Shot Videos 
India’s geographical location and monsoon climate make it highly vulnerable to natural disasters such as floods and cyclones, particularly in coastal and riverine areas
Representation Pic/Atul Kamble
A study by researchers at the Indian Institute of Technology Bombay (IIT Bombay) has analysed the financial burden of floods and cyclones on Indian states, highlighting the long-term economic strain caused by natural disasters. The research, conducted by Nandini Suresh, Prof. Trupti Mishra, and Prof. D. Parthasarathy, examined 25 states over a 24-year period (1995–2018) and is published in the International Journal of Disaster Risk Reduction.
ADVERTISEMENT
India’s geographical location and monsoon climate make it highly vulnerable to natural disasters such as floods and cyclones, particularly in coastal and riverine areas. On average, the country experiences five to six tropical cyclones annually, with two or three classified as severe. These disasters not only cause immediate loss of life and property but also impose a significant financial strain on state governments, which bear much of the cost of disaster response and recovery.
The study introduces a Disaster Intensity Index (DII) to measure the financial impact of disasters using data from weather and geographic sources such as IBTrACS and the India Meteorological Department (IMD). Instead of relying on traditional damage assessments—which can be inconsistent—the DII quantifies disaster severity based on cyclone wind speeds and unusual rainfall levels for floods, ensuring a standardized and unbiased evaluation of their economic impact.
How Disasters Impact State Budgets
Using a panel Vector AutoRegression (VAR) model, the study examines how revenue and expenditure interact over time, accounting for differences between states. The findings show that natural disasters place a heavy financial burden on state budgets in two key ways:
Increased Expenditure – States must allocate significant funds for relief efforts, evacuation, medical aid, food, and shelter, followed by reconstruction costs for infrastructure such as roads, bridges, and housing.
Declining Revenues – Economic activity is disrupted as agriculture, trade, and business operations suffer, leading to lower tax collection and reduced government income. This cycle of rising costs and falling revenues results in widening budget deficits.
The study also finds that the financial impact varies between states. Less disaster-prone states like Madhya Pradesh and Chhattisgarh, which mainly experience droughts and occasional floods, can manage relief efforts with their own resources and sustain minimal financial losses.
However, coastal states such as Odisha, Andhra Pradesh, and West Bengal, which are frequently hit by cyclones and floods, face higher recovery costs and greater revenue losses, often relying on external funding such as loans, increasing their debt burden.
What the study recommends
The study suggests that public-private partnerships (PPPs) can help build a more climate-resilient economy. Governments could offer tax incentives for businesses investing in disaster-resilient infrastructure and enforce sustainability regulations. Additionally, flexible state budgets with contingency reserves would allow for faster reallocation of funds during emergencies.
"Several Indian states have already taken steps toward climate resilience. Tamil Nadu has introduced advanced cyclone monitoring systems, Kerala has adopted climate-adaptive urban planning, and Odisha has pioneered budget tracking for climate-related expenditures. With climate change intensifying the frequency and severity of disasters, the financial strain on Indian states is expected to grow," pointed out Parthasarthy.
The study concludes that strengthening disaster preparedness, improving financial planning, and integrating resilience measures into state budgets will be critical in ensuring long-term economic stability and protecting both lives and infrastructure.
Subscribe today by clicking the link and stay updated with the latest news!" Click here!
