TITLE:
General Government Expenditure and Economic Growth in India: 1980-81 to 2015-16
AUTHORS:
S. V. Seshaiah, T. Koti Reddy, I. R. S. Sarma
KEYWORDS:
General Government Expenditure, GDP Growth, Development Expenditure, Non-Development Expenditure, FDI
JOURNAL NAME:
Theoretical Economics Letters,
Vol.8 No.4,
March
12,
2018
ABSTRACT: The objective of this paper is to investigate the
impact of General government expenditure on GDP growth in India for the period
1980-81 to 2015-16 by using Simple Regression Analysis. FDI Growth Rate and two
dummy variables i.e., one for
financial crisis 2008 and another one for reform period 1991 have been used.
All the explanatory variables are positively and significantly affecting the
GDP growth rate except FDI Growth rate. The crisis period dummy shows that in post
2008 there was a negative and significant impact of general government
expenditure on GDP growth rate. The reform period dummy shows that in post 1991
there was a positive and significant impact of general government expenditure
on GDP growth rate. We have tested the multicollinearity test, which indicates
presence of no serial correlation among the explanatory variables. We have also
tested the autocorrelation, using the Breutch Pagan test, the results of which
indicate the presence of no autocorrelation. The study further reveals that
Non-development expenditures continue to be a large proportion of the general
government expenditure. Expenditure management has to lay more emphasis on the
design of the programme and the exploration of the alternatives. The authors
suggest that there is a need to raise the development expenditure on infrastructure
to achieve more economic growth. The study highlights that in addition to
fiscal correction and consolidation, fiscal reform at the state level should
focus on fixing ceilings on guarantees, taking into account the default and
development probability, nature of guarantees issued, pricing of services
rendered by the project for which guarantees are extended.