Disaster Management & the Economy

Disaster Management & the Economy

Context

An analysis on disaster risk financing underscored India’s central policy dilemma: sustaining rapid economic growth while remaining highly vulnerable to natural hazards. Accelerating urbanisation and climate variability have pushed disaster losses to the core of fiscal planning, infrastructure design, and long-term development strategy in India.

Economic Impact: The 0.4% GDP Toll

• Average annual loss: India loses about 0.4% of GDP every year to natural disasters.
   
• Historical trend (1990–2024): Recurrent floods and landslides have steadily eroded development gains.
   
• Cost of inaction: In extreme years such as the 2018 Kerala floods or 2015 Chennai floods, localized losses have run into billions of dollars within days, overwhelming state finances.
   
• Industrial exposure: Highly industrialised states like Gujarat, Maharashtra, and Tamil Nadu contribute a major share of GDP yet face cyclones and urban flooding. Nearly 36% of India’s industrial output lies in disaster-prone zones.
   

World Risk Index: 2nd Highest Risk in Asia

According to the World Risk Report 2025/26, India ranks 2nd most at risk in Asia, after the Philippines.

Why Is the Risk So High?

• Exposure: Over 80 million people are affected by disasters every year; dense populations in floodplains and coastal belts magnify impacts.
   
• Vulnerability type: Predominantly hydrological like riverine floods, flash floods, and landslides rather than rare mega-storms.
   
• Recovery lag: A persistent “continuous threat”, new disasters strike before households, firms, and governments fully recover from previous shocks keeps risk chronically high.
   

Initiatives & Policy Shift

• Disaster Risk Finance (DRF): India is moving from reactive relief to data-driven, pre-arranged financing, including risk pooling and insurance mechanisms.
   
• Coalition for Disaster Resilient Infrastructure (CDRI): Launched by India in 2019, with its secretariat in New Delhi, CDRI now shapes resilient infrastructure standards across 50+ countries.
   
• Transition to NDP: By 2029–30, India plans to emphasise Net Domestic Product (NDP) to capture the true cost of growth, accounting for disaster-related capital loss and environmental degradation.
   

Conclusion

India’s economic ascent is persistently moderated by disaster risk. With a structural 0.4% GDP drag, the policy focus has shifted from post-disaster relief to resilience-first development—strengthening infrastructure, financing preparedness, and ensuring that growth remains durable, inclusive, and climate-resilient.