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Is private investment being crowded out in India? Some fresh evidence

Author

Listed:
  • Jagadish Prasad Sahu

    (Institute of Economic Growth, Delhi, India)

  • Sitakanta Panda

    (Institute of Economic Growth, Delhi, India)

Abstract

We reexamine the crowding out hypothesis for India for the period 1970-71 to 2009-10. Applying a flexible accelerator model in a VECM framework, we find that government investment crowds out private investment in the long run while GDP has a significantly positive impact on the later. We also find that in the long run causality runs from public investment and GDP to private investment.

Suggested Citation

  • Jagadish Prasad Sahu & Sitakanta Panda, 2012. "Is private investment being crowded out in India? Some fresh evidence," Economics Bulletin, AccessEcon, vol. 32(2), pages 1125-1132.
    • Handle: RePEc:ebl:ecbull:eb-12-00149
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    References listed on IDEAS

    as
    1. Chakraborty, Lekha S., 2006. "Fiscal deficit, capital formation, and crowding out: Evidence from India," Working Papers 06/43, National Institute of Public Finance and Policy.
    2. Pradhan, B. K. & Ratha, D. K. & Sarma, Atul, 1990. "Complementarity between public and private investment in India," Journal of Development Economics, Elsevier, vol. 33(1), pages 101-116, July.
    3. Pritha Mitra, 2006. "Has Government Investment Crowded Out Private Investment in India?," American Economic Review, American Economic Association, vol. 96(2), pages 337-341, May.
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    Cited by:

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    2. Sajad Ahmad Bhat & Javed Ahmad Bhat & Taufeeq Ajaz, 2020. "The Public–Private Investment Nexus In India: Evidence From A Policy Simulation Approach," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 65(224), pages 101-128, January –.
    3. Ouédraogo, Rasmané & Sawadogo, Relwendé & Sawadogo, Hamidou, 2020. "Private and public investment in sub-Saharan Africa: The role of instability risks," Economic Systems, Elsevier, vol. 44(2).
    4. Anirudha Barik & Asit Ranjan Mohanty, 2019. "New evidence on the relationship between public and private investment in India," Economics Bulletin, AccessEcon, vol. 39(3), pages 1989-2001.
    5. Nusrat Akber & Megha Gupta & Kirtti Ranjan Paltasingh, 2020. "The Crowding-in/ out Debate in Investments in India: Fresh Evidence from NARDL Application," South Asian Journal of Macroeconomics and Public Finance, , vol. 9(2), pages 167-189, December.

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    More about this item

    Keywords

    private investment; crowding out; India.;
    All these keywords.

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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