Quake to put massive burden on economy
The cost of repairing the damage from the deadly earthquake that ripped through India's industrial heartland will impose an enormous burden on the country's flagging economy, economists said on Monday.
"The damage is extensive...The government cannot do it alone. Not even 10 per cent," said Charan Wadhwa, economist at a New Delhi-based thinktank, the Centre for Policy Research.
And the job of counting up the losses in terms of lives and physical damage is only just beginning, authorities say.
The quake which struck with terrifying intensity on Friday is believed to have killed 20,000 people.
Thousands still are buried under rubble from the quake which flattened whole villages and toppled city high rises in Gujarat, a prosperous state outranked only by neighbouring Maharashtra.
Enforcement of building codes in India are lax which contributed to the damage, experts say.
India has asked the World Bank for $1 billion and the Asian Development Bank for $500 million to help rebuild the state which has a population of 41.3 million people.
An influential business lobby, the Federation of Indian Chambers of Commerce and Industry (FICCI), put building and construction losses across Gujarat at about Rs 150 billion.
Many insurance policies offer quake coverage, but India is generally regarded as underinsured compared to other countries which will exacerbate the costs.
FICCI pegged gross domestic product losses from non-production at Rs 4 billion daily, infrastructure losses at Rs 20-30 billion and losses to factories of around Rs 15-16 billion.
There is a "tremendous fear psychosis" among workers in Gujarat "who have not turned up for work today" and are not likely to do so for the next few days, contributing to the economic losses, the lobby group added.
However, in terms of physical damage to key industrial installations, the state escaped lightly from the quake which measured 7.9 on the Richter scale, according to the US Geological Survey.
While there was wide destruction of commercial and residential buildings, its huge petroleum refineries, chemical and textile plants and pharmaceutical factories, were relatively unscathed along with the country's busiest port, Kandla.
Finance Minister Yashwant Sinha told reporters that any damage figures now could only be "guesstimates".
All that was clear, he said, was that the requirement for funds for reconstruction from the most destructive earthquake to strike modern India "is going to be enormous".
Sinha, who has been under pressure to serve up a stimulus budget next month to kickstart India's slowing economy, said the catastrophe could hit growth.
He noted Gujarat was a major contributor to India's GDP. "Any slowdown in economic activity (there) will have an impact on various aspects of our national life," Sinha said.
He would not comment on a report on Monday that the government would impose a "Gujarat surcharge" -- either through direct or indirect taxes -- to help defray the rebuilding costs.
The surcharge was expected to be announced before Sinha presented the budget for 2001-2002 at the end of next month, a financial daily said, but gave no details about how much the government expected to raise.
Economists said there was no doubt that the reconstruction bill would impact on the country's already gaping fiscal deficit.
"On one hand there will be a drop in revenues from one of India's industrial centres and on the other massive reconstruction and rehabilitation expenditure. In the last financial year to March 2000, India overshot its deficit target of Rs 799.55 billion by nearly a third, partly due to a war with Pakistan over territory in disputed Kashmir and a cyclone that devastated the eastern state of Orissa.
This year's government budget deficit is targeted at Rs 1.17 trillion.