Infrastructure and Finance: Evidence from India's GQ Highway Network

35 Pages Posted: 6 Jun 2019

See all articles by Abhiman Das

Abhiman Das

Indian Institute of Management Ahmedabad

Syed Ejaz Ghani

World Bank

Arti Grover Goswami

World Bank

William Kerr

Harvard Business School

Ramana Nanda

Harvard University - Entrepreneurial Management Unit

Date Written: June 5, 2019

Abstract

We use the construction of India’s Golden Quadrangle (GQ) central highway network, together with comprehensive loan data drawn from the Reserve Bank of India, to investigate the interaction between infrastructure development and financial sector depth. We identify a disproportionate increase in loan count and average loan size in districts along the GQ highway network using stringent specifications with industry and district fixed effects. Our results hold in straight-line IV frameworks and are not present in ‘placebo tests’ with another highway that was planned to be upgraded at the same time as GQ but subsequently delayed. Importantly, however, results are concentrated in districts with stronger initial financial development, suggesting that while financing does respond to large infrastructure investments and help spur real economic outcomes, initial financial sector development might play an important role in determining where real activity will grow.

Suggested Citation

Das, Abhiman and Ghani, Ejaz and Goswami, Arti Grover and Kerr, William and Nanda, Ramana, Infrastructure and Finance: Evidence from India's GQ Highway Network (June 5, 2019). Harvard Business School Entrepreneurial Management Working Paper No. 19-121. Available at SSRN: https://ssrn.com/abstract=3399447 or http://dx.doi.org/10.2139/ssrn.3399447

Abhiman Das

Indian Institute of Management Ahmedabad ( email )

Vastraour
Ahmedabad, 380015
India

Ejaz Ghani

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

Arti Grover Goswami

World Bank ( email )

1818 H Street NW
Washington, DC 20433
United States

William Kerr

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Ramana Nanda (Contact Author)

Harvard University - Entrepreneurial Management Unit ( email )

Boston, MA 02163
United States

HOME PAGE: http://www.people.hbs.edu/rnanda

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