Natural disasters, climate change have long-term impact on state finances: IIT Bombay

New Delhi [India], January 30 (ANI): India experiences five to six tropical cyclones every year, with two or three being severe. A study by the Indian Institute of Technology Bombay (IIT-B) said that these disasters cause not only immediate loss of life and property but also put a significant financial strain on the government.

The state government bears much of the disaster response cost after natural disasters such as floods and cyclones which substantially impacts its budget.

The findings from the study show that disasters put a heavy financial burden on affected states.

It increased the state's expenditure. After the disaster, the state has to invest in rebuilding essential infrastructure such as roads, bridges, and homes. Secondly, these disasters reduce the government's revenues. As agriculture, trade, and business operations are often disrupted, tax collection and income from these services are reduced.

The IIT-B study highlighted a cycle in which increased expenditures and falling revenues lead to more significant budget deficits.

The study suggests that public-private partnerships (PPP) are essential for building a climate-resilient economy and the government can offer tax incentives for businesses to invest in climate resilience infrastructure and enforce sustainable regulations.

The research published in the International Journal of Disaster Risk Reduction pointed out that the implementation of disaster risk financing mechanisms is challenging due to a lack of awareness and understanding among stakeholders, including governments and the public, about the benefits of such instruments.

The study emphasised the need for proactive disaster risk financing mechanisms such as resilience bonds, disaster insurance, and catastrophe bonds. Mechanisms such as resilience bonds encourage investments in disaster prevention projects and offer incentives for reducing the effects of disasters.

Disaster insurance supports individuals, companies, or governments in recovering from losses brought on by natural disasters. Catastrophe bonds allow governments or organisations to shift disaster risk to investors who receive interest unless a disaster occurs.
The study also suggested states invest in early warning systems, cyclone shelters, and resilient infrastructure and promote sustainable land use that can minimise the economic impact of climate change and lower the long-term costs of dealing with disasters.

Many states have already made progress: Tamil Nadu has installed advanced cyclone monitoring systems, Kerala has adopted climate-adaptive urban planning, and Odisha and many others have introduced budget tracking for climate-related spending. (ANI)