🌧 Bengaluru is flooding..but why? ..Plus India’s economic policy paying off and more in today’s Finbrief
Hello. It’s the start of an exciting new week. And we welcome you to the September 12th edition of finbrief daily business brief!
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🌧 Bengaluru is flooding..but why?
Bengaluru is reeling under unprecedented floods with floating cars and submerged roads & houses being common sight. Not a great look for a city that’s the pre-eminent hub for India’s tech companies and talent. Even the uber rich haven’t been spared — with exclusive communities housing billionaires like Byju Raveendran (BYJU’s CEO) and Rishad Premji (Wipro Chairman) submerged under water.
But why is the situation so bad? We’ll try to explain:
- Unexpectedly high rainfall: This is the easiest to identify cause. Historically, Bangalore receives 970–990mm of rainfall annually. This year, the city has received over 1460mm already. But this isn’t entirely an anomaly. In 2020 and 2021, the average rainfall measured at over 1200mm — again, well in excess of the historic long term average. With temperatures rising across the world (yes, global warming), rainfall and droughts across the world are intensifying and this is only expected to continue going ahead. So yes, nature is to blame, but maybe some preparation was in order. What else failed?
- Shrinking waterbodies with a lack of interconnectivity: Lakes interconnected with canals and drains are critical for storm water management of a city. In 2005, as many as 110 villages were merged into the city metropolitan area, but the administration didn’t link them with city’s sewage system. Moreover, rapid urbanization has led to encroachment of lakes and drains through illegal construction. As a result, drains have narrowed to less than 20% of their capacity in many places leading to water logging on roads. The city’s water storage capacity has also shrunk from 35 thousand million cubic feet (tmcft) in the 1800s, to just 1.2tmcft today. Compounding the problems, there are no culverts (tunnels that carry water under roads / railways) along roads. Without culverts, roads act like mini dams leading to water logging.
- Poor maintenance: Less than 50% of the drain length in the city are covered by annual maintenance contracts. The result? Drains are often clogged with garbage and silt, and thus become too narrow to adequately carry the waste water.
- Development in low-lying areas: A lot of the newer wave of development in the city took place in low-lying areas (e.g., the outer ring road area which was one of the worst affected places) which are prone to overflowing when there’s heavy rainfall.
So what’s being done? The government has already tendered contracts to desilt city’s drainage system and is said to be in the process of identifying and clearing encroachments. Rs. 1,500 crore has also been allocated for the construction of stormwater drains in the city (in addition to Rs. 300 crores to repair damaged infrastructure like roads, electric poles and transformers). Will this be enough though?
▶︎ WHAT’S THE TAKEAWAY?
Bengaluru’s infrastructure has struggled to keep up with its growth and the cracks have been showing up for a while. Now, the floods have particularly drawn attention to the city’s ability to handle further growth. Companies in the outer ring road area of Bangalore estimated a Rs. 225 crore productivity loss from a single day as a result of employees being stuck in commute. Without adequate action, there is a very real possibility of companies (and talent) seeking alternate locations to set their base.
đź—ž Other quick hit stories
💸 India’s fiscal prudence paid off while US and Europe’s massive stimulus may have backfired: US and Europe are struggling with rampant inflation and the risk of a recession. Economists argue that US and Europe’s massive stimulus measures undertaken during the pandemic is a key reason for the high inflation in the region. Indian government in contrast prioritized careful spending and provided only targeted stimulus, which arguably puts the country in a more stable economic situation. India is the only large country with only a moderate inflation risk and strong growth rate.
📦 Festive season opens up 500,000+ temporary jobs: India will be celebrating the festive season without restrictions after the pandemic after two years, and consumption is expected to hit a new high (e-commerce sales are expected to be ~28% higher than last year). The demand for temporary workers (delivery agents, packers, loaders etc.) are up ~30–40% over last year to meet the spike in demand — opening up over 500,000 new temporary jobs. Something to celebrate indeed.
⛽️ Oil price at 7 month low, but retail price of petrol and diesel remains unchanged: International oil prices have hit a 7 month low on recession fears, but retail price of petrol and diesel in India remains unchanged. Why? (1) Public sector oil marketing companies (e.g., Indian Oil Corp, Hindustan Petroleum Corp) made significant losses by keeping prices steady when oil prices were at record highs — keeping the price unchanged will allow them to recoup some of the losses (2) Oil price is too volatile at this moment, making quick changes to retail prices challenging.
đź’ˇ Fin fact of the day
The “paper” used to make currency notes in India (and many parts of the world) is actually not paper — it is 75% cotton and 25% linen. And that’s why it comes out still usable if you put in the washing machine.
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