"EXPLORING THE DYNAMICS BETWEEN FISCAL POLICY AND ECONOMIC GROWTH IN INDIA: AN ARDL APPROACH OVER THE PERIOD 1991-2024"

Abstract

This study examines the relationship between fiscal policy and economic growth in India over the period 1991 to 2024, using secondary data collected from reliable sources including the EPWRF, RBI State Finance, Handbooks of Indian Statistics, and RBI Reports. The primary aim is to understand how fiscal variables such as government expenditure, revenue, outstanding debt, and fiscal deficit influence the Gross Domestic Product (GDP) at constant prices. The study focuses on the GDP data based on the 2011-12 base year prices, while all other variables, including Total Expenditure, Total Receipts, Total Outstanding, and Fiscal Deficit, are expressed in crore. The data series is transformed into logarithmic form to address potential scale differences and ensure a more accurate modelling of the relationships. Using the Autoregressive Distributed Lag (ARDL) model, the study explores both short-term and long-term dynamics between these fiscal variables and economic growth.
The findings suggest that government debt has a significant positive effect on economic growth, while fiscal expenditure and revenue do not show strong immediate impacts on GDP. Additionally, fiscal deficits and government receipts exhibit interrelated dynamics, with a notable influence on India’s economic performance over time. The study provides valuable insights into the role of fiscal policies in shaping India’s economic trajectory over the last few decades.