Do Effective State Business Relations Matter for Economic Growth? Evidence from Indian States

SummaryEffective state–business relations are a set of highly institutionalised, responsive and public interactions between the state and the business sector. This paper examines the impact of effective state–business relations on economic growth across Indian states over the period 1985–2006. We propose a measure that captures the various dimensions of effective state–business relations at the sub-national level, and estimate standard growth regressions using dynamic panel data methods. Our results show that effective state–business relations contribute significantly to economic growth and appear to be driven by the intensity of the interactions between the state and the private sector.