IIT Bombay study reveals financial impact of disasters on Indian states, calls for stronger preparedness and climate resilience

IIT Bombay study analyzes financial impact of floods and cyclones in India, offers solutions for disaster preparedness.

A recent study conducted by researchers at the Indian Institute of Technology (IIT) Bombay analyzed the financial impact of floods and cyclones across 25 states in India. The study, which covers a span of 23 years (1995–2018), highlights how the damage caused by these natural disasters severely affects the states’ budgets on an annual basis. The research also offers solutions for better disaster preparedness and economic protection, providing a roadmap to help mitigate the financial repercussions of such crises.

Published in the International Journal of Disaster Risk Reduction, the study titled, ‘The impact of floods and cyclones on fiscal arrangements in India: An empirical investigation at the sub-national level’ is conducted by Nandini Suresh,a research scholar with the Center for Climate Studies, IIT Bombay, Professor Trupti Mishra, and Professor D. Parthasarathy of IIT Bombay.  

Also Read | Natural disasters caused 2.5 million internal displacements in India in 2022, report says

Traditionally, disaster response funding relies on estimating the cost of damages based on evaluating economic losses, the number of deaths, and the number of people affected. “These evaluations are often inconsistent and biased,“ Ms. Suresh said. “We relied on data from weather and geographic sources [IBTrACS and the India Meteorological Department] to accurately measure cyclone strength [using wind speeds] and flood severity [based on unusual rainfall],” she explained.  

By combining this information, the researchers created a Disaster Intensity Index (DII), ensuring all types of disasters are treated fairly. This method avoids inconsistencies and biases and gives a clearer picture of disaster impacts, especially for floods and cyclones, which caused 80% of disaster-related losses in India during the study period.  

The study uses a statistical model called panel Vector Auto Regression (VAR) to examine how revenue and expenditure affect each other from one year to the next few years. The model allows accounting for differences between states and ensures that past economic conditions do not unfairly influence disaster severity measurements, giving a reliable way to study the financial impacts of disasters.