Storms and Surges: Evaluating the Effects of Floods and Cyclones on Sectoral Growth at Sub-National Level in India

The unexpected and destructive nature of natural catastrophes may cause major shocks to communities and jurisdictions at all levels of governance. The goal of this study is to reorient national and subnational research to focus on the connection between natural disasters and economic growth. This research experimentally investigates the economic impacts of floods and cyclones at the subnational government level in India. For this, the study created a balanced panel of 24 Indian states from 1995 to 2018, using GDP, sectoral growth data, and the Disaster Intensity Index created from the impact of cyclones (using windspeed data) and floods (gridded precipitation data).  The study finds that disaster shock negatively affects overall economic and sectoral growth in the Indian states. Dissecting the economic growth in terms of sectoral growth, the study observed that output growth of agriculture, industry, and service sectors all have a negative impact in the initial year of disasters, which negatively affects state GDP per capita. The results align with the predictions from endogenous growth theory. The model also shows a positive effect for the service sector in the second year and for the agricultural sector in the third year after the disasters. This study may encourage decision-makers to focus on developing India's overall resilience by implementing efficient and long-lasting preventive measures before the disaster occurs and ensuring quick response, recovery, and reconstruction during and after the disaster.