116
MACROECONOMICS
The estimated equation
42
for private corporate investment (
I
) is as follows:
I
t
=
-
1.28
+
0.13
BC
t
-
1
+
2.98
Y
t
-
3.89
CC
t
+
0.68
I
public
+
1.06
I
public,
t
-
1
-
0.50
K
t
-
1
-
0.45
I
t
-
1
+
0.75
PRD
The equation clearly indicates that business investment in any given year
accelerates with changes in GDP (
Y
), and there is a positive effect of
bank credit (
BC
)
.
Moreover, public investment has a strong complemen-
tary effect on business investment in India. As predicted by investment
theories, the cost of capital (
CC
) and the initial capital stock
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