the manufacturing sector, the share of agro-based industries came

down from 44% in 1961 to 11.4% in 2002. Another reason why the economy was insulated

against the impact of drought was the fact that the country has apparently developed the ability to

finance drought relief operations without diverting resources from public investment expenditure

in productive sectors. Relief operations have also been largely able to retain the purchasing

capacity of the rural population. However, this situation is not the same for all the states. The

poor and marginalised in the rural areas bereft of productive land and starved of food and water,

still reel under the effects of drought in an imperfect and corrupt relief system.

-45

-40

-35

-30

-25

-20

-15

-10

-5

0

Kharif foodgrain

production %decline

monsoon rainfall

%departure from normal

Figure 4.25

Manmade Disasters

In case of a manmade disaster like terrorist attack of September 11 the entire area is

cordoned off forcing business establishments to shut down for some days resulting in reduced

productivity. A major fire necessitates a factory / hotel to be closed down for normal operations

for an even longer period. It also causes loss of goods/output.

Water, electricity, gas and transportation are the most critical sectors, and their

production interruption has immediate consequences on the entire economic system. The

consequences of extended periods of downtime in trading or production can result in bankruptcy,

forced sale of the business, forced sale of stock or livestock, business closure, loss of

experienced workers, loss of supply chain linkages and a depleted customer base due to

temporary or permanent population shrinkage. These consequences are exacerbated by

community losses, which result in a reduction in disposable income. All these impacts hamper

the productivity.

Conclusion:

Due to disasters, there is a reduction/ loss of output which affects GDP of the country. 12%

of respondents have ranked it as most significant financial impact by giving first or second

rank. It indicates that the majority of respondents have not treated it as most significant

financial impact.

f) Rising Unemployment as a result of loss of jobs and business interruptions

2% of the respondents have ranked unemployment as a result of loss of jobs and business

interruptions as most significant impact followed by 10% who have given it second rank. 12% of

the respondents have given it third rank, 20% 4th rank, 12% 5th rank, 16% 6th rank, 18% 7th rank,

10% 8th rank.

Natural Disasters

As a result of an earthquake in Gujarat in 2001, 10,000 small and medium industrial units

went out of production 50,000 artisans lost their livelihood. Natural disasters especially droughts

cause unemployment in rural areas. In India the draught of 2002 caused the total loss in rural

employment due to shrinkage of agricultural operations during the drought months which was

estimated at 1,250 million man-days. The estimated loss of agricultural income was around Rs

39,000 crores.

A great damage was suffered by the fishing industry in the tsunami in 2004. A large

number of boats were damaged or lost as follows:

Damage to fishing industry due to tsunami of 2004

Also a large number of fishing nets were lost. A large part of the coastal population

depends on fishing and other allied industries for its livelihood. For some time after the tsunami,

the fisher-men were advised to avoid fishing until the sea had stabilized. The few fish that were

caught did not find buyers, because there was fear that the fish had become poisoned. It is

estimated that the livelihoods of about 645,000 families (about 3.2 million persons) have been

directly and indirectly affected in Tamil Nadu, Kerala, Andhra Pradesh and Pondicherry. Of

them, about one-third (220,784) are directly linked to the fisheries sector, about one-fourth

(143,000) to micro-enterprises, while the remaining 281,216 are engaged in agriculture,

livestock, seasonal employment or intermittent activities.

Table 4.18

Manmade Disasters

As regards manmade disasters, the Jaipur serial blasts, J&K Terrorism & Mumbai 26/11

attacks had direct impacts on a number of industries such as airlines, aerospace, travel and

tourism, insurance, hospitality, recreation and related activities.

In Jammu and Kashmir, economic development and employment opportunities did not expand

correspondingly, which lead to a rise in unemployment among the educated (Wirsing, 1998).

Frustrated and jobless, many unemployed yet educated youth fell into the ‘gun culture’ of the

late 1980s, which eventually lead to the insurgency and consequential military uprising during

the 1990s (Habibullah, 2008). JK officials stated that the several hundred damaged or burnt

down school buildings in the 1990s had negative implications to the overall education system, all

of which were related to the ongoing conflict in Kashmir (The Tribune, 2008).

Conclusion:

Disasters cause adverse impacts on industries, business interruptions and loss of jobs. This

gives rise to unemployment which may be temporary. The disaster such as drought causes

unemployment in rural areas. It causes loss of livelihood in the disaster affected

community. 12% of respondents have ranked it as most significant financial impact by

giving 1st or 2nd rank. It indicates that the majority of respondents have not treated it as

most significant financial impact.

g) Increase in the security

2% of the respondents have ranked increase in the security as most significant impact

followed by 2% who have given it second rank. 4% of the respondents have given it a third rank,

2% 4th rank, 2% 5th rank, 22% 6th rank, 30% 7th rank, 36% 8th rank.

Longer-term costs of security involve the opportunity cost of spending additional money

to fight terrorism. Currently India ranks on 9th position in the world for highest military

expenditure (2009-10), which amount to sum total of USD 32,700,000,000. Further, a variety of

new spending on security has occurred. As all this happens, economic resources will be directed

to shoring up security and diverted away from more productive private sector activity.

The Scheme for ‘Modernization of State Police Forces (MPF) is a significant initiative of

the Ministry of Home Affairs in India towards capacity building of the State Police Forces,

especially for meeting the emerging challenges to internal security in the form of terrorism,

naxalism, etc. Some of the major items for which funds are provided under the Scheme include

construction of secure police stations, outposts, police lines, ensuring mobility, provision of

modern weapons, security, surveillance, communication, forensic equipments, up-gradation of

training infrastructure, police housing, computerization, etc.

Central assistance released to the State Governments during the last 10 years

(Source: Report of Ministry of Home Affairs, India)

Table 4.19

Central assistance released to State Governments

(Graph drawn by the researcher based on data of Report of Ministry of Home Affairs, India)

It is observed that the central assistance released to the State Government has been increased

over the years.

Coastal security is a very important aspect as far as natural disasters are concerned. In

2004, about 28 km out of a total of 300 km of rubble mound seawalls (RMS) were damaged by

the tsunami. Many existing flood banks near the mouths of rivers were also damaged, especially

in Nagapattinam district. Estimates of the cost of damage are based on the cost of restoring

damaged coastal protection infrastructure to sound working condition. This amounts to Rs. 186

crore ($42.8 million), comprising Rs. 104 crore ($23.9 million) in Tamil Nadu, Rs. 42 crore

($9.7 million) in Kerala, and Rs. 40 crore ($9.2 million) in Andhra Pradesh.

A coastal security scheme was approved in January 2005 for implementation over a

period of five years with an outlay of Rs.400 crore for capital expenditure and Rs.151 crore for

recurring expenditure during the first five years. (Ref: Press Information Bureau, Government of

India, 11th December, 2008)

0

200

400

600

800

1000

1200

1400

Rs. In crore

Figure 4.26

Conclusion:

Disasters such as terrorism necessitate more funding for security aspects. However, longer-

term costs of security involve the opportunity cost of spending additional money to fight

terrorism. Coastal security is a very important aspect as far as natural disasters are

concerned. Only 4% of the respondents have ranked it as a significant financial impact by

giving 1st or 2nd rank. This indicates that the majority of the respondents are of the opinion

that ‘increase in the security’ does not cause a significant financial impact.

h) Stoppage/disruption of business

6% of the respondents have ranked Stoppage/disruption of business as most significant

impact followed by 6% who have given it second rank.6% of the respondents have given it a

third rank, 8% 4th rank, 14% 5th rank, 8% 6th rank,22 % 7th rank, 30% 8th rank.

Disasters have impact on the human resource and property. They cause destruction of

infrastructure. As a result, the businesses get disrupted.

Natural Disasters

The Gujarat earthquake of 2001 caused severe disruption of businesses. Gujarat was the

second most industrialised state in India, with well developed diamond, pharmaceutical,

chemical, textile and steel industries. Although most survived the quake with little or no major

structural damage, they were disrupted by the destruction of communications, transportation and

electricity / gas supplies. Immediately after the quake, industry lost about 200 million dollars

every day. The huge loss of life also had an impact on industry because many of the dead were

workers in local businesses.

The tsunami of 2004 caused damages of about 388 ha of shrimp ponds (worth Rs. 8.4 crore or

$1.9 million), and five hatcheries (Rs. 0.25 crore or $57,500), and to 102 small-scale oyster

farms in Kerala valued at Rs. 0.102 crore ($23,500). (Ref: The ADB/UN/World Bank report,

2005, page 6)

Due to the flooding of 2005 in Mumbai, The banking transactions and ATM networks

were adversely affected and many branches and commercial establishments were unable to

function from the evening of 26 July 2005. The disasters affect the businesses by affecting the

public utilities and infrastructure.

Man- made disasters

Luxury hotels Taj Mahal Palace and Oberoi Trident were targeted by the terrorists in

2008. The terrorist attack affected the business continuity of these hotels. Hurt by the prolonged

closure of its Taj Heritage wing due to the 2008 terror attack in Mumbai, Indian Hotels Company

had a nearly 80 per cent decrease in its profit after tax (PAT) at Rs 3 crore for the quarter ended

June 30, 2010. As per the estimates of analysts, the loss in business due to the attacks was about

$100 billion, arising from crucial institutions, such as the stock exchanges, commodities and

money markets, and business and commercial establishments which remained closed. The

foreign exchange loss was worth $20 billion.

The 60 hours of terror, spread over four days, has resulted in a loss of roughly Rs 4,000

crore to Mumbai, estimates industry body ASSOCHAM, after talking to companies and

industries in the city. The immediate impact of terrorism is destruction of property, loss of life,

and loss of money, but the greatest loss of them all is uncertainty and fear, which impacts

economic activity. Hospitality, transportation and tourism sectors are amongst the first areas to

get affected. Hotel occupancy went down 25% and rates plunged in western India. Civil aviation

is another affected sector.

Conclusion:

Disasters hamper the business activity. The disasters such as earthquakes, floods, tsunamis etc.

disrupt the businesses by destructing the communications, transportation and electricity / gas

supplies. They cause destruction of railway tracks, roads and bridges thereby causing hindrance to

commercial activities. The immediate impact of terrorism is destruction of property, loss of life, and

loss of money, but the greatest loss of them all is uncertainty and fear, which impacts economic

activity. 12% of respondents have ranked it as most significant financial impact by giving first or

second rank. It indicates that the majority of respondents have not treated it as most significant

financial impact.