Does Physical Infrastructure Investment Facilitate Resilient and Sustainable Productivity in India? An Empirical Investigation

By : Biswajit Paul, Ashish Kumar Sana

Page No: 11-20

Abstract
Total factor productivity (TFP) is an important indicator for measuring the relationship between outputs (total product) and inputs i.e., factors of production. It is primarily related with labour and capital. Increased TFP is the result of economic growth, technological change, education, innovation, etc. India, as one of the emerging market economies, should play an effective role in ensuring resilience and sustainability with respect to productivity. The objective of the study is to examine the influence of Infrastructure Investment (PII) on TFP in India. Annual time series data from the Federal Reserve Economic Data (FRED) for the time period 1961 to 2020 has been used for this. Econometric tools such as Augmented Dickey-Fuller (ADF) and Philips-Perron (PP) tests confirm the problem of non-stationarity at level. This problem was eliminated by taking first difference of all variables. Johansen Co-integration test was applied to find out co-integration. To capture the long-run and short-run causal relationships between PII and TFP, the Vector Error Correction Model (VECM) was applied. The results confirm that there is an impact of PII on TFP. Short-run causal effects of PII on TFP have also been found. The Error Correction Term (ECT) value reveals that the model is in equilibrium and adjusts itself to external shock. Each result shows evidences of validation of PII for TFP. This study can serve as a guideline for policy makers so that they can strive to make productivity sector resilient and sustainable in post-pandemic era.

Authors :
Biswajit Paul
Assistant Professor, Department of Commerce, University of Gour Banga, Malda, West Bengal.

Ashish Kumar Sana
Professor, Department of Commerce, University of Calcutta, Kolkata, West Bengal.
 

DOI: https://doi.org/10.32381/PROD.2022.63.01.2