Empirical analysis explores the relationship between public spending and economic growth in India, highlighting causal connections.
In this research paper, we test the connections between public spending and economic growth in India by employing annual data from 1981-82 till 2019-20. We examine if there is a long-run relation between public spending and economic growth and then we try to understand the direction of causality between them by using six versions of Wagner's law along with an augmented version. The paper employs tests of stationarity, cointegration, granger causality and the vector error correction model for the analysis in all the versions. Results from these tests show that only some versions give support to validate Wagners' law in India over the sample period studied.
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Wadhwa et al. (2024) studied this question.
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