India Begins Calculating Quake’s Cost

While the search for survivors continues, Indian authorities are beginning to calculate the economic costs of the destruction wrought by the worst earthquake in 50 years. First estimates indicate the costs of repairing damaged property at 150 billion rupees ($3.3 billion), and a decline in export earnings between 4 and 5 percent.

Gujarat, where the quake was centered, is one of India’s most industrialized states, and the cost of rebuilding and loss of revenues will be “enormous.” While many larger industrial plants escaped major damage, smaller enterprises, mainly producing textiles and pharmaceutical products, were heavily hit.

While many of the larger enterprises were insured against earthquake loss, most of the smaller firms and individuals were not, which raises the possibility that without government assistance they will be unable to recover. This means job losses and a drop in exports.

The earthquake may also adversely affect the inflow of foreign capital, and cause property/casualty insurers to more closely examine joint venture investments in the Indian market.