Does Road Development Contribute in Economic Growth of India? An Application of ARDL Model

ABSTRACT

The purpose of the study to analyse the impact of road development on economic growth in India from 1980-2021. Infrastructure is the real capital stock that increases the standard of life and contributes to the economic development by increasing productive capacity. Road construction affects all economic activities such as consumption, production, distribution and trade etc. by directly or indirectly, which have both the positive and negative externalities. The study examines the relationship between road development and economic growth of India by using annual data from CMIE, KLEMS reserve bank of India and UNESCO over the period from 1980-2019.The time period of 1990s has also been taken into consideration to taken into account the effect of financial and economic reforms. To check the incidence of integrating effects in the data, ADF test has been applied and long run and short run relationship are estimated by ARDL model. The results confirmed that there exist long run relationship between low quality roads (LROAD2) and economic growth in India. There is no significant impact of high quality roads (LROAD2) on economic growth in long run as well as short run. ARDL test results suggest that road development play a major role in enhancing the economic growth of Indian economy. The impact of average year of schooling (LSCHY) and capital formation (LKSL) on economic growth is positive and significant in long and short run. The empirical findings suggest that the policymakers of Indian economy should invest in low quality roads for the productive purpose to reap the maximum benefits of it and taking growth-enhancing advantage of these developments.

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