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Nexus Between Savings, Investment And Economic Growth In India

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  • Sachin N. Mehta
  • Gaurang D. Rami

Abstract

This paper examines the relationship between gross domestic product (GDP), gross domestic savings (GDS) and gross domestic investment (GDI) for India during the period 1951- 2012. Vector Error Correction Method and co-integration techniques are used for analyzing the relationship between gross domestic product (GDP), gross domestic savings (GDS) and gross domestic investment (GDI) in this study. The Johansen co-integration test indicates gross domestic product (GDP), gross domestic savings (GDS) and gross domestic investment (GDI) are co-integrated, and that a long-run equilibrium exists between them. The Vector Error Correction test reveals that there is unidirectional causality running from gross domestic savings (GDS) and gross domestic investment (GDI) to gross domestic product (GDP) in the short run as well as in the long run. It means gross domestic savings (GDS) and gross domestic investment (GDI) lead to gross domestic product (GDP) but gross domestic product (GDP) does not lead to gross domestic savings (GDS) and gross domestic investment (GDI). Key words: Economic Growth, Saving, Investment, Causality, Co-Integration. VECM

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  • Sachin N. Mehta & Gaurang D. Rami, 2014. "Nexus Between Savings, Investment And Economic Growth In India," Working papers 2014-12-12, Voice of Research.
    • Handle: RePEc:vor:issues:2014-12-12
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    1. Ramesh Mohan, 2006. "Causal Relationship Between Savings And Economic Growth In Countries With Different Income Levels," Economics Bulletin, AccessEcon, vol. 5(3), pages 1-12.
    2. Pradeep Agrawal, 2001. "The relation between savings and growth: cointegration and causality evidence from Asia," Applied Economics, Taylor & Francis Journals, vol. 33(4), pages 499-513.
    3. Sinha, Dipendra, 1996. "Saving and Economic Growth in India," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 49(4), pages 637-647.
    4. Singh, Prakash & Pandey, Manoj K., 2009. "Structural break, stability and demand for money in India," MPRA Paper 15425, University Library of Munich, Germany.
    5. Jangili, Ramesh, 2011. "Causal relationship between saving, investment and economic growth for India – what does the relation imply?," MPRA Paper 40002, University Library of Munich, Germany.
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