Impact of Development Expenditure on Economic Growth in Haryana State : An Empirical Analysis
DOI:
https://doi.org/10.17010/aijer/2023/v12i3/173260Keywords:
Development Expenditure
, Economic Growth, Vector Error Correction Model (VECM), Granger Causality.JEL Classification Codes
, C32, C50, H50, O40, R50Paper Submission Date
, March 10, 2023, Paper sent back for Revision, August 15, Paper Acceptance Date, August 25, 2023Abstract
Purpose : Public expenditure was traditionally focused on maintaining law and order in society. However, in the last few decades, public expenditure has become a significant instrument of fiscal policy used by the government to boost economic activities. The present paper has evaluated the impact of development expenditure and its components on economic growth in the Haryana state of India.
Methodology : The secondary data used in this study spans the years 1990–1991 to 2019–2020. The impact of development spending on economic growth in Haryana was investigated in this study using the Granger causality test, vector error correction model, and Johansen co-integration technique.
Findings : Long-term results indicate that state development spending favors economic growth, confirming the Keynesian theory. Nonetheless, it is determined that non-development spending has a negligible negative impact on economic growth. Development spending hinders economic growth in the near term. Additionally, it was discovered that spending on social services has a short-term favorable impact on economic growth. On the other hand, spending on non-development and economic services had a negative effect.
Practical Implications : The report recommended that the administration and legislators need to examine how public funds are allocated regularly and implement any necessary adjustments for improved expenditure management.
Originality : The current paper evaluated the impact of development expenditure on the economic growth of Haryana. This is the first study that analyzed the impact of components of development expenditure on economic growth in the state.
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