Thursday, March 31 2005 12:48 Hrs (IST) - World Time -

Washington: The economic cost of the tsunami disaster for India and reconstruction and disaster relief appear 'manageable', the International Monetary Fund (IMF) staff report has said.

The potential public costs it notes, have been estimated by the Government on a preliminary basis at about half per cent of GDP. The Government announced a first package of measures totalling Rs 23 billion, less than 0.1 per cent of GDP, to rebuild fisheries and houses in the affected region.

The authorities have indicated that fiscal targets for this year will not be affected, it noted in a 61-page country report released on Tuesday (Mar 29, 2005).

The staff report points out that some of the poorest regions were affected by the massive earthquake and tsunami of December 26. India has suffered a large number of deaths and many poor living in the region have been displaced. Many fisheries and local businesses have been destroyed in this tragic event.

The macroeconomic impact itself is, however, not projected to be very large. The most affected regions are not heavily industrialized. Some effect is possible on tourism, although there has been no indication of large-scale cancellations by tourists, it added.

There is some concern that the inundation of some croplands may reduce agricultural output but damage was yet to be ascertained at the time of reporting on January 24.

The Executive Board of IMF, in its assessment of the report also pointed to the importance of States introducing the VAT (Value Added Tax), strengthening their pension systems and accelerating progress on power sector reforms.