Infrastructure and Finance: Evidence from India's GQ Highway Network / Abhiman Das, Ejaz Ghani, Arti Grover Goswami, William R. Kerr, Ramana Nanda.

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Das, Abhiman

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w31590.Publication details: Cambridge, Mass. National Bureau of Economic Research 2023.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We use data from Reserve Bank of India to study the impact of India's Golden Quadrilateral (GQ) highway project on finance-dependent activity. Loan volumes increase by 20-30% in districts along GQ and are stronger in industries more dependent upon external finance. Loan growth begins with increases in average branch size and in places with more pre-GQ loan activity. New branch openings come later, consistent with short-run adjustment costs to expanding branch networks. These patterns are not evident in placebo tests using delayed investments in NS-EW highways. Results suggest the depth of initial financial infrastructure shapes how infrastructure investments impact localities.

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August 2023.

We use data from Reserve Bank of India to study the impact of India's Golden Quadrilateral (GQ) highway project on finance-dependent activity. Loan volumes increase by 20-30% in districts along GQ and are stronger in industries more dependent upon external finance. Loan growth begins with increases in average branch size and in places with more pre-GQ loan activity. New branch openings come later, consistent with short-run adjustment costs to expanding branch networks. These patterns are not evident in placebo tests using delayed investments in NS-EW highways. Results suggest the depth of initial financial infrastructure shapes how infrastructure investments impact localities.