The Economics of Counterinsurgency: Some Evidence from Andhra Pradesh

Present in India since the 1960s, the Naxalite insurgency has steadily spread across the country. Counterinsurgency measures lagged behind and did not follow any systematic process till the early 2000s with the exception of Andhra Pradesh, which in 1989 established the Greyhounds, an anti-Naxalite police force. However, under the Congress-led UPA government (in power since 2004), there has been a concerted effort to tackle the insurgency. This article analyzes the centrally funded Security Related Expenditure Scheme in the context of industrial investments in Andhra Pradesh over the period 2005-2009. I find the scheme to have had no effect on industrial credit at the district level. A further disaggregation of the industrial credit data reveals no effects on construction but finds a positive effect on mining and quarrying activity.