Institute for Social and Economic Change
Working Paper: 319
The Infrastructure-output Nexus: Regional
Experience from India
Infrastructure plays an important role to support development and growth. In recent years, India has come to enjoy the reputation of a rapidly developing nation. In order to ensure that nothing hinders this growth process or its continuance, it is important to identify the major bottlenecks to growth and the channels through which they operate. In this paper, attempts are made to establish the nexus between per capita NSDP in India and infrastructure availability in India’s 17 major States. The main conclusions that can be drawn are that considerable regional disparities exist in terms of per capita net State domestic product (PCNSDP) from 1981 to 2010 and these disparities have increased over the years even though the initially poorer States have been growing at faster rate. After grouping the states into three categories, it was observed that the poor States had poorly developed infrastructure whereas the richer States had relatively better infrastructure. However, there is evidence of increase in infrastructure growth in the poor states after the economic reforms of 1991even though their level still remained considerably lesser than that of the rich states. The panel data estimation reveals that physical infrastructure variables did not have a uniform influence on output. The relationship did not just differ for aggregate output and, secondary and tertiary sector outputs; there was a distinct difference in the impact infrastructure had on the same sector for different time periods. This paper is part of on-going research aimed at comprehensive empirical work exclusive to India to help identify the role of infrastructure development.