INFRASTRUCTURE INVESTMENT AND ECONOMIC GROWTH IN INDIA: AN EMPIRICAL ANALYSIS

Abstract

Infrastructure sector is a key driver for the Indian economy. Infrastructure may be termed as physical infrastructure which may include social infrastructure. Importance of infrastructure in economic growth cannot be overemphasized. Infrastructure is the lifeline of an economy and the fate of the economy is intricately linked to the development or otherwise of its infrastructure. The objective of the paper is to examine the effect of infrastructure investment on economic growth of India. Gross Capital Formation (GCF) and Gross Domestic Product (GDP) are considered as infrastructural development macroeconomic variable and economic growth variable respectively. The data have been collected for a period of 57 years i.e. 1960 – 2016 (World Bank). Different charts and graphs have been used to analyse the status of infrastructure investment during the study period. Short run and long run relationships between infrastructure investment and economic growth have been examined using time series econometric tools like VECM and Cointegration test. It is found that infrastructure investment and economic growth of India is integrated in long run which implies that there is a long run relationship between them.