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

34 Pages Posted: 6 Aug 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 University - Entrepreneurial Management Unit

Ramana Nanda

Harvard University - Entrepreneurial Management Unit

Multiple version iconThere are 2 versions of this paper

Date Written: June 13, 2019

Abstract

This paper uses the construction of India's Golden Quadrangle central highway network, together with comprehensive loan data from the Reserve Bank of India, to investigate the interaction between infrastructure development and financial sector depth. The paper identifies a disproportionate increase in loan count and average loan size in districts along the Golden Quadrangle highway network, using stringent specifications with industry and district fixed effects. The results hold in straight-line instrumental variable frameworks and are not present in placebo tests with another highway that was planned to be upgraded at the same time as Golden Quadrangle but subsequently delayed. Importantly, however, the results are concentrated in districts with stronger initial financial development, suggesting that although financing responds to large infrastructure investments and helps spur real economic outcomes, initial financial sector development might play an important role in determining where real activity will grow.

Keywords: Pulp & Paper Industry, Textiles, Apparel & Leather Industry, General Manufacturing, Food & Beverage Industry, Common Carriers Industry, Construction Industry, Plastics & Rubber Industry, Business Cycles and Stabilization Policies, Roads and Highways Performance, Roads & Highways, Inter-Urban Roads and Passenger Transport, Transport Services, Financial Sector Policy, Economic Growth, Industrial Economics, Economic Theory & Research

Suggested Citation

Das, Abhiman and Ghani, Ejaz and Goswami, Arti Grover and Kerr, William R. and Nanda, Ramana, Infrastructure and Finance: Evidence from India's GQ Highway Network (June 13, 2019). World Bank Policy Research Working Paper No. 8885. Available at SSRN: https://ssrn.com/abstract=3430493

Abhiman Das (Contact Author)

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 R. Kerr

Harvard University - Entrepreneurial Management Unit ( email )

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

Ramana Nanda

Harvard University - Entrepreneurial Management Unit ( email )

Boston, MA 02163
United States

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

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