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Government Size and Economic Growth:An Investigation of Causality in India

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Author Info
Ramesh Chandra (Department of Economics, University of Strathclyde Sir William Duncan Building, 130 Rottenrow Glasgow G4 OGE, UK)

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Abstract

The development literature of the post-war period justified governmental intervention in economic development on a number of grounds such as market failure, trade pessimism and further impoverishment of poor countries through trade. In line with the prevalent mainstream thinking, the Indian government implemented an inward-looking model of growth, and tried to engineer an economic take-off through its direct and indirect involvement. The objective of this paper is to examine whether the government actually succeeded in acting as an engine of growth in India. Taking 1950-1996 as the period of study, this paper finds that a large government size (in terms of investment and total expenditures) has a negative influence on growth in the short term although there is no long-term relationship between government size and GDP.

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Publisher Info
Article provided by Department of Economics, Delhi School of Economics in its journal Indian Economic Review.

Volume (Year): 39 (2004)
Issue (Month): 2 (july)
Pages: 295-314
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Handle: RePEc:dse:indecr:v:39:y:2004:i:2:p:295-314

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Related research
Keywords: Government Size; Public Expenditure; Growth; Causality; India;

Find related papers by JEL classification:
E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
O23 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development
O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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This page was last updated on 2009-12-21.

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