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Risk Pricing & Hedging - Financial Innovation for today's complex
marketplace
Rakesh Saxena
Author:Rakesh Saxena
Director, Risk Pricing
How Money Lenders and Criminals Prosper in Indian Floods
Friday 12th, September 2008

Summary: The State of Bihar has asked flood victims taking shelter in the relief camps to stay put until mid-October. Officials justifiably claim that, while aid agencies will direct food, medicine and clothing to such camps, the risk of water levers of the deadly Kosi River rising yet again remains very real. But, in actual fact, the relief camps have become havens for money lenders, people smugglers and gangs of thieves, who are all plying their trade under the supposedly watchful eyes of the notoriously corrupt police, bureaucracy and paramilitary forces of Bihar.

 

 

Publicly announced estimates of the number of dead in the Bihar floods are in the 60-100 range; relief workers on the ground say that well over 900 villagers have been drowned in the ferocious waters of the Kosi River.  But deaths apart, it is the living misery of the relief camps which is now shaping the future of 4 million people.

 

As government spokesmen in New Delhi and Patna (capital of Bihar) would lead you to believe, the Kosi River breached embankments in the vicinity of an old and badly-maintained dam in Nepal, and then unexpectedly changed course by as much 100 km. But, as recent and not-too-recent history shows, changing course or otherwise, the Kosi River has been flooding the plains of Bihar with striking regularity for the better part of the last century.

 

Furthermore, any credible fundamental economic analysis of Bihar will show that the periodic flood-related havoc caused by the Kosi, and other rivers originating in the high mountains of the Himalayas, have been the single biggest contributor to extreme poverty levels in the Bihar countryside. The current floods, for example, have destroyed virtually the entire standing crop in 14 districts; and, given that the Kosi carries with it coarse sand and gravel (as opposed to silt), millions of acres of agricultural land will be deemed barren for agricultural purposes many years into the future.

 

How then will the inhabitants of the relief camps ever be able to repay the high-interest loans being made to them today by unscrupulous money lenders? How then will flood victims ever be able to replenish their meagre resources of gold and silver jewellery, needed for the next family crisis, being sold at heavy discounts to predatory traders? How will fathers and mothers be able to locate young daughters being lured into the sex trade and young sons being turned into lowly paid domestic helpers in Delhi and Kolkata?

 

As the flood-to-poverty cycle unfolds before the eyes of a media which prefers to look elsewhere, the disaster itself is, once again, being blamed squarely on the general inability to control the melting glaciers around Mount Everest, and on the insufficiency or inadequacy of the Kosi`s embankments in Nepal. The bitter truth is that the entire water management system in Bihar is hopelessly outdated. And, at least 60% of the funds earmarked for flood prevention upgrades (including the upgrading of assets beyond the northern border) in previous decades have ended up in the coffers of politicians and contractors in India, and in the hands of surrogates of the former monarchy in Nepal.  

 

To worsen matters, the impoverishment and exploitation which the floods bring in their wake, is further consolidating the flow of capital resources (mainly cash surpluses) away from the agricultural hinterland, to banks and assets in the cities, and to wasteful expenditures by a new breed of urban rich. Finally, given the widely available flood prevention technologies available today, and given the huge infrastructure expenditures by national and state governments in India since the mid-1950s, it is important to note there is nothing natural about a flood or a famine, particularly from the perspective of the lasting social impact of such calamities. Death, starvation and misery are all direct consequences of political and economic failures.

 
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