Ranked top in a list of populations most at risk from natural disasters, India must find solutions to make its economy less exposed

High temperatures and a crippling shortage of rainfall in India is forcing schools to close and communities to ration drinking water. In Chennai, the oppressive heat currently gripping the southern Indian city has led to workers demanding an allowance for working in stifling factories and vets offering advice on caring for pets to avoid dehydration. “While some rains would have been a blessing in disguise, the rain gods have ditched Chennai,” writes a reporter for Skymet, which provides weather forecasts in India.

It would have been hard to imagine such a situation four-and-a-half months ago. Following the heaviest rainfall in more than a century at the end of last November, the Adyar river – which runs through the centre of Chennai – surged, causing muddy water to pour over the walls of nearby apartment blocks and into the streets. Thousands were forced to flee their homes, and hundreds died.

Businesses were also affected. Factories such as those of Ford and Renault-Nissan were closed, Chennai International airport suspended operations, power supplies were down and roads across the region became waterlogged, limiting the movement of goods and employees. Reinsurance company Swiss Re estimates the floods caused economic losses of $2.2bn (£1.53bn).

Despite high levels of economic growth, India lags significantly behind countries such as the US and China in building resilience to natural hazards, which cost it $9.8bn a year. This is the conclusion of risk analysis company Verisk Maplecroft, whose latest hazard risk indices have ranked India’s population first in a list of those most exposed to natural hazards.

The research identifies flooding as one of the biggest risks to communities and businesses in South Asia, and suggests that in India alone 113 million people – 9% of the population – are acutely exposed to flood hazard.

The reasons why India is so exposed are diverse. “India’s most vulnerable areas are characterised by high rates of poverty and poor access to public services, leaving people with a lack of resources to prepare for and recover from natural hazard events,” says Dr Richard Hewston, principal environmental analyst at Verisk Maplecroft. “Communities in rapidly growing urban areas also tend to be among the most vulnerable, as poor urban planning and weak enforcement of building standards means the impacts of natural hazard events are more keenly felt.”

In addition, the country’s dependence on agriculture leaves it highly sensitive to extreme weather events. India derives a greater proportion of GDP (17%) from agriculture than the global average (4%) and the sector employs 47.2% of the population, compared to the global average of 30.7%.

The Indian government has begun to address these vulnerabilities, introducing a $1.3bn crop insurance scheme at the start of this year to help farmers cope with falling market prices and crop failure due to natural disasters. At present only 19% of India’s farmers insure their crops due to lack of awareness about the practice of crop insurance, its cost and lack of availability.

Insurance companies themselves could encourage more resilient business practices, for example by offering products that support the adoption of drip irrigation.

“It is impossible for insurance companies in India not to notice the risks of extreme weather and water scarcity,” says Alejandro Litovsky, CEO and founder of Earth Security Group, which has recently published a report on the role of the insurance sector in India. “Besides their agricultural portfolios, their clients in energy and infrastructure are also being affected as droughts cripple their operations. There is a powerful business case for insurance companies to plan their future growth through companies promoting sustainable agriculture and renewable energy.”

Ultimately, tackling unsustainable business practices requires more than insurance. The Delhi-based Energy and Resources Institute proposed to work with companies to study the impact of climate change on the oil and gas sector. So far, however, only two have signed up to take part. “They’re concerned about numbers for demand of their product, but not about what the climate can do to their business. Everyone’s knowledge is based on hindsight,” says a researcher from the institute who wished to remain anonymous.