Economic growth in the aftermath of floods in Indian states

Abstract

Flood disaster is a recurrent phenomenon in India. The geo-climatic conditions are a major cause for higher flood damages in Indian states. This study employs the pooled mean group (PMG) approach to examine economic growth in the aftermath of floods in 14 non-special category states in India using flood disaster data over the period 1981–2011. The PMG estimates show that flood impacts in terms of area affected, the population affected, and economic losses due to floods decline real per capita GSDP growth in the long run after taking into account growth-enhancing factors. Moreover, instrumental variables (IV)-two-stage least-squares (2SLS) estimates also confirm that states experience lower real per capita GSDP growth due to higher flood impacts. The results, further, show that higher urbanization and enrollment of higher education increases real per capita GSDP growth in the long run. For robustness check, the study investigates the impact of floods on real per capita GSDP growth after taking into account government capital expenditure and per capita power consumption. The PMG and IV-2SLS estimates produce same results and confirm that flood impacts reduce real per capita GSDP growth, while government capital expenditure and per capita power consumption enhances real per capita GSDP growth. Overall, results confirm that flood management policies are essential to minimize the adverse impacts of floods on the growth of real per capita GSDP.