Working Paper: NBER ID: w31590
Authors: Abhiman Das; Ejaz Ghani; Arti Grover Goswami; William R. Kerr; Ramana Nanda
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.
Keywords: Infrastructure; Finance; India; Highway Project; Bank Lending
JEL Codes: G21; H4; O18; R12; R14; R33; R42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| GQ project (C68) | growth in loan activity (G21) |
| growth in loan activity (G21) | increase in number of loans (G21) |
| growth in loan activity (G21) | increase in average branch sizes (L25) |
| increase in average branch sizes (L25) | new branch openings (O16) |
| supply of bank credit (E51) | expansion of operations in new regions (R11) |
| financing capacity + infrastructure development (H54) | economic activity (E20) |
| GQ project (C68) | loan growth in districts adjacent to GQ (R11) |