DETERMINANTS OF CONSTRUCTION SECTOR GROWTH IN INDIA: THE ROLE OF INFRASTRUCTURE AND INFLATION

DOI: https://doie.org/10.65985/APER.2026426425

Authors:

Ar. Abin Sam, Dr. Sunita Daniel

Keywords:

Construction Sector Growth; Infrastructure Investment; Inflation; ARDL Model; Cointegration; Sectoral Growth

Abstract:

The construction sector plays a central role in infrastructure development and economic growth in India, yet empirical evidence on its macroeconomic drivers remains limited. This study examines the long-run and short-run relationships between infrastructure activity, inflation, and construction sector output using quarterly data from 2015–2025. A log-linear econometric framework is employed, incorporating Augmented Dickey–Fuller unit root tests, Johansen cointegration analysis, and an Autoregressive Distributed Lag (ARDL) model to capture dynamic adjustments. The results reveal that infrastructure expansion exerts a strong and statistically significant positive impact on construction sector GDP, underscoring its structural importance in driving sectoral growth. Inflation exhibits a negative but statistically insignificant effect in the long run. Diagnostic tests confirm model stability, with no evidence of autocorrelation or heteroskedasticity. The findings provide empirical support for infrastructure-led growth dynamics within an emerging economy context and highlight the importance of sustained infrastructure investment for stabilizing construction sector performance. Future research may extend the analysis through nonlinear modelling approaches or multi-country panel investigations.

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