Profitability and Investment: Evidence from India’s Organized Manufacturing Sector

Authors

Deepankar Basu, Department of Economics, University of MassachusettsFollow
Debarshi Das, Department of Humanities and Social Sciences, Indian Institute of Technology, GuwahatiFollow

Working Paper Number

2015-14

Publication Date

2015

Abstract

Using a state-industry panel data set at the 3 digit national industrial classification (NIC) level of disaggregation for 19 major Indian states over the period 1983-84 to 2007-08, we analyze the contemporaneous and long run impacts of the rate of profit and its components – profit share, capacity utilization rate, and capacity-capital ratio – on investment. Our results show that: (a) the rate of profit has both short and long run positive impacts on investment; (b) the profit share and capacity-capital ratio have only long run positive impacts, and the capacity utilization rate has only a contemporaneous positive impact on investment.

DOI

https://doi.org/10.7275/7565630

Recommended Citation

Basu, Deepankar and Das, Debarshi, "Profitability and Investment: Evidence from India’s Organized Manufacturing Sector" (2015). Economics Department Working Paper Series. 183.
https://doi.org/10.7275/7565630