Does the Business Environment Affect Corporate Investment in India?

Author/Editor:

Kiichi Tokuoka

Publication Date:

March 1, 2012

Electronic Access:

Free Full text (PDF file size is 773 KB).Use the free Adobe Acrobat Reader to view this PDF file

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.

Series:

Working Paper No. 12/70

Subject:

English

Publication Date:

March 1, 2012

ISBN/ISSN:

9781463939069/1018-5941

Stock No:

WPIEA2012070

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

22

Please address any questions about this title to publications@imf.org