Determinants of Private Infrastructure Investment in India: A Post-liberalization Analysis

Abstract

In spite of the initiatives by the Government of India for reviving private infrastructure investment, its growth is not up to the mark, especially after the COVID-19 pandemic. It is well known that the contribution of the private sector to infrastructure is inevitable to the overall growth of a country. An enquiry into its determining factors will help to explore the reasons behind the ebb and flow of private infrastructure investment in India and helps in finding solutions to revive it. This paper aims to identify the macroeconomic determining factors of private infrastructure investment in India after the liberalization period. ARDL-bound test results show that in the long run, there exists a positive long-run relationship between private infrastructure investment with gross domestic product (GDP), public infrastructure investment and domestic credit to the private sector, whereas in the short run, it was found that only the GDP and domestic credit to the private sector are statistically significant. Although there are many empirical studies that presented the contribution of macroeconomic factors to the growth of private investment in general, this study stands out as this is the first attempt to identify the determinants of private infrastructure investment.