International Research Journal of Agricultural Economics and Statistics

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Impact of Fiscal Deficit on Economic Growth in India:A Cointegration Analysis


Affiliations
1 Department of Agricultural Economics, University of Agricultural Sciences, G.K.V.K., Bengaluru (Karnataka), India
2 Department of Agricultural Economics, Indian Agriculture Research Institute, New Delhi, India
3 National Institute of Veterinary Epidemiology and Disease Informatics, Bengalurum (Karnataka), India
4 University of Agricultural Sciences, G.K.V.K., Bengaluru (Karnataka), India
     

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Objectives: To investigate the long run and short run relationship between fiscal deficit and economic growth in Indian economy.

Methods and statistical analysis: The study is based on secondary data; objective of the study is examined using time series data from the period 1980-81 to 2013-14.

Findings: The Johansen methodology concludes an existence of a one cointegrating relationship among gross domestic product, fiscal deficit, gross domestic capital formation and employment. The finding of the study indicates that one per cent increase in fiscal deficit is likely to decrease Gross domestic product by 0.618609 thus, it shows there is a negative relationship between Gross domestic product and fiscal deficit in the long run. But the Vector Error Correction model discards the short run relationship between fiscal deficit and economic growth.

Application/ improvements: Fiscal deficit hampered the economic growth in the long run hence gap between the government revenue and government expenditure should be minimized.


Keywords

Economic Growth, Fiscal Deficit, Gross Domestic Product, Gross Domestic Capital Formation, Employment.
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  • Ahmad, Najid (2013). The role of budget deficit in the economic growth of Pakistan. Global J. Mgmt. & Business Res.Econ. & Commerce, 13 (5).

  • Fatima, Goher, Ahmed, Mehboob and Rehman, Wali Ur (2012).Consequential effects of budget deficit on economic growth of Pakistan. Internat. J. Business & Soc. Sci., 3 (7) : 203-207.

  • Kumar, Ranjan and Mohanty, R.K. (2012). Fiscal deficiteconomic growth nexus in India: A Cointegration analysis, Paper presented In: first international conference on Development and Innovation in the Emerging Economies, Punjabi University, Patiala. November 16-18.

  • Swamy, Allam Venkata, Chakravarthy, Annamareddy Kalyan and Abhijit, Koka Venkata Raghava (2014). An empirical study of India’s Fiscal deficit. Indian Res. J., 1 (7).


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  • Impact of Fiscal Deficit on Economic Growth in India:A Cointegration Analysis

Abstract Views: 262  |  PDF Views: 0

Authors

T. Amrutha
Department of Agricultural Economics, University of Agricultural Sciences, G.K.V.K., Bengaluru (Karnataka), India
H. R. Chikkathimme Gowda
Department of Agricultural Economics, Indian Agriculture Research Institute, New Delhi, India
Afrin Zainab Bi
National Institute of Veterinary Epidemiology and Disease Informatics, Bengalurum (Karnataka), India
K. S. Rashmi
University of Agricultural Sciences, G.K.V.K., Bengaluru (Karnataka), India

Abstract


Objectives: To investigate the long run and short run relationship between fiscal deficit and economic growth in Indian economy.

Methods and statistical analysis: The study is based on secondary data; objective of the study is examined using time series data from the period 1980-81 to 2013-14.

Findings: The Johansen methodology concludes an existence of a one cointegrating relationship among gross domestic product, fiscal deficit, gross domestic capital formation and employment. The finding of the study indicates that one per cent increase in fiscal deficit is likely to decrease Gross domestic product by 0.618609 thus, it shows there is a negative relationship between Gross domestic product and fiscal deficit in the long run. But the Vector Error Correction model discards the short run relationship between fiscal deficit and economic growth.

Application/ improvements: Fiscal deficit hampered the economic growth in the long run hence gap between the government revenue and government expenditure should be minimized.


Keywords


Economic Growth, Fiscal Deficit, Gross Domestic Product, Gross Domestic Capital Formation, Employment.

References