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Savings, Investment and Growth in India

Author

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  • Reetu Verma

    (Reetu Verma is in the Economics Discipline, University of Wollongong, Northfields Avenue, Wollongong NSW 2500, Australia. Email: reetu@uow.edu.au)

Abstract

This article considers savings, investment and economic growth for India using annual time series data for the period 1950/51 to 2003/04. The analysis uses Perron's innovational outlier model to conduct unit root tests which endogenously determines structural break. The empirical results show that the null hypothesis of unit root cannot be rejected for gross domestic product. Moreover, the results show that the most significant structural breaks over the last five decades correspond to the wars, regime change and the nationalization of the banks. The study also utilizes the autoregressive distributed lag (ARDL) approach to test for cointegration. Whilst the results support the existing evidence for the Carroll-Weil hypothesis, the study also finds that saving unambiguously determines investment in both the short and long runs. No evidence is found to support the commonly accepted growth models in India, that investment is the engine of economic growth.

Suggested Citation

  • Reetu Verma, 2007. "Savings, Investment and Growth in India," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 8(1), pages 87-98, January.
    • Handle: RePEc:sae:soueco:v:8:y:2007:i:1:p:87-98
    DOI: 10.1177/139156140600800105
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    References listed on IDEAS

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    Cited by:

    1. Oksana Zaporozhets, 2014. "Becoming A Subway User: Managing Affects And Experiences," HSE Working papers WP BRP 52/HUM/2014, National Research University Higher School of Economics.
    2. Inder Sekhar Yadav & Phanindra Goyari & R. K. Mishra, 2018. "Saving, Investment and Growth in India: Evidence from Cointegration and Causality Tests," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 1, pages 55-68, March.
    3. Philippe Ferreira, 2012. "Déficits extérieurs et déclin de l'épargne intérieure sont des obstacles au financement du développement de l'Inde," Revue d'économie financière, Association d'économie financière, vol. 0(3), pages 115-136.
    4. Yilmaz BAYAR, 2014. "Savings, Foreign Direct Investment Inflows and Economic Growth in Emerging Asian Economies," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(8), pages 1106-1122, August.

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    More about this item

    Keywords

    JEL: F43; JEL: E21; JEL: E22; JEL: C22; JEL: C52; Structural break; ARDL model; Savings; Investment; Economic growth;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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