COMPLEMENTARITY BETWEEN PUBLIC AND PRIVATE INVESTMENT IN INDIA

In this paper, we examine the question of complementarity between public and private investment in India under different modes of allocation and financing of public investment. We use an 18 sector computable general equilibrium model where money plays a non-neutral role. We find that public investment crowds out private investment; but in terms of its effect on total investment and growth and distribution of income, the economy is better off with increased public investment. That raises the question: Is crowding out all that undesirable’? 1