Rethinking the effect of floods and financial development on economic growth: Evidence from the Indian states
Indian Growth and Development Review
ISSN: 1753-8254
Article publication date: 15 January 2020
Issue publication date: 15 December 2020
Abstract
Purpose
The purpose of this paper is to evaluate the effect of floods and the role of financial development on per capita gross state domestic product (GSDP) growth, controlling for growth-enhancing factors across Indian states.
Design/methodology/approach
The paper uses the pooled mean group (PMG) method using state-level panel data for 19 Indian states over the period 1981-2011.
Findings
The PMG estimate shows that floods negatively affect the per capita GSDP growth in the long run. The results show that the mean of economic losses, the population affected and the area affected by floods increase by 10 per cent, leading to a decline in per capita GSDP growth by 0.0303, 0.0633 and 0.0232 per cent, respectively, in the long run. Furthermore, the population affected by floods exerts a higher adverse impact on the per capita GSDP growth compared to other flood measures. The results further show that states with better financial development experience a higher per capita GSDP growth, supported by additional capital expenditure, enrolment in higher education, better road infrastructure and higher urbanization. The crime rate is negatively correlated with per capita GSDP growth.
Originality/value
The results based on PMG estimates suggest that not only floods but also crime activities adversely affect the per capita GSDP growth across Indian states. Better financial market increases the per capita GSDP growth in the long run. This study not only contributes to empirical growth literature but also provides some useful policy suggestions. Moreover, the results lead to the conclusion that long-term flood management policies are essential to mitigate the adverse impact of floods on per capita GSDP growth across Indian states.
Keywords
Acknowledgements
The authors would like to thank two anonymous reviewers, Dr Rashmi Rekha Barua, Prof B. N. Goldar and Priti Agarwal for giving their valuable suggestions and comments for further improvement of the manuscript. Special thanks to Dr Joyita Roy Chowdhury and Dr Parul Bhardwaj for excellent editorial support and suggestions. This research did not receive any specific grant from the funding agencies in the public, commercial or not-for-profit sectors. This manuscript is the part of Yashobanta Parida’s PhD thesis.
Citation
Parida, Y. and Prasad Dash, D. (2020), "Rethinking the effect of floods and financial development on economic growth: Evidence from the Indian states", Indian Growth and Development Review, Vol. 13 No. 3, pp. 485-503. https://doi.org/10.1108/IGDR-05-2019-0044
Publisher
:Emerald Publishing Limited
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