Public debt and economic growth in India: A reassessment

Debi Prasad Bal and Badri Rath

Economic Analysis and Policy, 2014, vol. 44, issue 3, 292-300

Abstract: This paper examines the effect of public debt on economic growth in India between 1980 and 2011. Using the autoregressive distributed lag ARDL model, the paper traces a long-run equilibrium relationship between public debt and economic growth. The error correction model (ECM) results show that central government debt, total factor productivity (TFP) growth, and debt-services are affecting the economic growth in the short-run, and that the results are consistent with our a priori expectation. It is recommended that the government should follow the objective of inter-generational equity in fiscal management over the long term in order to stabilize debt-GDP ratio, particularly, after the global financial crisis.

Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:44:y:2014:i:3:p:292-300

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