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Infrastructure development and economic growth in India

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  • Pravakar Sahoo
  • Ranjan Dash

Abstract

In this study, we investigate the role of infrastructure in economic growth in India for the period 1970–2006 on the basis of the empirical framework developed by D.A. Aschauer (Is public expenditure productive? Journal of monetary economics, 23 (2), 1989, 177–200). In this context, we develop an index of infrastructure stocks and estimate growth-accounting equations to investigate the impact of infrastructure development on output. Overall, the results reveal that infrastructure stocks, labour force and total investment play an important role in economic growth in India. More importantly, we find that infrastructure development in India has a significant positive contribution toward growth than both private and public investments. Further, causality analysis shows that there is unidirectional causality from infrastructure development to output growth. From a policy perspective, there should be greater emphasis on infrastructure development to sustain the high economic growth which the Indian economy has been experiencing for the last few years.

Suggested Citation

  • Pravakar Sahoo & Ranjan Dash, 2009. "Infrastructure development and economic growth in India," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 14(4), pages 351-365.
    • Handle: RePEc:taf:rjapxx:v:14:y:2009:i:4:p:351-365
    DOI: 10.1080/13547860903169340
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    References listed on IDEAS

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    3. Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
    4. Christophe Kamps, 2006. "New Estimates of Government Net Capital Stocks for 22 OECD Countries, 1960-2001," IMF Staff Papers, Palgrave Macmillan, vol. 53(1), pages 1-6.
    5. Binswanger, Hans P. & Khandker, Shahidur R. & Rosenzweig, Mark R., 1993. "How infrastructure and financial institutions affect agricultural output and investment in India," Journal of Development Economics, Elsevier, vol. 41(2), pages 337-366, August.
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    7. Randall W. Eberts, 1986. "Estimating the contribution of urban public infrastructure to regional growth," Working Papers (Old Series) 8610, Federal Reserve Bank of Cleveland.
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