IDEAS home Printed from https://ideas.repec.org/a/sae/jouinf/v13y2021i1p21-43.html
   My bibliography  Save this article

Interactions among Infrastructure, Trade Openness, Foreign Direct Investments and Economic Growth in India

Author

Listed:
  • Rahul Sarania

Abstract

This study examines the dynamic interrelationships among infrastructure, trade openness, foreign direct investments (FDI), economic growth, fixed capital formation, labour and inflation rate in the context of India for the period 1970 to 2018 through the application of Toda–Yamamoto (TY) causality test and the auto-regressive distributed lag (ARDL) bounds testing approach to cointegration to offer policy implications of the effectiveness of these important macroeconomic determinants in the short and long-run. This article developed two composite indices, namely, infrastructure development index (INFI) and trade openness index (TOI) and used to see the effectiveness of infrastructure indicators and trade openness on economic growth along with other variables of interest. Results suggest a strong causal short and long run interrelationship among infrastructure, FDIs, trade openness and economic growth during 1970–2018. In the long run, a bi-directional relationship exists between INFI and GDP, suggesting that India should expedite construction of adequate and expanded infrastructure facilities in the economy and among others things, frame its policy in a more liberalised manner for various sectors including infrastructure with a view to attracting more FDI inflows and making more openness to trade and globalisation within the environment of ease of doing business that would help to sustain higher economic growth for long period, accomplishing the goal of US$5 trillion economy by 2024–25. JEL Classification: H54, O1, H4, O4, P33, L9, C32

Suggested Citation

  • Rahul Sarania, 2021. "Interactions among Infrastructure, Trade Openness, Foreign Direct Investments and Economic Growth in India," Journal of Infrastructure Development, India Development Foundation, vol. 13(1), pages 21-43, June.
    • Handle: RePEc:sae:jouinf:v:13:y:2021:i:1:p:21-43
    DOI: 10.1177/09749306211023621
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/09749306211023621
    Download Restriction: no
    File URL: https://libkey.io/10.1177/09749306211023621?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Robert J. Barro, 2013. "Inflation and Economic Growth," Annals of Economics and Finance, Society for AEF, vol. 14(1), pages 121-144, May.
    2. Marcelo OLARREAGA, 2016. "Trade, Infrastructure and Development," Working Papers P177, FERDI.
    3. Ghosh, Buddhadeb & De, Prabir, 2005. "Investigating the linkage between infrastructure and regional development in India: era of planning to globalisation," Journal of Asian Economics, Elsevier, vol. 15(6), pages 1023-1050, January.
    4. Aswini Kumar Mishra & Kunapareddy Narendra & Bibhu Prasad Kar, 2013. "Growth And Infrastructure Investment In India: Achievements, Challenges, And Opportunities," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 58(196), pages 51-70, January –.
    5. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    6. Chandra, Amitabh & Thompson, Eric, 2000. "Does public infrastructure affect economic activity?: Evidence from the rural interstate highway system," Regional Science and Urban Economics, Elsevier, vol. 30(4), pages 457-490, July.
    7. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
    8. Jung‐Yoon Lee & Jean‐Paul Rodrigue, 2006. "Trade Reorientation and Its Effects on Regional Port Systems: The Korea‐China Link along the Yellow Sea Rim," Growth and Change, Wiley Blackwell, vol. 37(4), pages 597-619, December.
    9. Asiedu, Elizabeth, 2002. "On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different?," World Development, Elsevier, vol. 30(1), pages 107-119, January.
    10. Aschauer, David Alan, 1989. "Is public expenditure productive?," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 177-200, March.
    11. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
    12. Edward Nketiah-Amponsah & Bernard Sarpong, 2019. "Effect of Infrastructure and Foreign Direct Investment on Economic Growth in Sub-Saharan Africa," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 11(3), pages 183-201, September.
    13. Pravakar Sahoo & Ranjan Kumar Dash & Geethanjali Nataraj, 2012. "China¡¯S Growth Story: The Role Of Physical And Social Infrastructure," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 37(1), pages 53-75, March.
    14. Robin M. Leichenko, 2000. "Exports, Employment, and Production: A Causal Assessment of U.S. States and Regions," Economic Geography, Taylor & Francis Journals, vol. 76(4), pages 303-325, October.
    15. Johansen, Søren & Juselius, Katarina, 1992. "Testing structural hypotheses in a multivariate cointegration analysis of the PPP and the UIP for UK," Journal of Econometrics, Elsevier, vol. 53(1-3), pages 211-244.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tong, Tingting & Yu, Edward & Roberts, Roland K., 2014. "Dynamics of Transport Infrastructure, Exports and Economic Growth in the United States," Journal of the Transportation Research Forum, Transportation Research Forum, vol. 53(1).
    2. Perles-Ribes, José Francisco & Ramón-Rodríguez, Ana Belén & Rubia, Antonio & Moreno-Izquierdo, Luis, 2017. "Is the tourism-led growth hypothesis valid after the global economic and financial crisis? The case of Spain 1957–2014," Tourism Management, Elsevier, vol. 61(C), pages 96-109.
    3. Chi, Junwook & Baek, Jungho, 2016. "Modeling the Transport Infrastructure-Growth Nexus in the United States," Journal of the Transportation Research Forum, Transportation Research Forum, vol. 55(3), December.
    4. Omoshoro-Jones, Oyeyinka Sunday, 2016. "A Cointegration and Causality Test on Government Expenditure –Economic Growth Nexus: Empirical Evidence from a South African Province," MPRA Paper 102085, University Library of Munich, Germany, revised 17 Oct 2017.
    5. Dinda, Soumyananda, 2008. "Factors Determining FDI to Nigeria: An Empirical Investigation," MPRA Paper 28097, University Library of Munich, Germany, revised Nov 2010.
    6. Lee, Chin, 2013. "The Role of Macroeconomic Fundamentals in Malaysian Post Recession Growth," MPRA Paper 44808, University Library of Munich, Germany.
    7. Al Iriani, Mahmoud A. & Trabelsi, Mohamed, 2016. "The economic impact of phasing out energy consumption subsidies in GCC countries," Journal of Economics and Business, Elsevier, vol. 87(C), pages 35-49.
    8. Dinda, Soumyananda, 2012. "Factors Determining FDI in Nigeria: Role of Emerging Economies," MPRA Paper 40192, University Library of Munich, Germany, revised 20 Jul 2012.
    9. Shahbaz, Muhammad & Hoang, Thi Hong Van & Mahalik, Mantu Kumar & Roubaud, David, 2017. "Energy consumption, financial development and economic growth in India: New evidence from a nonlinear and asymmetric analysis," Energy Economics, Elsevier, vol. 63(C), pages 199-212.
    10. Zheng, Li & Abbasi, Kashif Raza & Salem, Sultan & Irfan, Muhammad & Alvarado, Rafael & Lv, Kangjuan, 2022. "How technological innovation and institutional quality affect sectoral energy consumption in Pakistan? Fresh policy insights from novel econometric approach," Technological Forecasting and Social Change, Elsevier, vol. 183(C).
    11. Chen, Pei-Fen & Chien, Mei-Se & Lee, Chien-Chiang, 2011. "Dynamic modeling of regional house price diffusion in Taiwan," Journal of Housing Economics, Elsevier, vol. 20(4), pages 315-332.
    12. Gerard Bikorimana & Charles Rutikanga & Didier Mwizerwa, 2020. "Linking energy consumption with economic growth: Rwanda as a case study," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2020(2), pages 181-200.
    13. Kouton, Jeffrey, 2018. "Education expenditure and economic growth: Some empirical evidence from Côte d’Ivoire," MPRA Paper 88350, University Library of Munich, Germany.
    14. Levent KORAP, 2008. "Exchange Rate Determination Of Tl/Us$:A Co-Integration Approach," Istanbul University Econometrics and Statistics e-Journal, Department of Econometrics, Faculty of Economics, Istanbul University, vol. 7(1), pages 24-50, May.
    15. Muhammad Azmat Hayat & Huma Ghulam & Maryam Batool & Muhammad Zahid Naeem & Abdullah Ejaz & Cristi Spulbar & Ramona Birau, 2021. "Investigating the Causal Linkages among Inflation, Interest Rate, and Economic Growth in Pakistan under the Influence of COVID-19 Pandemic: A Wavelet Transformation Approach," JRFM, MDPI, vol. 14(6), pages 1-22, June.
    16. Maparu, Tuhin Subhra & Mazumder, Tarak Nath, 2017. "Transport infrastructure, economic development and urbanization in India (1990–2011): Is there any causal relationship?," Transportation Research Part A: Policy and Practice, Elsevier, vol. 100(C), pages 319-336.
    17. Sun Ho Lee & Eung-Soon Lim & Jinyoung Hwang, 2017. "Do credit guarantees for small and medium enterprises mitigate the business cycle? Evidence from Korea," Empirical Economics, Springer, vol. 52(4), pages 1367-1378, June.
    18. Nino Fonseca & Marcelino Sánchez-Rivero, 2020. "Significance bias in the tourism-led growth literature," Tourism Economics, , vol. 26(1), pages 137-154, February.
    19. Man-Keun Kim & Kangil Lee, 2015. "Dynamic Interactions between Carbon and Energy Prices in the U.S. Regional Greenhouse Gas Initiative," International Journal of Energy Economics and Policy, Econjournals, vol. 5(2), pages 494-501.
    20. Santos, Carlos Filipe & Fuinhas, José Alberto & Marques, António Cardoso, 2014. "O nexus energia-crescimento e o nível da auto-suficiência na produção de petróleo: análise com macro painel [Energy-growth nexus and oil self-sufficiency: macro panel analysis]," MPRA Paper 57008, University Library of Munich, Germany.

    More about this item

    Keywords

    Infrastructure index; FDI; trade openness index; economic growth; cointegration; ARDL; causality; India;
    All these keywords.

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • H4 - Public Economics - - Publicly Provided Goods
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • P33 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - International Trade, Finance, Investment, Relations, and Aid
    • L9 - Industrial Organization - - Industry Studies: Transportation and Utilities
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:jouinf:v:13:y:2021:i:1:p:21-43. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: http://www.idfresearch.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.