DEBT AND ECONOMIC SITUATIONS – THE DETAIL STUDY OF INDIA

Authors

Mr.Jakku Srikanth,
Research Scholar, OPJS University, Churu, Rajasthan.
Dr.Shrawan Kumar Saini
Research Scholar, Department of Computer Science, Shri SS Shasun Jain College for Women, Chennai, India.

Abstract

This study examines the impact of public debt on economic growth by taking other control variables like institutional credit and commercial electricity consumption. It uses panel data of 14 major (non-special category) States in India for the period 1980-81 to 2013-14. After establishing long-run relationship among the variables, panel long-run estimates are drawn using both DOLS and FMOLS methods. Results from both the methods suggest positive and statistically significant impact of all the variables on economic growth. To test causal relationships among the variables, causality test is employed. The results indicate existence of bi-directional causality between public debt and economic growth. One way causality is revealed from economic growth to electricity consumption and from economic growth to credit. The policy implication is that, the sub-national governments in India should not think public debt as a burden but expand it for productive spending to reap higher economic growth.