In what way does the construction sector contribute to economic growth? Empirical evidence from India

Abstract

In its attempt to investigate the change in the demand of the construction industry mix and its impact on the economic growth as India develops, the study tries to analyse the long-run equilibrium relationship between construction subsectors and economic growth using ARDL bounds test to cointegration for the period 1970-2011. The empirical findings indicate that the impact of new construction subsector on the economic growth is greater than that of repairs and maintenance construction subsector in the long run. The findings ratify an assumption that in the upward growth trend in developing countries, the structure of the construction industry tends to conform that of the general economy. Findings have important policy implications for policy makers. To boost employment and enhance the productivity of the industry, the government should efficiently make use of local resources in the development and maintenance of structures in the country.