A costly peril

Mean annual rainfall and extreme single-day rainfall events in India are projected to increase the frequency and intensity of floods in India. Apart from Global Warming and Climate Change, the scale of the impact of these extreme events on people is to be further intensified by socioeconomic factors such as increasing population, rapid urbanisation, infrastructure expansion in high-risk zones, and a large number of people living in informal settlements in poor and destitute conditions.

India's geophysical and climatic conditions make it one of the most disaster-prone countries in the world. Of the different types of natural disaster, hydrological disasters have the largest number of recorded instances and the highest mortality and damage costs. India experienced 278 floods since the 1990s affecting more than 750 million people and caused about $58.7 billion in losses. Calculations of losses are usually lower-bound estimates because of the presence of a large informal economy and the difficulty of monetising indirect impacts. Floods account for more than half of climate-related disasters in India.

A multidimensional view presented by the latest working paper of ADB on 'Impact of Natural Disasters on Households and Small Businesses in India' goes farther than usual routine damage assessment. To understand the impacts of extreme rainfall events on households and businesses, it chose three diverse cases: Mumbai, Chennai, and Puri district, and came out with rich insights into the asset exposure and direct and indirect impacts on poor urban and rural households, small businesses and farming communities.

The study found that poorer households are more vulnerable because of their low incomes, poor-quality housing and location in informal settlements in low-lying and flood-prone areas. Their main investments, including their house and household assets, are at risk from flood-related damage and destruction. During extreme floods, families living below the poverty line in Mumbai faced damage costs amounting to 1,480 per cent of the average monthly income of this socioeconomic class. In Chennai and Puri district, extreme floods washed away or partly damaged the houses of poor and migrant families.

Although poor households face lower damage costs in absolute terms because they own so little, in relation to their earnings, their damage costs are higher than those of better-off families. Overall, flood-affected households experienced damage to assets in which their life savings are invested (houses) or on which their livelihood depends (work tools, livestock). Extreme events, therefore, threaten the critical asset base of poor families. Households also had to cope with indirect impacts of floods such as shortages of food, water and fuel, and disruption of services. Workdays and even jobs were lost after floods. Therefore, people faced a loss of assets, livelihood and access to basic services with obvious financial implications over the short to medium term to rebuild their lives and restore their assets to pre-flood levels.

Compensation and social protection are partial. In Mumbai and Chennai, the government offered some households a fixed amount as compensation to assist with immediate needs such as food and clothing. However, this amounted to less than 10 per cent of total losses suffered by households across different socioeconomic strata. Many households, such as migrant workers in Chennai or families who had lost their documents and could not prove their identity or place of residence, were excluded as this made them ineligible for compensation. In Puri district, if compensation had been offered under the new notification of Central and State Disaster Response Funds, it would have been inadequate to rebuild lives. Families that have limited resources and lack access to compensation mechanisms or government social protection had to use their savings or borrow from informal sources to rebuild their lives. This pushed them into indebtedness and poverty, negating the gains made by poverty reduction programs. Insurance coverage is dismally low in India. More than 90 per cent of the affected families had no insurance of any kind, let alone property or flood insurance. Even when families opted for insurance, claim settlements were lengthy, time-consuming and generally did not cover the full extent of losses.

For small businesses, most of the damage cost related to the physical structure. Losses of finished products, inventory and raw materials were also extensive. Besides the cost of damage, businesses also had to cover the immediate expenses of cleaning their premises, restarting operations or temporarily moving production elsewhere. Overall, small businesses were more vulnerable to flood impacts than their larger counterparts because of their more limited technical and financial capacity and the absence of effective business continuity plans. They took longer to recover and lost customer confidence as a result. Businesses had to use their funds or borrow to build back to pre-flood levels. None of the businesses in the three locations studied reported receiving government compensation for their losses. As profit-making ventures, they may have been left to fend for themselves using their own resources. A few SMEs that had opted for flood insurance received less than the claimed amount after months of delay. Thus, compensation and insurance did not help businesses cope with flood impacts and rebuild. As losses from floods were unexpected, businesses took a long time to recover. Many could not repay loans taken from financial institutions. Loss of credit and clients increased their distress and some businesses sold their assets and closed operations.

Experiences about rescue and relief operations in the aftermath of floods demonstrate why well-intentioned efforts may not reach the beneficiaries. In Chennai, for example, rescue operations and relief material only reached houses located along the roadside. Those who lived in interior parts of affected areas received nothing. When food packets and other material were airdropped, they were scattered and people could not reach or use them. In Chennai and Mumbai, people did not receive any flood warning, and by the time they realised the intensity of rainfall, floodwaters had already entered their homes or flooded access roads. Even when compensation was offered, government officials declared many affected households ineligible because of their migrant status or other reasons. In some areas, people who had been relocated from other hazard-prone areas in the past were affected once again in the supposedly safer areas.

Experiences like this raise many questions about the quality of rescue, relief, resettlement and rehabilitation processes. Findings also raise important questions regarding the long-term economic impacts of extreme events on poor families and the need for a protective social safety net to prevent their downward spiral into poverty and debt. Adaptation policies and plans should be designed to protect poor and vulnerable people from risks associated with extreme events.

Views expressed are strictly personal