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RESEARCH PAPER ON
ECONOMICS OF DISASTERS: CRITICAL ANALYSIS OF ECONOMIC
IMPACT AND SUSTAINABILITY IN JOSHIMATH

Submitted as a part of Internal Assessment for Development Economics

BA Economics Hons.

Under the guidance of

Prof. Ashish Singh

Submitted by

Aman Dubey 2200

Dhruvi Chaturvedi 2148
Prayrna Dodani 2144
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ECONOMICS OF DISASTERS: CRITICAL ANALYSIS OF ECONOMIC

IMPACT AND SUSTAINABILITY IN JOSHIMATH

ABSTRACT

1. INTRODUCTION

1.1 What is the economics of disaster?

Disasters, whether natural or anthropogenic, have a significant impact on society and the
economy. There are two aspects to consider when calculating the cost of a disaster: direct and
indirect costs. Direct costs refer to the physical damage or impact caused by a disaster, such as
loss of life, destruction of infrastructure, disruption to the supply chain, and damage to
agricultural output. As disasters spread, indirect costs become interconnected and dispersed. One
of the most severe impacts of disasters is fear of their consequences. Confidence is key to a
stable economy and disasters can disrupt it, leading to a decline in the stock market. However, a
country's GDP may surprisingly increase. Governments invest significant funds in infrastructure
reconstruction and disaster relief, which leads to an increase in government expenditure.
Insurance companies pay for damaged property, which can lead to increased consumption
expenditure in the economy. Although investment spending and net exports may experience a
slight decline, the overall gains outweigh the losses. While the economy may seem to be
thriving, it is crucial to recognize that this phenomenon, also known as "The Parable of the
Broken Window," tells a different story. This concept, introduced by French economist Frédéric
Bastiat, emphasizes the importance of considering potential hidden costs associated with
economic growth.

1.2 The Joshimath Crisis

The study area of our research paper specifically focuses on the land subsidence case that has
been happening in Joshimath for the past few decades and has aggravated until recently in late
2022.

The holy town of Joshimath also known as Jyotirmath sitting in the lap of the Himalayas, is
located in the Chamoli district of Uttarakhand. Present at an altitude of 1875 meters, the town is
believed to be sitting on the debris of an ancient landslide near Main Central Thrust (MCT), also
falling in seismic zone V (the highest risk zone for earthquakes). At the toes of the Joshimath hill
are flowing Alaknanda and Dhauliganga rivers which continuously erode the base of the hill.
This town founded by Adi Guru Sri Shankaracharya is one of the four major mathas
(monasteries) in the Hindu religion. Joshimath town is also the gateway to the major Hindu and
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Sikh shrines of Badrinath and Hemkund Sahib, respectively. During winters, the idol of Lord
Badrinarayan is brought from the snowbound Badrinath temple to the Narsingh Temple in
Joshimath thus directing a huge amount of pilgrims and visitors to the town making it a hotspot
site of religious and eco-tourism. Just like this, the town is used as a passage to many famous
Himalayan locations and is famous for its ropeway to Auli Ski Resort, trekking, ecotourism, etc.

Recently, the town became a common mention in newspapers and media for earning the tag of
‘The Sinking Town’. Huge cracks on buildings, fissures on roads, and buildings dangerously
tilting towards each other were observed earlier in the year 2023. Such a phenomenon is termed
as Land Subsidence and was not noticed for the first time in the town as it dated as far back as
the 1970s which sooner or later was bound to happen again but the scale at which it happened
was unprecedented. Land Subsidence is a geological phenomenon wherein the land gradually
settles and sinks below the surface. This happens because of the removal of water, oil, natural
gas, and mineral resources utilizing extraction, pumping and even explosion. Natural events such
as earthquakes, incessant rainfall and flooding also add to the situation. An ISRO report stated
that it took 8 months (April 2022 to November 2022) for the town to subside by 9 cm and just 12
days (27 December 2022 to 8 January 2023) to sink by 5.4 cm.
In our discussion ahead, we have tried to find out as to what reasons could have led to the
subsidence of Joshimath’s land over the short term and long term and what impact it has had on
the economy of the town along with the suitability and sustainability of the developments taking
place there.

1.3 Government Projects at Joshimath

The government-funded initiatives in Joshimath have had a significant impact on the conditions
of the area. The Tapovan Vishnugad hydropower plant, developed by the National Thermal
Power Corporation (NTPC) Ltd., is a 520-megawatt facility consisting of a barrage and a tunnel
spanning approximately 12 km from Selang to Tapovan. However, local communities and
activist organizations have claimed that the project has contributed to the sinking of Joshimath.
The Char Dham project Pariyojna, initiated by the central government in 2016, aims to connect
the four Hindu pilgrimage places - Badrinath, Kedarnath, Yamunotri, and Gangotri - through an
889 km long two-lane highway. The project extends from Helang to Marwari and was halted due
to land subsidence in the area. While the project has benefits, environmentalists have raised
concerns about its potential negative impacts on the area's topography.
A report published in 2015 by Austrian geologist Bernard Millen and his team revealed that the
tunnel construction was plagued with a TBM (tunnel boring machine) getting stuck on multiple
occasions, leading to cracks in the walls and eventual widening with each recurrence.
A comprehensive evaluation of a project from both economic and environmental perspectives is
essential for the well-being of ecosystems and nearby communities. Such assessments can aid in
protecting the interests of the local population and government while simultaneously preserving
the environment for present and future generations.

1.4 The Mishra Committee Report

Land subsidence began happening in the town as far back as the 1970s. In 1976, a government
committee was formed by the then Uttar Pradesh Government to look into the issue. It was
headed by Garhwal Commissioner M.C. Mishra who carried out an extensive report regarding
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the Joshimath crisis. It cited deforestation and unplanned construction of heavy infrastructure
that sped up since 1962 without due regard to its carrying capacity as one of the triggering
factors along with inadequate drainage of domestic wastewater, excessive water seepage and
erosion at the base of the hill by Dhauliganga and Alaknanda rivers. It also recommended that to
contain the problem at the nascent stage itself some stricter measures from the end of
government were required like there should be a ban the mining activities that involved blasting
and explosion, town planning to be done keeping in mind the carrying capacity of the region,
excavation of slopes to be stopped herewith, agricultural activity to be avoided on slopes, and a
closure of open drains and soaking pits to be done to prevent water from seeping in. But to the
dismay of the Mishra Committee, all these recommendations were completely disregarded and
the activities of the government carried on at a much larger scale.
In December 2003, residents of Joshimath wrote to the President of India, and the Governor of
Uttarakhand following which National Thermal Power Corporation (NTPC) was asked to allay
the fears of the people but again there was no reply from it whatsoever.
Again in 2014, an Expert body was appointed by the Union Ministry of Environment, Forest and
Climate Change (MoEFCC) which recommended that no hydropower projects be further
constructed in the paraglacial zone north of MCT. The MoEFCC initially accepted the body’s
report and all its recommendations but later reversed its decision.

1.5 Causes of Joshimath Land Subsidence

 The fact that the town sits over the debris of an ancient glacial landslide is enough of a
reason to not permit any heavy construction activity beyond its carrying Capacity.
 The region lies in Seismic zone V which makes it highly susceptible to earthquakes,
incidents of which have been observed in the past eg the Chamoli Earthquake of 1999
which recorded readings as high as 6.8 Richter.
 Joshimath is situated on the weathered, landslide mass of big unsettled boulders in a
loose matrix of sandy and clayey material. The highly weathered gneiss rocks which
make the foundation of the hill have low cohesive characteristics. At the toe region of the
hill flows the Dhauliganga and Alaknanda rivers whose flow erodes the base of the hill
making the foundation further weaker and unsustainable to support any heavy
development at the hilltop.
 Given its proximity to the India-China Border, that is. roughly 20,000 troops of the
Indian Army, ITBP, and BRO are stationed at Joshimath along with military hardware,
missile systems and housing of its own.
 Reckless construction activity in the name of economic advancement is carried out by the
government, its contractors, and private bodies without due regard to the load-bearing
capacity and fragility of the pristine Himalayan Region is one of the major reasons for the
disaster occurring in Joshimath.
Environmental Impact Assessment had been considered just a tickbox and getting
environmental clearances is made just a formality when it comes to the interests of big
corporate players favorable to the government.
 Locals are of the popular opinion that construction of and excavations for the 12.25 km
long head-race tunnel beneath the Joshimath mountain for the NTPC-owned ambitious
520 MW Tapovan-Vishnugad Hydroelectric Project has been the immediate cause of the
subsidence which aggravated the already deteriorating situation for the past few decades.
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2. Literature Review

A. Their paper titled “The Economic Impacts of Natural Disasters (2020)”, by W.J.
Wouter Botzen, Olivier Deschenes, and Mark Sanders is a paper that examines the short-
term and long-term effects of natural disasters on the economy and society. The authors
highlight the importance of designing policies that can mitigate the impacts of such
disasters on the economy and society. Most estimates of natural disaster impacts on the
economy are based on regressions of aggregate variables, measured at the country level.
The paper identifies research gaps and highlights the importance of designing policies to
reduce the impact of natural disasters on the economy and society. The main findings
suggest that natural disasters harm economic growth, which tends to increase over time
and is more detrimental in developing economies. Higher-income nations have lower
death tolls due to better healthcare systems, information systems, and more resilient
economies, but they suffer from higher direct property damages. Short-run declines in
economic growth are observed for climatic and geological disasters, while
hydrometeorological disasters reduce growth in both the short and long run. The paper
notes that post-disaster aid increasingly requires coordination at the international level.

B. In their article "The Economics of Natural Disasters: Concepts and Methods (2010),"
Stéphane Hallegatte and Valentin Przyluski discuss the concept of the cost of a disaster.
They argue that the cost of a disaster cannot be limited to the direct costs, but must also
include the indirect costs, which are often underestimated. These indirect costs include
the effects of the disaster on the economy, such as consumption losses of assets and
production losses.
To estimate the total cost of a disaster, the authors provide various methods, including the
IIASA CATSIM model, national methods for assessing flood damage, and input-output
approaches. Each method has its assumptions and options that can lead to different
results. While these are just a few examples of the numerous methods available, it is
essential to consider both direct and indirect costs when estimating the total cost of a
natural disaster.

C. “The Economics of Natural Disasters (2010)" is a survey by Eduardo Cavallo and Ilan
Noy that examines the economic consequences of natural disasters. The survey reviews
the main data sources available, discusses the factors that determine the direct and
indirect effects of disasters, and explores policy considerations related to natural
disasters. The document also presents several case studies of specific disasters and
identifies gaps in the literature. Overall, the survey provides a comprehensive overview
of the economics of natural disasters.
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3. Trends and Graphs

3.1

Time series graph plotted using MS Excel: Data from

the Industrial profile of District: Chamoli, MSME
Development Institute, http://msmedihaldwani.gov.in/

Uttarakhand is famous for its mountains, weather, and Hindu pilgrimage. With a low population
density, the state has seen an 18.81% increase in the population. Tourism has grown due to better
infrastructure, but this has also led to ecological consequences.
The graph indicates a sharp increase in investment in Chamoli, which has been identified as a
significant contributor to land subsidence in Joshimath. Several projects, including the Char
Dham Pariyojna and Tapovan Vishnugad hydropower plants, have been implemented.
The construction-intensive nature of these projects has led to the disturbance of the area's
topology, raising concerns about the long-term impact on the landscape and local community.
Although these projects aim to improve accessibility and provide energy, their environmental
impact is a concern. Because this area is seismically active and archaeologically sensitive,
investments must be assessed in terms of their environmental impact.
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3.2

Time series graph plotted using MS Excel: Data

from Detailed Report: Uttarakhand Disaster, NDMA
(2021)

Joshimath town faces the problem of land subsidence due to continuous water discharge.
there was an all-time high level of water discharge between 1997-99. Recent data shows a
decrease in water discharge, but the problem persists, causing cracks in 863 houses and affecting
public infrastructure. Local authorities are working to find a solution, but complexity makes it
challenging. Safety concerns for tourists visiting the popular destination are raised.

3.3
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Time series graph plotted using MS Excel: Data:

https://uttarakhandtourism.gov.in/sites/default/files/document/type/Tourist%20Statistics
%20from%202000%20to%202020%20of%20Major%20Tourist%20Destinations.pdf

Joshimath holds great importance as a pilgrimage site where the revered idol lord Badri is
brought down from the Badrinath temple to the Vasudeva temple. While the years between 2010
and 2012 saw the highest number of tourists visiting Joshimath, the catastrophic flood in 2013
led to a decline in tourist influx.
The negative impact of land subsidence in Joshimath on tourism, the principal source of revenue
in the region, cannot be overlooked. Besides the direct costs of damage to buildings, hotels, and
markets, as well as the disruption of commodity supply can severely harm the local economy.
The phenomenon of subsidence can bring about negative consequences for the local community,
extending beyond the direct costs associated with the issue. These indirect costs may impact the
livelihoods and well-being of the people living in affected areas.
The recovery of tourism in this area will take years and have a significant impact on the standard
of living of the locals.

4. Conclusion
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