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Is private investment being crowded out in India? Some fresh evidence

  • Jagadish Prasad Sahu


    (Institute of Economic Growth, Delhi, India)

  • Sitakanta Panda


    (Institute of Economic Growth, Delhi, India)

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    We reexamine the crowding out hypothesis for India for the period 1970-71 to 2009-10. Applying a flexible accelerator model in a VECM framework, we find that government investment crowds out private investment in the long run while GDP has a significantly positive impact on the later. We also find that in the long run causality runs from public investment and GDP to private investment.

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    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 32 (2012)
    Issue (Month): 2 ()
    Pages: 1125-1132

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    Handle: RePEc:ebl:ecbull:eb-12-00149
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    1. Chakraborty, Lekha S., 2006. "Fiscal deficit, capital formation, and crowding out: Evidence from India," Working Papers 06/43, National Institute of Public Finance and Policy.
    2. Pradhan, B. K. & Ratha, D. K. & Sarma, Atul, 1990. "Complementarity between public and private investment in India," Journal of Development Economics, Elsevier, vol. 33(1), pages 101-116, July.
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