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Disaster Batters Economy in Sri Lanka, Maldives; India Escapes

Anjana Pasricha

The economic damage from the tsunami disaster will be marginal in the largest country in South Asia - India. But the economies of Sri Lanka and the Maldives will be hit much harder.

The devastating waves along coastlines in India and Sri Lanka wiped out the homes and livelihoods of hundreds of thousands of families. But economists say this is a huge humanitarian tragedy, not an economic disaster in India.

Experts say India's booming growth of about seven percent will be barely touched by the havoc wrought in the country's southeast region by tsunami waves on December 26.

That is partly because the two industries most heavily hit, tourism and fishing, make up a small percentage of the country's overall gross domestic product.

A South Asia analyst at the Confederation of Indian Industry, T.K. Bhaumik, says the waves destroyed fishing hamlets, but did not touch the core sectors of the country's economy.

"The real sectors of the economy are not likely to be very much impacted because it has not impacted agriculture production and in any case the industrial economy remains unaffected so far as India is concerned," he explained.

But the economic challenge is greater in Sri Lanka where thriving tourist resorts in the south were damaged along with fishing communities.

The disaster prompted thousands of tourists to cancel trips to the region, in the middle of peak season.

Infrastructure losses have also been huge. Sri Lanka says it needs $1.3 billion to rebuild roads, railways, and hotels along its devastated eastern coastline.

The losses could lower growth by as much as two percentage points in an economy that was just beginning to recover from the effects of two decades of civil conflict.

The economic costs may be the highest in the tiniest country to be hit by the waves - the Maldives. This vacation paradise was spared a large human toll, but the low-lying islands have been severely damaged.

Many luxury resorts need rebuilding, and will be closed for months in a country where tourism brings in half the foreign exchange earnings. With the tourist economy in disarray, growth could plummet by as much as four percent, according to estimates.

As in most disasters, Mr. Bhaumik, says the true cost will be borne by the poor.

"It is possible that poverty intensity may increase both in Sri Lanka, Maldives, and southern parts of the country [India]. In this case, the poor people have lost huge amounts of assets. For instance in [the] case of fishermen's family - their trawlers have been destroyed so they have to re-equip themselves," he explained.

But, some economists and aid workers have said, if the large amounts of international aid that have been promised come in quickly and are used effectively, economic recovery among these poor people may happen sooner rather than later.

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