Does the Business Environment Affect Corporate Investment in India?

March 1, 2012

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Format: Chicago

Kiichi Tokuoka. Does the Business Environment Affect Corporate Investment in India?, (USA: International Monetary Fund, 2012) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Since the global financial crisis, corporate investment has been weak in India. Sluggish corporate investment would not only moderate growth from the demand side but also constrain growth from the supply side over time. Against this background, this paper analyzes the reasons for the slowdown and discusses how India can boost corporate investment, using both macro and firm-level micro data. Analysis of macro data indicates that macroeconomic factors can largely explain corporate investment but that they do not appear to account fully for recent weak performance, suggesting a key role of the business environment in reviving corporate investment. Analysis of micro panel data suggests that improving the business environment by reducing costs of doing business, improving financial access, and developing infrastructure, could stimulate corporate investment.

Subject: Business environment, Corporate investment, Economic sectors, Financial services, Gross fixed investment, Infrastructure, National accounts, Real interest rates

Keywords: Business cost, Business environment, Corporate investment, Corporate investment, Costs of doing business, Firm, Firm size dummy, Global, Gross fixed investment, Infrastructure, Investment function, Investment in India, Panel data, Real GDP, Real interest rates, WP

Publication Details

Pages:

22
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/070
Stock No:

WPIEA2012070
ISBN:

9781463939069
ISSN:

1018-5941

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