Physical infrastructure and development of secondary sector:an econometric analysis for six states in India

While the importance of physical infrastructure in the development of secondary sector of the Indian economy is acknowledged, there is little or no empirical study to validate its role at the state-level. This paper presents a quantitative analysis of the relationship between development of physical infrastructure and the growth of secondary sector at the state level. Six states of the Indian Union, first three states being more developed industrially, and the other three states being industrially the least developed, are studied for this purpose. We discuss the important issue of whether all the states will be able to reap similar benefits from improved infrastructure or will the benefits be different for different states. Applying regression technique using factor scores, we show that while some states have reached the inflexion point in terms of physical infrastructure, others will gain significantly from infrastructure development. For some less-developed states, it is seen that even if infrastructure facilities are increased, the corresponding growth in output from secondary sector may not be encouraging, pointing to institutional and social factors that have a role to play in economic development.