18th Annual Conference of Economic Association of Bihar

Dr.Debesh Bhowmik has presented the following  paper on 23rd November,2016 during the conference of Economic Association of Bihar.

The following  paper is published in the Bihar Economic Journal,Vol-5,No-2,Nov,2016,9-22

INFRASTRUCTURE, ECONOMIC GROWTH AND THE ECONOMY OF BIHAR

Dr.Debesh Bhowmik

(Retired Principal and Associate Editor,Arthabeekshan-Journal of BEA)

Abstract

The paper studied the nexus between infrastructure and growth in Bihar during 1990-91-2014-15.Firstly,causality and cointegration were shown among investment in power sector and SDP,per capita SDP,net capital formation and growth rate. Secondly, causality,cointegration, VAR,and VECM among social sector investment and SDP,per capita SDP,net capital formation and growth have been calculated during the same period. In both the cases, estimation of double log linear model has been used to get the relationships.The structural break model verified that both the trends of the investment in power sector and social sector have been rising during 1990-91-2014-15 but investment in power sector has one downward structural break in 1994 and one upward structural break in 1998,on the other hand,investment in social sector has three upward structural breaks in 1999,2007,and 2011 respectively. Hodrick-Prescott Filter model removed smoothly the cyclical movements from both the series.

The study explores that infrastructure investment in Bihar in power sector has insignificant positive effects on SDP per capita, net capital formation and growth rate during 1990-91-2014-15 where impact on SDP is positive and significant.On the contrary, infrastructure investment on social sector has positive significant impact on SDP,SDP per capita and net capital formation of Bihar but has insignificant positive impact on growth during the same period. But there is bi-directional causality and cointegration among the variables in both the sectors.VEC model in the social sectors is stable, divergent and insignificant error correction processes. Economic impact of social sector infrastructure investment is higher than that of power sector in Bihar. The paper throws light on some important policies to develop the infrastructure in Bihar and provides some scope of future research irrespective of some limitations. 

Key words – infrastructure, power sector, social sector, causality, cointegration, VAR,

JEL-C32,I1,I2,O4,Q4