Industrial Activity in Indian States: The Role of Infrastructure

We use panel data for fourteen Indian states to assess the influence of public infrastructure on industrial activity, namely productivity, employment, real wages and investment, at the state level and over the period 1974-1998. Our results indicate that the length of national highways has on average the greatest impact on each of the four measures of industrial activity. While the length of national highways and electricity generating capacity are found to be important determinants of state real wages and productivity, total highway length is a key variable in determining the level of investment in fixed capital in each state.