Public Sector Spending and Economic Growth in India

Jeevan Khundrakpam

MPRA Paper from University Library of Munich, Germany

Abstract: The paper analyses the dynamic interaction between the public sector expenditure and national income in India for the period 1960-61 to 1996-97. It finds a stable long-run relationship between public sector expenditure and national income in India, with the causality running strictly from the former to the latter. The study also indicates that long-run positive impact of public sector expenditure on national income would turn adverse if the growth of the former is excessive. In the short-run, however, there is a trade-off between growth in public sector expenditure and income. Thus, though national income growth in India seems to be investment or demand led, there is the need for maintaining a proper balance between public sector expenditure and investment for economic growth.

Keywords: Public Expenditure; National Income; Economic Growth (search for similar items in EconPapers)
JEL-codes: C22 E62 H50 (search for similar items in EconPapers)
Date: 2003, Revised 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Published in RBI Occasional Papers No.1, 2 & 3.22(2003): pp. 1-17

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