Causality between Credit Market Development and Economic Growth in India: Toda and Yamamoto Approach

The Issue of causal relationship between credit market development and economic growth is very crucial in an emerging market economy like India especially in the after-math of the global financial crisis. A developed credit market efficiently allocates resources for higher economic growth and higher economic growth by stimulating investment opportunities spurs economic growth. This necessitates the investigation of the causality between credit market development and economic growttl. It is with this objective, this paper Investigated the causal relationship between credit market development and economic growth using the Toda and Yamamoto non-causality test. The results provide the evldence In support of the feedback causal relation between credit market development and economic growth in India over the period 1980 to 2009. It means credit market devlelopment leads to economic growth and economic growth spurs the credit market development.