Naxalite Insurgency and the Economic Benefits of a Unique Robust Security Response

Using the synthetic control method of analysis, we provide the first measurements of the direct economic benefits of a unique robust security response to an insurgency. Of all the states affected by Naxalite violence in India, only one state i.e. Andhra Pradesh raised a specially trained and equipped police force in 1989 known as the Greyhounds, dedicated mainly to combating the Naxalite insurgency. Compared to a synthetic control region constructed from states affected by Naxalite violence that did not raise a specially trained anti-Naxalite police force, we find that Andhra Pradesh gained on average 16.11% of its per capita NSDP over the period 1989 to 2000. The effects on the various subsectors of the non-agricultural sector range from approximately 11% to 25%. Placebo tests indicate that all results are significant. Standard difference-in-difference specifications at the state and industry level further corroborate these findings.