Taking the data for 17 Indian states for the period running 1991–2017, the study investigates relationship between infrastructure and manufacturing value added at the overall as well as segregated levels to study the spatial differences. Preliminary tests of cross-section dependence point to the existence of dependence among the cross sections after which second-generation testing procedures are applied. Spatial differential impact of infrastructure on the performance of manufacturing activity is estimated using fixed/random effect modelling. The empirical results show that infrastructure index exerts positive and significant impact on the manufacturing performance with estimate of 0.20 for all states in India and 0.49 for high-income states. Similarly, individual components of infrastructure influence manufacturing activity differently. Road infrastructure is influencing manufacturing performance negatively in high-income states while it is positive for other states; teledensity exerts positive influence in case of middle-income states while the impact is negative in case of low-income states. Dumitrescu and Hurlin’s causality test shows bidirectional causality from infrastructure to manufacturing output. JEL Codes: D02, E62, H54, L94, L96

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Keeping in mind the importance of telecommunications sector for India especially post the reform of 1991, the study seeks to study the causal relationship between telecommunication and economic growth for selected panel of 17 Indian states by implicitly taking into account panel heterogeneity. Using Hurlin–Venet causal mechanism, the study investigates homogeneous causality (HC) as against heterogeneous causality (HEC). Homogeneous non-causality and HC hypothesis both of which assume homogeneity are rejected in both the directions thereby implying that Indian panel is made up of heterogeneous cross sections. After this HEC tests are conducted namely heterogeneous non-causality (HENC) and HEC for each and every cross section. The results from HENC and HEC test show that six states show up unidirectional causality from economic growth to telecommunication, four states show unidirectional causality from telecommunications to economic growth, four states show up bidirectional relationship and three states show up no causality. The results are robust to different lags for both our dependent as well as independent variables. This implies that state level differences are very much relevant for India and thus policies suitable for each state would be guided majorly by direction of relationship that is true in a particular state economy. JEL Classification: C23, L96, O40

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