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Public and Private Corporate Investment: An Empirical Analysis of the "Crowding -in" Effects of Fiscal Policy in India

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Listed:
  • Venkat Hariharan Asha

    (Department of Economic Affairs, Ministry of Finance)

  • Ojha, Ajay

    (Department of Economic Affairs, Ministry of Finance)

  • Chakraborty, Lekha

    (National Institute of Public Finance and Policy)

Abstract

Using the high frequency data, the paper analyses the link between public investment and the private corporate investment in India for the post pandemic period. The results of ARDL models reinforced that there is no crowding out effects in India. The monetary variables including cost of credit - both long term and the short-term rates of interest - have been as significant in determining private corporate investment in the medium and long terms, which has crucial policy implications. The output gap uncertainties due to the global economic headwinds and geopolitical risks, cause lags in the responsiveness of private corporate investment to public investment.

Suggested Citation

  • Venkat Hariharan Asha & Ojha, Ajay & Chakraborty, Lekha, 2025. "Public and Private Corporate Investment: An Empirical Analysis of the "Crowding -in" Effects of Fiscal Policy in India," Working Papers 25/428, National Institute of Public Finance and Policy.
    • Handle: RePEc:npf:wpaper:25/428
    Note: Working Paper 428, 2025
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    References listed on IDEAS

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    3. Pradyumna Dash, 2016. "The Impact of Public Investment on Private Investment: Evidence from India," Vikalpa: The Journal for Decision Makers, , vol. 41(4), pages 288-307, December.
    4. Olivier Blanchard, 2019. "Public Debt and Low Interest Rates," American Economic Review, American Economic Association, vol. 109(4), pages 1197-1229, April.
    5. Alan J. Auerbach & Yuriy Gorodnichenko, 2013. "Corrigendum: Measuring the Output Responses to Fiscal Policy," American Economic Journal: Economic Policy, American Economic Association, vol. 5(3), pages 320-322, August.
    6. Olivier J Blanchard, 2019. "Public Debt: Fiscal and Welfare Costs in a Time of Low Interest Rates," Policy Briefs PB19-2, Peterson Institute for International Economics.
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    8. Willem H. Buiter, 1990. "Principles of Budgetary and Financial Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262524139, December.
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    Keywords

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    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • H6 - Public Economics - - National Budget, Deficit, and Debt

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