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Public Expenditure and Growth: The Indian Case

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  • Antra Bhatt

    () (University of Chicago - Harris School of Public Policy.)

  • Claudio Sardoni

    () (Department of Social Sciences and Economics, Sapienza University of Rome)

Abstract

The paper deals with the analysis of the relationship between public spending and growth as well as the dynamics of the ratio public debt/GDP. We show that a composition of public spending that favours productive expenditures, i.e. those with a direct positive effect on the economy's rate of growth, can determine a situation in which the ratio of the public debt to GDP is stable, even though the government runs primary de cits. We test our theoretical results by considering the Indian case that, for a number of reasons, appears to be consistent with our theoretical hypotheses and assumptions. The results of the empirical analysis substantially support the idea that the dynamics of the economy as well as of the ratio public debt/GDP are crucially contingent on having a public sector that favours productive expenditures.

Suggested Citation

  • Antra Bhatt & Claudio Sardoni, 2016. "Public Expenditure and Growth: The Indian Case," Working Papers 7/16, Sapienza University of Rome, DISS.
  • Handle: RePEc:saq:wpaper:7/16
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    More about this item

    Keywords

    Public expenditure; Growth; Public debt.;

    JEL classification:

    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures
    • H60 - Public Economics - - National Budget, Deficit, and Debt - - - General

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