Impact of Drought on Indian Economy

Drought has made life miserable across several Indian states. Drought in 10 states is estimated to impact the economy by at least Rs. 6,50,000 crore as about 33 crore people across 256 districts are facing the grave situation, a study has revealed.

Due to two consecutive years of poor monsoon, water shortage in reservoirs as well as lowering of ground water table has created a serious challenge for the drought-affected areas in 10 states like Maharashtra and Karnataka, the study by The Associated Chambers of Commerce (Assocham) said.

“The rough estimate indicates that this will cost national economy at least Rs.6,50,000 crore or say USD 100 billion,” it said. The impact of is likely to remain for at least six months more because one needs resources and time to revive the activities on ground even if monsoon is predicted to be normal this year, it said.

“Let us assume, the government will spend just Rs. 3,000 per person to cover water, food, health for these people for one or two month. With the population of 33 crore at risk, the estimated cost to economy will be about Rs.1,00,000 crore per month,” the study said.

The loss of subsidies on power, fertiliser and other inputs multiply the impact, it added. On economic impact of drought, the study said the financial resources get diverted from development to aid and the possible migration to other places puts pressure on urban infrastructure and supplies.

There is likely an impact on children and women health besides farm debt increase due to loss in livestock and farm economy in the affected districts, it said. The drought would create inflationary pressures making the food management an imperative challenge for the government and the policy makers, he added. The drought has made it difficult for the government to handle the drought-hit areas and the money that is needed to bring relief is having an adverse effect on the nation’s economy.

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