Economic development and Maoist insurgency

  • Blog Post Date 07 October, 2015
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The Indian government’s two-pronged strategy to counter Maoist insurgency involves economic development and military repression. Analysing data for 2006-2011, this column finds that increasing wages led to a small but statistically significant increase in conflict. It suggests that when the reason for conflict is absence of rights of low-income local communities on natural resources, this strategy by itself will not solve the problem and may even exacerbate it.

Extremist groups that follow Maoist ideology have existed in India since the 60s but the last decade has seen an increase in the intensity and frequency of Maoist-related incidents that have claimed thousands of lives including security forces, civilians and Maoists. The increase in violence has primarily been in forest areas that are inhabited by Adivasis1 who depend on natural resources found within these forests. Forests also house resources needed by industries such as mining and construction. The Maoists claim to fight for these Adivasis to get them their basic rights to “jal, jungle, jameen” (water, forest, land), which they say are threatened by the government acting on the behest of corporations and industries. The Indian government’s response to the insurgency is well articulated by the former Union Minister for Rural Development, Jairam Ramesh, who said in a public lecture in 2013, “India’s answer to the Maoist challenge is a twin answer, a two-legged answer, one leg – security, and the other leg – development. This has been our response.”

India’s counter-insurgency strategy

The government’s two-legged response - increasing military operations against the rebels and providing economic benefits to the local population, mainly Adivasis, in affected areas - is largely in line with the prevailing view in political science and economics, that conflict becomes less likely with an increase in wages and an increase in ‘State capacity’. The term ‘State capacity’ indicates all the resources available to the government that it can potentially use to deploy security forces in conflict-affected areas.

The underlying arguments behind this view are as follows. The first is that an increase in wages will make conflict less attractive for the local community by increasing the potential earnings that they would lose because of the conflict; in other words, the opportunity cost of conflict would increase. The second argument is that increased State capacity would increase the cost of rebellion as the State would have more resources to deploy more numbers of and better-equipped security forces. Much of this literature, however, has focussed on less developed countries, mostly from sub-Saharan Africa (Miguel, Satyanath and Sergenti 2004), and has used measures of per capita national income as a proxy for wages (Collier and Hoeffler 2004). Hence, these results become questionable when applied to other scenarios where wages are directly involved. Berman, Callen, Felter and Shapiro (2011) analyse data on employment and conflict from Philippines, Afghanistan and Iraq and find that the results are contrary to the opportunity cost logic. In India, the conflict with Maoist rebels has been spreading and intensifying while the economy of the country has been doing well, and both wages and State capacity have been increasing. Over a five-year period from 2006, the number of Maoist-related incidents of violence has doubled, while agricultural wages in affected areas have increased by 9% and expenditure by the governments of affected states during the same time period has increased by 40% (both figures are after correcting for inflation).

Increasing wages may increase conflict

In recent research (Shrivastava 2015), I propose a theoretical model of civil conflict to explain the conditions under which a positive correlation between conflict and wages and between conflict and State capacity can occur. Conflict is risky, in the sense that its outcome is uncertain. As wages increase from a low level, the opportunity cost of conflict does increase but people also become less averse to taking risks. This makes them more likely to support rebel groups like Maoists in fighting to take control of natural resources that they depend on for their livelihood, thus nullifying or even reversing the effect of the increased opportunity cost. Also, as State capacity increases, it does make conflict more difficult and costly for the rebels, but a more powerful government is also more likely to try and grab natural resources, thus opening up new fronts of conflict. I use data from news reports in print media of conflict incidents from 148 districts in central India over a five-year period starting 2006 to analyse the relationship between agricultural wages and conflict2 . My results indicate that increasing wages leads to a small but statistically significant increase in conflict. Although this does not prove that the model is an accurate description of the relationship between wages and conflict, it does show that opportunity cost is not the only way in which wages affect conflict and that there are other possible mechanisms, such as the one described in my model, which may drive the effect in the opposite direction.

Strengthen rights of local communities

Academics are divided (Fetzer 2014, Khanna and Zimmerman 2014) on the success of the Indian government’s counter-insurgency strategy based solely on deploying security forces and undertaking development programmes. My research suggests that when the underlying reason for the conflict is the absence of rights of low-income local communities on natural resources that they depend on for their livelihoods, then economic development and military repression by themselves will not solve the problem and may even exacerbate it. Implementing existing legislation like the Forest Rights Act and the Panchayat (Extension to Scheduled Areas) Act to empower Adivasis communities, and bringing industrial projects under the framework of democratic consent envisaged in these Acts would not only be a more equitable approach to economic development but will also reduce local support for the Maoists, which is key for their guerrilla-style campaign. The current government, unfortunately, appears to be further diluting whatever rights the Adivasis have, as a means of pushing industrial growth. This does not bode well for people living in Maoist-affected areas as it may lead to an increase in violent incidents.


  1. The term Adivasi literally means original inhabitants and is used for various tribal groups in India, many of whom come under the legal category of Scheduled Tribes.
  2. The news reports of conflict incidents used here were compiled by the Institute of Conflict Management and are available at the South Asia Terrorism Portal.

Further Reading

  • Berman, Eli, Michael Callen, Joseph H Felter and Jacob N Shapiro (2011), “Do working men rebel? Insurgency and unemployment in Afghanistan, Iraq, and the Philippines”, Journal of Conflict Resolution, 55(4), 496-528.
  • Collier, Paul and Anke Hoeffler (2004), “Greed and grievance in civil war”, Oxford Economic Papers, 56(4), 563-595.
  • Fetzer, T (2014), “Can workfare programmes moderate violence?”, 5 May 2014.
  • Khanna, Gaurav and Zimmermann Laura (2014), “Fighting Maoist Violence with Promises: Evidence from India´s Employment Guarantee Scheme”, Economics of Peace and Security Journal, 9(1), 30-36.
  • Khanna, G and L Zimmermann (2015), ‘Maoist violence and MNREGA’, 15 April 2015.
  • Miguel, Edward, Shanker Satyanath and Ernest Sergenti (2004), “Economic shocks and civil conflict: An instrumental variables approach”, Journal of Political Economy, 112(4), 725-753.
  • Ramesh, J (2013), ‘21st century Maoism’, Lecture delivered at the Nehru Memorial Museum and Library, 22 January 2013, New Delhi.
  • Sethi, N (2015), ‘Forest land: Govt finalising dilution of tribal rights’, Business Standard, 1 January 2015.
  • Shrivastava, A (2015), ‘Civil conflict with rising wages and increasing state capacity: Theory and application to the Maoist insurgency in India’, Working Paper.
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