Hurricane Sandy’s economic damage felt in far-away India

October 30, 2012

The skyline of lower Manhattan is in darkness after a preventive power outage. (Eduardo Munoz/Reuters)

Analysts are trying to put a number on Hurricane Sandy's potential cost to the United States, with a disaster-modeling firm predicting $10 billion to $20 billion in damages, a University of Maryland economist estimating $45 billion, and a financial analyst suggesting the storm could cost $10 billion per day in lost productivity. That's just in the United States, but there's reason to believe that this hit to the world's largest economy could resonate farther out  — as far as India.

India's economically essential software and outsourcing industry maintains a number of offices in New York, many of which have closed, potentially disrupting the ability of outsourcers and developers back in India to connect with their U.S. offices. The Wall Street Journal's India-based service says that most Indian firms have "contingency plans" for such an event. But the Indian publication Business Today notes that an extended disruption — such as a longer-than-expected power outage — could cut into the industry.

Investors in Indian information technology seem to be getting concerned, a vice president with a Mumbai brokerage told the Indian Economic Times, adding that he was assuring investors that the storm "would not have any recurring impact." Still, this could be a sensitive time for Indian market, and skittish investors could do some damage all their own.  Business Today says that the country's stock market is "already bracing" for a monetary review announcement expected from the government on Tuesday.

"The Indian market on Monday ended subdued, amid a slump in trading volumes, following weakness in the global markets as investors braced for the impact of Hurricane Sandy," the Business Standard's India service reported at the end of trading on the Indian stock market. "A senior treasury official said the rupee could suffer more depreciation tomorrow on account of the shutdown in the U.S."

Outside of information technology and stock markets, the Indian aviation industry could also be exposed. The storm has prompted the cancellation of 15,500 flights so far. Both the Wall Street Journal's India service and the New York Daily News (carrying a wire report) report that international Indian flights are "severely disrupted." In absolute terms, India is probably just one of many countries to have its aviation revenue hit by the storm, but it's worth noting that India's rapidly growing commercial aviation sector is both increasingly important to the country's economy and growing international travel. The United States, with its large Indian diaspora, is a natural market.

Trade between the United States and India was worth $86 billion just last year. 

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Max Fisher · October 30, 2012