Road to resilience: Floods, highways and Indian informal manufacturing

Road infrastructure is widely recognized as a driver of economic development, but can it also aid in disaster resilience? This study addresses the resilience question in the Indian context by examining the output effects of dual and staggered treatments: national highway construction – the Golden Quadrilateral, and the North-South and East-West highways – and extreme flood exposure. Employing a production-theoretic framework, this study focuses on India’s informal manufacturing, the largest in the world without any formal safety nets. It combines geospatially matched, staggered flood exposure data from the Dartmouth Flood Observatory with phased highway rollout timelines from the National Highways Authority of India and repeated cross-section plant-level survey data (1990–2016). Exploiting quasi-random variation in the timing of flood exposure and road construction, a stacked difference-in-differences design is implemented, matching treated districts to future-treated counterparts. Results show that floods significantly reduce gross output and value added, while access to completed highway segments nearly offsets the average 8 percent flood-related output loss through higher output and reduced input expenditures. These effects are magnified for plants that own transport assets, highlighting a complementarity between internal logistics and external infrastructure. Off-highway plants exhibit similar resilience only when they possess transport assets. Heterogeneity analysis by market orientation reveals that resilience benefits are higher among non-tradable industries through local market stabilization. These findings reveal that roads are not only engines of development but also critical to disaster resilience. Designing infrastructure with dual function— development and resilience —is essential for building a climate-smart and resilient economy.