Institute for Social and Economic Change

Established in 1972 by Professor V K R V Rao, ISEC is an All-India Institute for Interdisciplinary Research and Training in the Social Sciences

Savings and Economic Growth in India: The Long-Run Nexus – isec

Savings and Economic Growth in India: The Long-Run Nexus

Abstract

In this paper, the causal nexus between savings and economic growth in India is investigated within the framework of causality, co-integration and error correction in the presence of a structural break, using annual data from 1950-1951 to 1998-1999. Identifying the structural breaks in both savings and economic growth in different time period, this study finds support for the long-run equilibrium between savings and economic growth. Further, the study reveals that there is a unidirectional causality from economic growth to savings, thereby repudiating the classical view that savings has been the engine of economic growth.

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