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Estimating Infrastructural Investment Needs for India

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  • Chandan, Sharma
  • Bhanumurthy, N R

Abstract

This paper attempts to systemically project the demand and fund requirements of the Indian infrastructure sector up to 2013. In the infrastructure sector transportation (rail, port, air and road), electricity and telecommunication sectors are covered in this study. Our analysis is performed in three stages. In the first stage, long run linkage between infrastructure variables and income are established by applying cointegration method. Subsequently, infrastructure demand functions are estimated by using Dynamic OLS (DOLS) technique. In the second stage, by using the estimated infrastructure elasticity to income of variables and IMF’s projected income data, we project the sector-wise demand and funding requirement. In the final stage, we put forward some suggestions for reforms in infrastructure financing, so the projected demand in the country would be achieved. The results of the analysis indicates that in important sectors like electricity and port, the government(the Planning Commission) has seriously underestimated the future demand, while in air transport sector, the demand seems to be overestimated. Only in telecommunication sector, the projections of this study are at par with their projections. Overall, we find that the government has at least 7% underestimated the infrastructure needs. Based on these results, we propose for initiation of a set of reforms in existing financing pattern of infrastructure in the country

Suggested Citation

  • Chandan, Sharma & Bhanumurthy, N R, 2010. "Estimating Infrastructural Investment Needs for India," MPRA Paper 22188, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:22188
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    File URL: https://mpra.ub.uni-muenchen.de/22188/1/MPRA_paper_22188.pdf
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    References listed on IDEAS

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    1. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
    2. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
    3. Muhammad Akmal & David I. Stern, 2001. "Residential energy demand in Australia: an application of dynamic OLS," Working Papers in Ecological Economics 0104, Australian National University, Centre for Resource and Environmental Studies, Ecological Economics Program.
    4. Stock, James H & Watson, Mark W, 1993. "A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems," Econometrica, Econometric Society, vol. 61(4), pages 783-820, July.
    5. Fedderke, J.W. & Bogetic, Z., 2009. "Infrastructure and Growth in South Africa: Direct and Indirect Productivity Impacts of 19 Infrastructure Measures," World Development, Elsevier, vol. 37(9), pages 1522-1539, September.
    6. Mitra, Arup & Varoudakis, Aristomene & Veganzones-Varoudakis, Marie-Ange, 2002. "Productivity and Technical Efficiency in Indian States' Manufacturing: The Role of Infrastructure," Economic Development and Cultural Change, University of Chicago Press, vol. 50(2), pages 395-426, January.
    7. Hulten, Charles R. & Schwab, Robert M., 1997. "A fiscal federalism approach to infrastructure policy," Regional Science and Urban Economics, Elsevier, vol. 27(2), pages 139-159, April.
    8. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
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    Cited by:

    1. Mitra, Arup & Sharma, Chandan & Véganzonès-Varoudakis, Marie-Ange, 2016. "Infrastructure, information & communication technology and firms’ productive performance of the Indian manufacturing," Journal of Policy Modeling, Elsevier, vol. 38(2), pages 353-371.
    2. Marie-Ange VEGANZONES-VAROUDAKIS & Arup MITRA & Chandan SHARMA, 2012. "Are reforms productive? Explaining productivity and efficiency in the Indian manufacturing," Working Papers 201233, CERDI.
    3. Mitra, Arup & Sharma, Chandan & Véganzonès-Varoudakis, Marie-Ange, 2014. "Trade liberalization, technology transfer, and firms’ productive performance: The case of Indian manufacturing," Journal of Asian Economics, Elsevier, vol. 33(C), pages 1-15.

    More about this item

    Keywords

    Infrastructure projection; DOLS; India;

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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