Estimating the Efficiency of Public Infrastructure Investment: A State-wise Analysis

Manvi Saxena, Varun Chotia and N.V. Muralidhar Rao

Global Business Review, 2018, vol. 19, issue 4, 1037-1049

Abstract: The objective of this study is to empirically analyse the relationship between public infrastructure investment and economic growth for India using yearly data for its 28 states (excluding Telangana). We have taken six major sub-sectors falling under infrastructure sector: transport; education, sports, arts and culture; energy; medical and public health; telecommunication; and water supply and sanitation. We have aimed to analyse the efficiency of each of these sub-sectors using data envelopment analysis (DEA). For every state, we have used the public investment data from the state budget files as input while sector-specific infrastructural criterions and sector-wise revenue are taken as outputs. We have gone by the logic that a state’s particular sub-sector of infrastructure will be highly efficient if it is able to use up the investment allotted to it and create a stronger infrastructure as compared to other states, subsequently generating higher amount of revenues. For each sector, various infrastructural criteria were clubbed together using principal component analysis technique to construct a single infrastructure index (representing the sector-wise output). Further, DEA was applied to calculate efficiency for each Indian state and they were ranked based on their efficiency scores. The analysis tells us that policy-making and budget allocation may be done in accordance with standing performances of different states in various sectors and the goals of the respective state governments.

Keywords: Public infrastructure investment; data envelopment analysis; efficiency; economic growth; principal component analysis (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:sae:globus:v:19:y:2018:i:4:p:1037-1049

DOI: 10.1177/0972150918772975

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