Does public investment boost economic growth? Evidence from an open-economy macro model for India

Using annual data for India for the period 1984-2003 and employing parametric technique (GMM), the present paper jointly determines GDP growth, real exchange rate and net foreign assets in Indian economy. There is evidence that public investment exerts a significant influence on real exchange rate and the growth rate and does so non-linearly. A comparison of the Indian estimates with those available for the UK and the USA economies is also revealing and highlights the role of governance on the effects of public investment.