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DEATHQUAKE;
ECONOMIC IMPACT
Contd...
The
crippling of Kandla port-which handles about 17 per cent of the cargo
traffic in the country-however, is likely to have a more profound impact
on the economy.
The immediate
fallout of the quake has been suspension of production for reasons ranging
from worker absenteeism to disruption of power and telecommunications.
Says GCCI President Ratan Prakash Gupta: "Right now, it is the fear
psychosis that affects the industry more than anything else. I own a hotel
in Ahmedabad, but can't run it because my managers and waiters have stopped
coming to work."
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| THE
BAD loss of property: Property worth Rs 15, 000 crore was damaged
but it may trigger demand for cement and steel |
In Surat,
where diamond trade alone accounts for a daily turnover of Rs 30 crore,
work had come to a complete halt for three days after the earthquake.
It's the same in Rajkot, which produces some 1.8 lakh diesel pumps annually.
Mehta expects business to return to normal in 15-30 days. By then the
panic would have subsided and workers who have lost houses or family members
will start piecing their lives together. Says Karsan Bhai Patel, chairman
of Nirma Ltd: "The mental trauma will remain for about a year."
But the industry will be up and running before that.
A more tangible
damage has taken place at the retail level. The manufacturers of consumer
goods (such as soaps, cosmetics, appliances and consumer electronics)
will have to cope with inventories lost with the dealers and showrooms.
Admits Sunil Parekh, senior director of CII's Gujarat office: "A
big loss right now is that of market, both in terms of products lost in
inventories and the dip in purchasing power." A section of the middle
class in Gujarat will shift its spending preferences from consumer goods
to building and repair of property.
Perverse
as the logic may sound, such a shift will signal a revival of some basic
industries like cement, steel and other businesses related to property
development, which have been on the low ebb for the past few years. More
significantly, being labour intensive, the reconstruction of Gujarat could
set off a revival in some of the beleaguered sectors of the economy. Argues
Bibek Debroy, director, Rajiv Gandhi Institute for Contemporary Studies:
"If shortage of demand is what is holding back the Indian economy
from a high growth path, it is reasonable to expect that the quake will
lead to some demand revival." Anticipating such an upturn, the share
prices of cement companies started rising on the stockmarkets on January
30.
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| THE
GOOD Business as usual: The Ahmedabad Stock Exchange continued to
operate normally even after the quake |
Even the
demand for consumer goods in Gujarat will be depressed only in the short
run and could actually witness a sudden upturn after a few months. The
chairman of the Videocon Group, Venugopal Dhoot, believes that there will
be "a pick-up in demand in the medium term". In fact, the Ahmedabad
Stock Exchange defied the gloom surrounding the quake by conducting its
business normally in the past week. Claims Rajiv Desai, executive director
of the stock exchange: "The fear of the unpredictable will not bog
us down."
Most industry
heavyweights based in Gujarat escaped the fury of the quake with minor
or little injury. The Reliance Group, which has over Rs 30,000 crore invested
in the state, has declared that its facilities have escaped damage. Its
Jamnagar refinery gradually resumed normal operations after an eight-hour
shutdown. The units of the Essar Group, which has over Rs 14,000 crore
invested in its steel and refinery plants, are already operational. The
Torrent Group has reported that its plants at Chattral, Massad and Nadiad
as well as its R&D centre near Gandhinagar are intact. The Mahendra
Mehta Group's 2.5 million-tonne Saurashtra Cements plant has not suffered
any major damage. Nirma's plants at Vadodara are working, though production
has dropped and its soda-ash plant at Bhavnagar will get going once power
is restored. Hindustan Lever's units in Kandla Free Trade Zone have been
partially damaged, but will be operational in six weeks.
Since the
Gujarat quake is not going to jam the wheels of the Indian economy as
much as was initially feared, a key question is: should Finance Minister
Yashwant Sinha have taxed people for funding reconstruction and rehabilitation?
Says Debroy: "The rush to talk of a calamity surcharge even before
assessing the full financial fallout smacks of opportunism." If Rs
20,000 crore is taken to be the total cost of rebuilding Gujarat, less
than half of it has to come from the state Government, relief funds and
the Central Government. The rest is likely to come from non-government
sources - NGOs, aid agencies, industry and the Gujarati diaspora.
-with Malini Goyal
Pg 1
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