The Economics of Natural Disaster-Kerala Floods

The Economics of Natural Disaster-Kerala floods

1. Name : Sadhana Shankar

2. Batch : PGCBM-34

3. SMS ID: TB18061

4. Name of the Topic : The Economics of natural disaster-Kerala floods

5. Name of the Faculty : Prof Vishwa Ballabh

6. Name of the Study Center : Chennai

The Economics of Natural Disaster-Kerala floods

Over the past few weeks, Kerala has been facing a massive flood; the last time anything like this had happened was in 1924. The lack of preparedness and unprecedented occurrence of this natural disaster has created a huge loss of men and money. Natural disasters invoke a series of complex chain of events that have an impact on the local and national economy a g the various aspects of economy such as the supply and demand curve, opportunity cost, price elasticity and price controls. This impact on economy is due to the state being both a producer or consumer of various essential commodities. A sudden reduction or increase in the consuming patterns tampers the flow of funds and products thus impacting the various aspects of economy. Although Kerala is not one of the hubs for manufacturing or an important player in the service sector, there is close to a 20% impact either directly or indirectly on the BSE500 companies. There are primarily 5 sectors which are likely to have the maximum impact

• Rubber

• Financial Services (NRI remittances and Gold loan enterprises)

• Construction materials and real estate

• Tourism

• FMCG products

Impact on Demand patterns:

In times of a natural disaster, there is a profound variation in the demand patterns of various goods and services which in turn causes a change in the pricing of such commodities. The ideal demand curve with all factors unchanged looks like:

Since quantity demanded is a function of current price and expected change in price, income and price of related goods, the demand curve either moves to the right or the left based on the effect of these factors.

Considering the demand and supply for rubber in particular:

Almost 40% of the cost of a tyre is dedicated to the price of rubber. Kerala contributes to almost 90% of the supply of rubber for indigenous industries. With the rubber plantations and the industry processing rubber to make it fit for manufacturing