Infrastructure financing and economic growth in India: an empirical investigation

Abstract

PurposeThis paper aims to suggest the preferred mode of financing for major sub-sectors of infrastructure: roads, seaports, telecommunication and energy by examining which mode of infrastructure financing – public, private or public–private partnership (PPP) – has the maximum positive impact on the overall GDP of India. The same exercise was carried out for the overall infrastructure sector by integrating data from all the four sub-sectors.Design/methodology/approachThe structural vector autoregressive approach was used with the period of analysis taken from 1995 to 2014. The stationary properties of the variables were checked by the Phillips–Perron unit root.FindingsThe PPP mode of financing was found to make the maximum positive impact on the GDP of India. Considering the four sub-sectors individually, it was concluded that the private mode of financing in roads, energy and telecom sectors has the maximum positive impact on the GDP, while the PPP gives optimal benefit to the seaports sector.Practical implicationsResults will aid the Indian Government and policymakers to efficiently design and develop their economic policies accordingly.Originality/valueThe study is novel in a sense that it helps to address the lack of research into the area of infrastructure financing in India.