Does Defence Spending and its Composition Affect Economic Growth in India?

Ranjan Kumar Mohanty, Sidheswar Panda and Biswabhusan Bhuyan
Additional contact information
Ranjan Kumar Mohanty: Ranjan Kumar Mohanty (Corresponding author) is at the National Institute of Public Finance and Policy (NIPFP), New Delhi, India.
Sidheswar Panda: Sidheswar Panda is at the Indian Institute of Technology Indore, Madhya Pradesh, India, e-mail: sidheswareco@gmail.com
Biswabhusan Bhuyan: Biswabhusan Bhuyan is at the Indian Institute of Technology Kharagpur, West Bengal, India, e-mail: biswabhusanbhuyan2@gmail.com

Margin: The Journal of Applied Economic Research, 2020, vol. 14, issue 1, 62-85

Abstract: The article investigates the relationship between economic growth and defence expenditure in India from 1970–1971 to 2015–2016. By using the Autoregressive Distributed Lag and Toda-Yamamoto Granger Causality approach, the empirical results find that defence expenditure has a positive and significant impact on economic growth in India. The study also finds that capital defence expenditure has a positive and significant effect on economic growth, while revenue defence expenditure does not have any substantial influence on it. The causality test confirms a bidirectional causality between defence expenditure and economic growth, while it finds a unidirectional causality that runs from capital defence expenditure to economic growth. The study suggests that defence spending, especially capital defence spending, should be encouraged to enhance economic growth in the Indian economy. JEL Classification: H56, O40, C32

Keywords: Defence expenditure; Economic growth; ARDL approach; India (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:sae:mareco:v:14:y:2020:i:1:p:62-85

DOI: 10.1177/0973801019886486

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