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We examine the output elasticity of infrastructure for four South Asian countries viz., India, Pakistan, Bangladesh, and Sri Lanka using panel cointegration techniques for the period 1980-2005. In this context, we develop an index of infrastructure stocks and investigate the impact of infrastructure on output. The study finds a long-run equilibrium relationship between output and infrastructure along with other relevant variables, such as gross domestic capital formation (GDCF), labor force, international trade and human capital. The results reveal that GDCF, labor force, export and expenditure on human capital exhibit a positive contribution to output. More importantly, infrastructure development contributes significantly to output growth in South Asia. Further, the panel causality analysis shows that there is mutual feedback between total output and infrastructure development.

India's prowess in the service sector has been recognised the world over. Sustaining services exports is important not only to sustain India's high growth rate but also to compensate for a consistent deficit in merchandise trade and to maintain stability on the external sector. In this context, we analyse the factors of India's performance in services exports over the past three decades. The results reveal that endowment factors such as human capital, improvement in physical infrastructure and financial development are key drivers for India's surge in services exports along with world demand, exchange rate and manufacturing exports. While factors such as institutions, R&D expenditure, telecommunication, foreign direct investment and financial development significantly impact the export of modern services, traditional services exports are more dependent on infrastructure development, manufacturing exports, world demand and exchange rate. India's economic reforms in the financial sector, FDI, communication so far have helped the services exports, but India needs to focus on supply‐side factors to improve the competitiveness – and thereby volume – of services exports.

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We investigate the role of physical and social infrastructure in economic growth in India after controlling for other important variables such as investment, labour force, and trade, using the Two-Stage Least Squares (TSLS) and Dynamic Ordinary Least Squares (DOLS) techniques, for the period 1970 to 2006. In this context we develop a composite index of physical infrastructure stocks and examine its impact on output. We find that physical and social infrastructures have a significant positive impact on output apart from gross domestic capital formation and international trade. Further, the causality analysis supports the results, revealing unidirectional causality from infrastructure development and human capital to output growth in India.India, infrastructure, output, TSLS and DOLS,