Estimating impact of infrastructure on productivity and efficiency of Indian Manufacturing

Abstract

Drawing on a recent data set of the Indian manufacturing industry for the period 1994-2008, this article shows for eight sectors that core infrastructure matters in determining Total Factor Productivity (TFP) and Technical Efficiency (TE). Results suggest that the impact is rather strong on both measures (elasticity of 0.32 and 0.17, respectively). This finding is of particular importance in the Indian context characterized by infrastructure bottlenecks and strongly supports the view that a lack of infrastructure can hamper growth in developing countries