Infrastructure and Finance: Evidence from India's GQ Highway Network

Abhiman Das (), Ejaz Ghani (), Arti Grover, William Kerr and Ramana Nanda
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Abhiman Das: Indian Institute of Management Ahmedabad

No 19-121, Harvard Business School Working Papers from Harvard Business School

Abstract: We use the construction of India's Golden Quadrangle (GQ) central highway network, together with comprehensive loan data drawn from the Reserve Bank of India, to investigate the interaction between infrastructure development and financial sector depth. We identify a disproportionate increase in loan count and average loan size in districts along the GQ highway network using stringent specifications with industry and district fixed effects. Our results hold in straight-line IV frameworks and are not present in 'placebo tests' with another highway that was planned to be upgraded at the same time as GQ but subsequently delayed. Importantly, however, results are concentrated in districts with stronger initial financial development, suggesting that while financing does respond to large infrastructure investments and help spur real economic outcomes, initial financial sector development might play an important role in determining where real activity will grow.

Pages: 35 pages
Date: 2019-06
New Economics Papers: this item is included in nep-pay, nep-tre and nep-ure
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Citations: View citations in EconPapers (1)

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http://www.hbs.edu/faculty/pages/download.aspx?name=19-121.pdf (application/pdf)

Related works:
Working Paper: Infrastructure and Finance: Evidence from India's GQ Highway Network (2023)
Working Paper: Infrastructure and Finance: Evidence from India's GQ Highway Network (2019)
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