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

Author

Listed:
  • 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)

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

Suggested Citation

  • Ranjan Kumar Mohanty & Sidheswar Panda & Biswabhusan Bhuyan, 2020. "Does Defence Spending and its Composition Affect Economic Growth in India?," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 14(1), pages 62-85, February.
    • Handle: RePEc:sae:mareco:v:14:y:2020:i:1:p:62-85
    DOI: 10.1177/0973801019886486
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    References listed on IDEAS

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    Cited by:

    1. Sharma, Sapana & Karol, Sanju, 2022. "India’s Defence Expenditure and Economic Growth," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 75(1), pages 51-74.
    2. Lukasz Wiktor Olejnik, 2023. "Economic growth and military expenditure in the countries on NATOʼs Eastern flank in 1999–2021," Bank of Estonia Working Papers wp2023-2, Bank of Estonia, revised 09 May 2023.

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    More about this item

    Keywords

    Defence expenditure; Economic growth; ARDL approach; India;
    All these keywords.

    JEL classification:

    • H56 - Public Economics - - National Government Expenditures and Related Policies - - - National Security and War
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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