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Estimating Infrastructural Investment Needs for India

Author

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  • Chandan Sharma

    (Chandan Sharma is Assistant Professor, Department of Economics, National Institute of Financial Management, Sector 48, Faridabad 121001, Haryana, India. Telephone: +91-129-2465268, Fax: +91-0129-2418867; email: chandanieg@gmail.com)

  • N.R. Bhanumurthy

    (N.R. Bhanumurthy is Professor, National Institute of Public Finance and Policy 18/2 Satsang Vihar Marg, Special Institutional Area, New Delhi 110067, India, Telephone: +91-11-26563688; email: nrbmurthy@gmail.com)

Abstract

This article attempts to systemically project the demand and fund requirements for the Indian infrastructure sector up to 2013. In the infrastructure sector transportation (rail, port, air and road), electricity and telecommunication sectors are covered in this study. The analysis is carried out in two stages. In the first stage, long-run linkages between infrastructure variables and income are established by applying the cointegration method. Subsequently, infrastructure demand functions are estimated by using a dynamic ordinary least squares (OLS) (DOLS) technique. In the second stage, by using the estimated infrastructure elasticity to income of variables and IMF’s projected income data, we project sector-wise demand and funding requirements. The results of the analysis indicates that in important sectors like electricity and ports, the government (the Planning Commission) has seriously underestimated future demand, while in the air transport sector, demand seems to be overestimated. Only in telecommunications, are the projections of this study at par with the government’s projections. Overall, we find that the government has underestimated infrastructure needs by at least 7 per cent. Based on these results, we propose the initiation of a set of reforms in the existing financing pattern of infrastructure in the country.

Suggested Citation

  • Chandan Sharma & N.R. Bhanumurthy, 2011. "Estimating Infrastructural Investment Needs for India," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 5(2), pages 221-243, May.
    • Handle: RePEc:sae:mareco:v:5:y:2011:i:2:p:221-243
    DOI: 10.1177/097380101100500203
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    9. żeljko Bogetić & Johannes W. Fedderke, 2006. "Forecasting Investment Needs In South Africa'S Electricity And Telecom Sectors," South African Journal of Economics, Economic Society of South Africa, vol. 74(3), pages 557-574, September.
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    Cited by:

    1. Marie-Ange Véganzonès-Varoudakis & Arup Mitra & Chandan Sharma, 2012. "Are Reforms Productive? Explaining Productivity and Efficiency in the Indian Manufacturing," Post-Print hal-03058727, HAL.
    2. Mitra, Arup & Sharma, Chandan & Véganzonès-Varoudakis, Marie-Ange, 2014. "Trade liberalization, technology transfer, and firms’ productive performance: The case of Indian manufacturing," Journal of Asian Economics, Elsevier, vol. 33(C), pages 1-15.
    3. Mitra, Arup & Sharma, Chandan & Véganzonès-Varoudakis, Marie-Ange, 2016. "Infrastructure, information & communication technology and firms’ productive performance of the Indian manufacturing," Journal of Policy Modeling, Elsevier, vol. 38(2), pages 353-371.

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    More about this item

    Keywords

    Infrastructure Projection; DOLS; India; JEL Classification: C53; JEL Classification: H54;
    All these keywords.

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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