India’s Defence Expenditure and Economic Growth

Sapana Sharma and Sanju Karol
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Sapana Sharma: Department of Economics, Himachal Pradesh University, Shimla, India
Sanju Karol: ICDEOL, Himachal Pradesh University, Shimla, India

Economia Internazionale / International Economics, 2022, vol. 75, issue 1, 51-74

Abstract: This study investigates the relationship between defense expenditure and economic growth during 1961-62 to 2019-20 in India. For this purpose, this study uses the ARDL bounds test for cointegration and the Toda-Yamamoto approach to Granger causality to assess linkages between defense expenditure and economic growth. The analysis in this paper suggests that there is a long-run relationships between defense expenditure and economic growth. Furthermore, the causality results show that there is only unidirectional relationship between variables and running from defense expenditure to GDP growth. It is concluded that defense expenditure is a vital determinant for GDP growth in India. Defense expenditure affects economic growth through various channels and defense expenditure is, therefore, a key tool available to policy makers. Spesa militare e crescita economica in India Questo articolo esamina la relazione tra la spesa militare e la crescita economica in India nel periodo dal 1961-62 al 2019-20. A questo scopo viene utilizzato l’ARDL bound test di cointegrazione e l’approccio Toda-Yamamoto di Granger causalità per valutare i legami tra la spesa militare e la crescita economica. L’analisi effettuata suggerisce che c’è una relazione di lungo periodo tra queste variabili e i risultati di causalità mostrano che tale relazione è unicamente unidirezionale e va dalla spesa militare alla crescita del PIL. La conclusione è che la spesa militare è una determinante essenziale per la crescita del PIL in India. Tale spesa influisce sulla crescita tramite diversi canali e la spesa militare rappresenta pertanto un utile strumento a disposizione dei governanti.

Keywords: Defense Expenditure; Economic Growth; Gross Domestic Product; India; Cointegration; Causality (search for similar items in EconPapers)
JEL-codes: C01 C33 H50 O30 O38 (search for similar items in EconPapers)
Date: 2022
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