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Profitability and Investment: Evidence from India's Organized Manufacturing Sector

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  • Basu, Deepankar

    (Department of Economics, University of Massachusetts, Amherst)

  • Das, Debarshi

    (Department of Humanities and Social Sciences, Indian Institute of technology, Guwahati)

Abstract

Using a state-industry panel data set at the 3 digit national industrial classification (NIC) level of disaggregation for 19 major Indian states over the period 1983-84 to 2007-08, we analyze the contemporaneous and long run impacts of the rate of profit and its components - profit share, capacity utilization rate, and capacity-capital ration - on investment. Our results show that: (a) the rate of profit has both short and long run positive impacts on investment; (b) the profit share and capacity-capital ration have only long run positive impacts, and the capacity utilization rate has only a contemporaneous positive impact on investment.

Suggested Citation

  • Basu, Deepankar & Das, Debarshi, 2015. "Profitability and Investment: Evidence from India's Organized Manufacturing Sector," UMASS Amherst Economics Working Papers 2015-14, University of Massachusetts Amherst, Department of Economics.
    • Handle: RePEc:ums:papers:2015-14
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    Cited by:

    1. Chhibber, Ajay & Kalloor, Akshata, 2016. "Reviving Private Investment in India: Determinants and Policy Levers," Working Papers 16/181, National Institute of Public Finance and Policy.
    2. Agarwal, Manmohan & Azim, Rumi, 2021. "The Indian manufacturing sector: finance, investment and performance of firms," Working Papers 21/339, National Institute of Public Finance and Policy.

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    More about this item

    Keywords

    profitability; investment; manufacturing; India;
    All these keywords.

    JEL classification:

    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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