Relation Between GDP Growth and PPP Investment: A Time Series Analysis Anirban Sarkar

Journal Name: 
Journal of Accounting and Finance
Vol. 30 - No. 1
Author Name Designation Organization
Anirban Sarkar

Infrastructure bottleneck has been a serious concern in India in its way of robust pace of economic progression. While many advanced economies and fiscal constrained developing countries have developed their physical infrastructure successfully either through private participation or through public-private  partnership (PPP) model, in India, private participation in the process of infrastructure development has received lackluster response. A Public-Private Partnership (PPP) is a long term contractual  agreement between a government agency and a private partner for the delivery of goods or services.PPP can take various forms and include both collaborative (non-legal binding) or contractual (legally binding)  agreements. The financing of infrastructure projects has been traditionally the responsibility of the government. However, owing to the budgetary constraints and other priorities, successive governments were not in a position to fund the infrastructure development activities effectively. As a result, the much needed development has lost its momentum. In an emerging economy like India, the importance of PPP model has gained greater momentum for increasing and sustaining the current pace of socio- economic development. Thus, the hypothesis of our study is to investigate whether there is any granger causality between Real GDP growth and growth in total infrastructure investment, Real GDP growth and growth in PPP Investment and also whether there is any granger causality between PPP growth and Public Investment growth. We have taken available data for 15 years ranging from 1996 to 2014 on real GDP, total infrastructure investment, public sector infrastructure investment and PPP infrastructure investment. The paper uses Time-series analysis to examine the above mentioned hypothesis. The statistical package STATA is used for the analysis. The result indicates that lagged growth of PPP does not Granger causes growth of real GDP of current year whereas lagged growth of PPP Granger causes growth of public investment of current year and also it appears that lagged growth of real GDP granger cause growth of total investment in infrastructure.