Drought Situation to Cost Rs 6.5 lakh Cr to Indian Economy

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Widespread drought  will impact the Indian economy at least by Rs. 6,50,000 crores (about US$ 100 billion) as about 33 crore people across 256 districts are facing the grave situation, an ASSOCHAM study has noted with concern.

In the pre-monsoon season, weekly rainfall for the country as a whole during the last week of April, 2016 was 19% lower than Long Period Average (LPA). Rainfall (% departure from LPA) in the four broad geographical divisions of the country during the above period was higher by 38% in East & North East India and lower by 89% in South Peninsula, 78% in Central India, 61% in North West India.

Recent estimates indicate that the current water shortage both in reservoirs as well as lowering of ground water table has created a serious challenge for the drought affected areas in 10 states.  Mr D S Rawat, Secretary General ASSOCHAM said the drought would create inflationary pressures making the food management an imperative challenge for the government and the policy makers.

The cumulative rainfall in the country during the pre-monsoon season i.e. since 1st March, 2016 till April end was 8% lower than Long Period Average (LPA). Rainfall (% departure from LPA) in the four broad geographical divisions of the country during the above period was higher by 8% in East & North East India, 4% in North West India and lower by 70% in South Peninsula, 31% in Central India.

Let us assume that government will spend just Rs. 3000 per person to cover water, food, health for these people for one or two month. With the population of 33 crores at risk, the estimated cost to economy will be about Rs.100,000 crores per month.  The loss of subsidies on power, fertilizer and other inputs due loss of crop multiply the impact.

Estimates may vary depending upon the assumptions. While making any assumption please include the following loss of man-days, cost of health, cost of livestock and their fodder, loss of productivity of land, animals, water bodies and people, increased burden on health services, revival from crisis of nutrition, fodder shortage and revival of rural economy, cost of displacement, etc.

It is clear that these 33 crore people need water and food for their existence and they purchasing power has vanished. Both of this will have negative impact on economy, said Mr. Rawat.

Lack of focus on natural resources will hurt the economic growth very seriously. Depleting soil health, water levels and air pollution will create inflationary pressures and will hurt Indian competitiveness. Corporate India must look at these aspects for their own existence, noted the study.

Economic Impact of Drought:

  • 33 crore people need support for existence it means about 25% of Indian people need help in the food, water, medicine. This will divert financial resources soft h states from development to aid.
  • Even if 10% of these people migrate of other places, there will be massive socio-economic challenges in urban centers.
  • This will put pressure on urban infrastructure, over strengthen water and food supplies in cities will come under further pressure and crime rate is likely to go up.
  • Overall health, mainly for children, women and other aged people will be a serious social challenge and cost to economy.
  • Livestock and agriculture economy in these districts will also suffer and debt trap will increase in these areas.

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