Ann Reg Sci (2013) 51:515–536 DOI 10.1007/s00168-012-0537-x ORIGINAL PAPER Private investment in India: regional patterns and determinants Jagannath Mallick Received: 25 July 2011 / Accepted: 3 September 2012 / Published online: 9 October 2012 © Springer-Verlag 2012 Abstract This paper analyses private investment by type for 15 major states over the period from 1993–1994 to 2004–2005. This study is new in investigating the deter- minants of total private investment and domestic private investment at the state level in the Indian context by using generalized method of moments panel estimator. The results show that there is high variation in private investment across Indian states. The results obtained from the regressions show that private investment in the Indian states is explained by infrastructure, the gross fiscal deficit, market size and labour produc- tivity. This paper contributes to the literature on regional development by empirically establishing the existence of simultaneity between private investment and income at the state level in Indian economy. JEL Classification E2 · R11 · C33 1 Introduction Private investment is identified as a crucial factor for economic growth at both the national and state levels in Indian economy (see, Everhart and Sumlinski 2001; Odedokum 1997; Khan and Reinhart 1990; Blejer and Khan 1984; Ahluwalia 2000; Baddeley et al. 2006; Rao et al. 1999; Krishna 2004). The inflow of private investment into a state has the potential to generate state income and output along with providing employment opportunities to local residents. An additional benefit emanating from investment inflows is an upsurge in tax revenues.Direct tax returns from profitable J. Mallick (B ) Institute for Studies on Industrial Development (ISID), 4 Institutional Area, Phase II, Vasant Kunj, New Delhi 110070, India e-mail: mallickjagannath@gmail.com 123