Does the Business Environment Affect Corporate Investment in India?
IMF Working Papers, March 1, 2012
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- Does the Business Environment Affect Corporate Investment in India?
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Bibliographic details
- Authors: Kiichi Tokuoka
- Published: March 1, 2012
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781463939069.001
Summary and context
- 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.
- The paper analyzes reasons for the slowdown and discusses how India can boost corporate investment using both macro and firm-level micro data.
Major findings — macro data analysis
- Macroeconomic factors can largely explain corporate investment.
- Macroeconomic factors do not appear to account fully for recent weak performance.
- The incomplete explanatory power of macro factors suggests a key role for the business environment in reviving corporate investment.
Major findings — micro (firm-level panel) data analysis
- Improving the business environment could stimulate corporate investment.
- Specific micro-level channels identified:
- Reducing costs of doing business.
- Improving financial access.
- Developing infrastructure.
Policy implications and recommendations
- Focus on reforms that lower firms’ operating costs to encourage investment.
- Enhance financial access for firms to reduce financing frictions and support investment.
- Prioritize infrastructure development to alleviate constraints on firm-level investment decisions.
Key metadata cited in the source
- Author: Kiichi Tokuoka
- Publication date: March 1, 2012
- Series: Working Paper No. 2012/070
- Pages: 22
- DOI: https://doi.org/10.5089/9781463939069.001
Kiichi Tokuoka. "Does the Business Environment Affect Corporate Investment in India?", IMF Working Papers 2012, 070 (2012), March 1, 2012.
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