When somebody dies an untimely death, how can the loss to the economy be computed? One way is to work out the number of productive years that person might have lived, and the likely value of work that person would have done through those years. After adding up that amount, a Net Present Value – a tool financial analysts use to measure the future cost and success of projects – can be calculated.
Net Present Value is calculated like compound interest in reverse. Just as you can say that Rs 100 will compound to Rs 161 over five years at an interest rate of 10%, you can reverse the calculation and say that a sum of Rs 161 accumulated over five years would be equivalent to Rs 100 now, if you assume an interest rate (it is called a “discount rate” in Net Present Value) of 10%.
So, for example, assume a 25-year-old dies in an accident. We may reasonably assume that this person would have gone on to work till the age of 60, or for 35 years. Based on the skill and education levels of the deceased person, a rough estimate of how much that person would have earned over their working life could be calculated. We can then adjust for likely inflation and industry growth rates to arrive at a Net Present Value.
Obviously this is a crude method. It is based on long- term assumptions that will contain large error factors. For instance, it cannot be used to make a decent estimate for an outlier like an artist, or even a lawyer, who might earn vast sums at age 75. It cannot estimate the loss in the case of a successful sportsman whose career might end at the age of 35. In the case of a criminal, there may actually be a long-term gain, not loss.
When dealing with large numbers, however, this method can be used to derive an averaged value of likely loss.
Around 1.5 lakh Indians die every year in road accidents. Another 25,000 die in rail-related accidents. Those are large numbers and they can be averaged by assuming that the unfortunate people who died would have earned close to the per capita income and would have seen their earnings grow at around the same rate as per capita.
Of course, each such accident also leads to other losses. If train services are interrupted, or a road is blocked by an accident, there are economic losses. If vehicles are damaged, there are costs of repairs. If people are injured, there are medical costs and loss of earnings. Plus there are the unquantifiable emotional costs of the loss where friends and family are concerned.
Impact on GDP
The average Indian accident victim is under 30 and therefore has over 30 years of productive life ahead of them. The economy and per capita income has grown at fairly high rates in the past 25 years and it is expected to continue growing at a reasonable clip. So the assumed growth of that lost productivity compounded across three decades would be high.
One estimate is that road accidents alone cost about 3% of India’s gross domestic product on an annual basis. Rail accidents would cost an additional amount. The estimate of loss seems high. It possibly is. However, this estimate was made by a respectable body and it has been unofficially endorsed by former senior bureaucrats.
It is the United Nations Economic and Social Commission for Asia and the Pacific that has said: “The Indian economy takes a 3% hit to GDP [gross domestic product] every year due to road traffic accidents, which is over $58,000 million in terms of value.”
To put that figure in perspective, India’s central tax collections, direct and indirect, amount to 12% of its gross domestic product.
Accidents are very largely caused by human error, deliberate flouting of safety rules, poor design of roads and from poorly maintained rail infrastructure that is being stressed way beyond its capacity. There is scope for a dramatic reduction in the country’s accident rates.
Terrible rail safety record
No nation has anywhere near as terrible a rail safety record as India. A very large number of deaths occur when people crossing tracks are hit by trains. Another common problem is people falling off trains. According to the National Crime Records Bureau, 25,006 people died and 3,882 were injured in a total of 28,360 railway accidents across the country in 2014. The leading cause of deaths was falls from trains or the collision of trains with people on the tracks. These together accounted for 13,542 deaths. Other causes mentioned included other collisions (99 deaths), derailments (59), explosion/fire (32).
The Union Ministry of Road Transport and Highways publishes an annual handbook of traffic accidents. According to this handbook, in 2015, 1,46,133 people died in road accidents across India and 4.94 lakhs were injured. Of these, a total of 51,204 persons were killed in road accidents on National Highways. Another 39,352 deaths occurred on state highways. As many as 93% of road accident victims are under 65, with about 86% between 15 years and 65 years of age.
The World Health Organisation claims road accidents are the 10th-highest cause of deaths in India. Hence the assumption of high economic loss compounded over decades seems reasonable.
The Ministry of Road Transport and Highways says the single largest cause of fatal accidents was speeding (43% in 2013). Other major causes included overloading (21%), intoxication (4.6%) and load-protrusion (7%). I assume the ministry has a method for assigning causes, when for example, an intoxicated driver kills somebody while speeding in an overloaded vehicle. Driver error accounted for 78% of accidents, mechanical defects accounted for under 2%. About 9% of victims were pedestrians while two-wheelers (28.5%) and cyclists (3.5%) also suffered.
Improving safety on roads and in the rail system would appear to be relatively low hanging fruit in terms of policy. Better licensing systems for drivers, better road design, more stringent checks on weight carried and protrusions, better rail safety standards including controlling the movement of commuters across tracks, and rebuilding of rail infrastructure would seem to be the order of the day.
But for some reason, a focus on safety has never been considered politically worthwhile. It occasionally hits the headlines when there is a bad accident but there is a steady attrition rate of 450 deaths per day that are scarcely mentioned.
I cannot recall a single political campaign at any level – from the municipal level to the Lok Sabha – which have mentioned road and rail safety as a central issue. I am sure that there must have been some mentions but it is not an issue that seems to excite much political attention. For instance, it has never even been mentioned in Maan Ki Baat – the prime minister’s radio programme – nor has it been a topic of debate on TV programmes. This lackadaisical attitude suggests that road and rail safety has never been a hot button issue for civil society. Until that attitude changes, there will not be policy focus on this issue.