Infrastructure and economic growth in Assam: implications for strategic planning

This paper investigates the relationship between public infrastructure and economic growth in Assam, India, using annual data from 1990–1991 to 2019–2020. The study adopts a broader classification of public infrastructure comprising economic, social, and financial infrastructure. Composite infrastructure indices are constructed using principal component analysis, while the autoregressive distributed lag bounds testing approach and its error correction specification is used to differentiate between long- and short-run effects. The empirical findings indicate the existence of a long-run relationship among economic growth, labour, capital, and infrastructure variables. Financial infrastructure is found to have a significant negative relationship with long-run economic growth, whereas economic and social infrastructure exhibit statistically insignificant long-run effects. In the short run, social infrastructure is found to stimulate economic growth, while economic infrastructure appears to impede it. The causality analysis further indicates that social infrastructure Granger-causes economic growth, whereas the direction of causality for economic and financial infrastructure appears to run from economic growth to infrastructure development. These findings raise serious concerns about the efficacy of public infrastructure development for long-term economic growth of Assam. Secondly, the demand-driven character of economic and financial infrastructure limits its development to the level required to contribute towards economic growth.