Mumbai's businesses - and India's economy - count the cost after devastating floods
Flooding in India causes $7 billion worth of damage each year, according to the United Nations
Usman Chauhan sighed as he stood in his small store in Mumbai, almost knee-deep in a pool of water and cooking oil.
The old man’s son and others frantically scooped up the murky grey liquid and threw it out on to the street.
It was just one of many such scenes of destruction to be found in Mumbai after torrential monsoon rains hit India’s financial capital last Tuesday, leading to widespread flooding and bringing the city to a standstill.
“It’s a total loss, total damage – at least one thousand litres of cooking oil has been lost,” said Mr Chauhan. “All these soaps, toothpastes, damaged. Now it’s difficult to do business. The money is gone.”
He estimated that his losses from the water damage would amount to up to 800,000 rupees (Dh46,000).
From small shopkeepers to company productivity and the overall investment climate, the flooding has had a huge economic impact on Mumbai and on India’s wider economy, with the city being a crucial contributor to India’s overall tax revenues and GDP.
“The recent floods severely expose Mumbai’s failings as India’s commercial capital, and it is the commercial capital that showcases the economic strength of a country,” says Aaron Solomon, the managing partner at Solomon and Co, a corporate and financial law firm headquartered in Mumbai.
“The floods demonstrate the abject lack of infrastructure development in the city. Mumbai’s failings not only affect residents of Mumbai, but the economic growth of India as a whole.”
India on average suffers an economic loss of US$7 billion each year because of floods, according to the United Nations.
There were scenes of chaos across Mumbai on Tuesday as the rains poured down relentlessly, the heaviest in 12 years, and the water rose to levels that were waist-deep. Some citizens were forced to abandon their cars, and many employees were sent home early. Some were left with no way of getting home as train services ground to a halt, and many people ended up sleeping in their workplaces, and even at train stations, before they managed to get home the next day when a lot of the flooding receded.
On Wednesday, authorities advised the city’s residents not to venture out, meaning that productivity was impacted, with many meetings, events, and conferences cancelled, ultimately hitting revenues for a number of companies.
Trading on the stock exchanges in Mumbai were also hit by the disruption, with volumes remaining subdued as business activity in the city slowed down.
There were also deaths in the city as a result of the flooding, with 33 people dying when a dilipated residential building collapsed in the densely populated area of Bhendi Bazaar.
“Mumbai’s image has taken a beating,” says Gaurang Shah, the head investment strategist at Geojit Financial Services, an Indian financial services company.
This comes at a time when India – and especially the state of Maharashtra where Mumbai is located – is actively trying to encourage more foreign direct investment into the country to boost economic growth and create more jobs for the population.
Because Mumbai is India’s richest city with total wealth of $82bn, according to the New World Wealth report, questions have been raised about why the city was unsuitably prepared to cope with the rains. Ineffective drainage systems and litter clogging up drains are among the factors that have been blamed for the devastating impact of the floods.
“I couldn’t leave the office until 1.50am ... because of the floods,” says Rushiraj Bagwaiya, an administrative assistant who works in the bustling area around the Bombay Stock Exchange, which is home to a number of banks and law firms in south Mumbai.
“Many headquarters of the big institutions are around us, so that’s a problem if they’re affected like this. We know that Mumbai gets heavy rains, so action should be taken by the authorities to be able to cope with it.”
Mumbai’s municipal corporation, BMC, has defended itself by noting that the rains were exceptionally heavy. But many comparisons have been made with a similar situation in 2005, when there were particularly devastating floods in the city.
“It is sad that the projects that were undertaken after the 2005 flooding have not been completed, so it does leave a kind of a bad taste behind in terms of the ability of the state government to undertake such huge projects and despite having financial stability and strength, they are not able to complete, so somewhere something is missing which needs to be put right,” says Mr Shah.
“Authorities have claimed that the city is monsoon-ready but they have to eat their words and they need to come up with a solution sooner rather than later.”
Analysts says that it is hard to put a figure at this stage on the overall financial impact of the floods in Mumbai, but that the dent would be significant and far-reaching.
“Mumbai needs to provide a business environment that is comparable to the world’s best cities,” says Mr Solomon. “It is critically important that investment in Mumbai’s roads and highways, sewage systems, parking spaces, green areas, community centres, airports and railways, power supply and other infrastructure facilities are prioritised and expedited.”
He adds that events such as flooding, combined with the fact that real estate costs are so high in Mumbai, could prompt businesses to locate their offices elsewhere in India.
With other parts of the country including Assam and Bihar also impacted by flooding, the problem goes beyond Mumbai and is taking its toll on many sectors, ranging from farming to tourism. Floods often also disrupt the country’s power supplies, putting manufacturing at risk.
“These are states where you have a lot of agricultural activity and a lot of crops have got washed out with the flooding, so it will have an impact on the agricultural produce overall,” says Mr Shah.
He says that the floods in India “create an image deficit on the overall Indian scenario in front of the large investors, but it’s not going to stop the investment from coming into India.”
For Mr Chauhan in Mumbai, he says it will take months, if not longer, to recover from the damage caused by the flooding of his little shop.“We have to do this on our own,” he says. “We’re not getting a single paisa from anyone.”
Updated: September 2, 2017 04:08 PM