Infrastructure Development and Regional Growth in India

Prakash Singh and N R Bhanumurthy

Chapter 19 in Analytical Issues in Trade, Development and Finance, 2014, pp 321-341 from Springer

Abstract: Abstract The present study attempts to understand the significance of variation in infrastructural (both physical and social) development in determining regional economic divergence in India. Preliminary analysis suggests that, at the cross-sectional level, there is a strong positive correlation between infrastructural development and level of state domestic product (SDP) growth in 15 major states. Further, this correlation only shows an increasing trend over a period of time. Presence of cointegration between both the infrastructural variables as well as SDP growth demonstrates the importance of infrastructure in promoting economic activity at the subnational level. Further, fully modified ordinary least square (FMOLS) result supports the importance of infrastructure variable on SDP. However, it also suggests that between the two, social infrastructure development was found to have greater impact on SDP growth. Finally, Granger causality results indicate the presence of bidirectional causation between SDP growth and infrastructure with a stronger causation running from social infrastructure to SDP growth than vice versa. Overall, the chapter concludes that unequal infrastructure endowment could be one of the drivers of growth divergence in India. It calls for higher investments on infrastructure, in particular in social infrastructure, if India has to achieve faster and inclusive growth in the medium to long term.

Keywords: Economic growth; Infrastructure; Panel time series; India (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1007/978-81-322-1650-6_19

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