Analysing the effect of critical variables on the economic growth of a developing economy

A study of the impact of military expenditures on economic growth and development examines the differences in the results of previous studies which led to contradictory conclusions. The authors find that these differences are due to sample variations, specificational choices, and the different time periods examined. The data indicate that there is no consistent, statistically significant connection between military spending and economic growth. Augmentation of the models suggests that military expenditures neither help nor hurt economic growth to any significant extent. 2 tables.

After an extended period of indifferent economic growth, the Indian economy has been one of the fastest growing economies of the world since the 1980s. Both the timing of India's growth acceleration and the causes of India's economic growth remain contested. The paper argues that India's growth turnaround occurred in the late 1970s, and not in the 1980s or 1990s as commonly understood. Furthermore, most interpretations of India's growth acceleration have tended to privilege one dimension of the growth experience over another, and that an analysis of the causes of India's growth suggest a more complex story and that no single perspective can provide a convincing explanation of India's growth phenomenon.

India's economic growth performance can be better understood relative to other economies, such as those in East Asia. Over the 1970–2005 period, the purchasing power parity-adjusted gross domestic product (GDP) data from the Penn-World Tables 6.2 show that the average per capita GDP growth rate for nine emerging East Asian economies2 was 4.6%, and that per capita real income increased fivefold. China's performance was most remarkable, with per capita GDP increasing 7.0% per annum and per capita real income rising nearly 12-fold. In contrast, the average per capita GDP growth rate for India was 3.1% over the same period, and its per capita real income only rising by a factor of three. However, India has shown remarkable growth acceleration in the last decade. The average per capita GDP growth rate for India was 4.9% over the 1995–2005 period, close to the long-term average growth rate for the nine East Asian economies. The successful performance of the Indian economy over the past 10 years is attributed to the same favorable growth factors that contributed to East Asia's success. The standard growth model – such as an extended version of the neoclassical growth model – predicts “conditional convergence” of income, implying that an economy with a lower initial income relative to its own long-run (or steady-state) potential level of income grows faster than a higher-income economy over time. The convergence model implies that economies with more favorable factors influencing the long-run level of per capita income would grow faster than those with less favorable factors, when controlling for the level of initial income. The literature identifies a number of important growth factors: (i) investment, (ii) fertility, (iii) human capital (schooling and health), (iv) institutions and policy variables (quality of institutions and price stability), (v) openness (trade and direct investment), and (vi) the external environment (terms-of-trade shocks). A comparison of these growth factors between India and the average of nine East Asian economies or China indicates that, by and large, India had less favorable conditions for rapid growth in 1970s – based on relatively lower levels of investment, human capital, quality of institutions, and openness. For instance, the average schooling for the Indian adult population was only 1.9 years compared to 4.0 years for East Asia (Barro & Lee, 2001). But the Indian economy, nonetheless, has significantly advanced its human capital, quality of institutions, and trade and foreign direct investment (FDI) openness over the past decades, which in turn contributed to the remarkable growth acceleration. While India's growth acceleration is broadly explained by the improvement in the growth factors, there must be additional factors that are more specific to India. Ahluwalia (2008) addresses several important factors, such as reform of trade and FDI policies, government support for information technology development, and the role of services. Nevertheless, the author needs further elaboration in defining unique features of India's development strategy, perhaps by providing more detailed empirical evidence or international comparisons. For instance, further discussion of how India differed from other economies in policy reform, the globalization process, and service sector development would be helpful. While Ahluwalia emphasizes the role played by changes in policies and institutions in accelerating India's economic growth, it is not clear how deep or broad India's market reform and trade liberalization were in the 1980s and 1990s, and how much they have contributed to improving the growth in productivity. The role of services can be further elaborated by using growth accounting-type analysis of the source of growth in the Indian service sector, compared with that in East Asian economies. In terms of challenges ahead, the author rightly points out four major challenges: (i) the lack of infrastructure, (ii) a scarcity of skilled labor, (iii) a lagging agricultural sector, and (iv) the difficulties of macroeconomic management. The lack of infrastructure investment is often emphasized as a major impediment to sustaining India's high growth rate. Discussions of the economic, political, and institutional factors that have hindered long-term infrastructure investment in the Indian economy would be of interest. One can assume that there are other important challenges. The current levels of institutional quality and openness for India are still lower than those in East Asian economies. In order to sustain high growth, India must accelerate its efforts at reform and trade and investment liberalization. In addition, India needs to stimulate investment for upgrading technology and human capital. According to data from the United Nations Educational, Scientific and Cultural Organization, the number of patents granted per millions over the 2000–2005 period was only 1 for India, compared with 16 for China, and 1113 for South Korea. The secondary school enrollment ratio in 2005 was 54% for India, far below the 75% in China and Vietnam.

Indian Economy has witnessed tremendous growth during last two decades and many believe that liberalisation of external sector has helped India to rise at such a faster pace. Though there are several theoretical studies concerning the role of trade and financial openness in the income growth of an economy but there is acute lack of country specific empirical studies in this field. The present study attempts to examine the role of External Sector in India's Real GDP growth over the period of 2001–02 to 2014–15. The study concludes that exports have played the most important role in the growth of India's Real GDP. Imports, Foreign Direct Investment and Foreign Exchange Reserves have also played significantly positive role in India's growth. However, Foreign Portfolio Investment and Foreign Exchange Rate have played statistically insignificant role in India's Real GDP growth.

India has always held great economic promise. Its recent economic performance has captured the imagination of policymakers, financial markets, analysts, as well as the general public, and led to bold predictions of even greater things to come. But it is often said that India is a place of contradictions-in effect, an admission that India can excite and disappoint at the same time. This time is no different. While making bold projections of future achievement, many are also pointing to some of the growth constraints that India faces.The purpose of this article is to explore India's growth possibilities, but to do so using a credible yardstick against which its growth can be measured. Comparison with other countries is somewhat useful, but ultimately performance needs to be measured against India's own intrinsic capabilities. These capabilities are neatly summed up in a measure of the country's long-term potential growth rate, that is, the pace of growth that the economy can sustain over an indefinite period of time based on its own internal structural capacity.This article proposes such a measure. It then assesses India's past, present, and near-term future performance against this measure. In addition, India's technical capacity to sustain growth in excess of this pace over a protracted period is examined. Finally, the article examines in some detail two fundamental constraints that have the potential to frustrate India's growth aspirations and identifies the steps that will be necessary to overcome those hurdles.RECENT PERFORMANCE AND CYCLICAL OUTLOOKIndia's economic growth over the past 25 years has been quite impressive, with real growth averaging just under six percent. In 2003, however, India seemed to move up onto a significantly higher growth plane, posting growth of 8.3 percent and maintaining above eight percent growth ever since.Unsurprisingly, this has people extrapolating such performance long into the future, and the technical feasibility of such forecasts is the main subject of this article. At the outset, it must be acknowledged that India's recent growth acceleration came in the context of a global boom. Following the sharp slowdown in 2001, the world economy spent two years rebuilding momentum. Recovery was cemented in 2004, when global growth hit a blistering 5.3 percent, the strongest pace experienced in over 20 years. Since then, the pace of global growth has remained remarkably strong, racking up 4.9 percent in 2005, and on track to tip the scales at 5.1 percent in 2006. It would be surprising were India not to grow above-trend in such circumstances, which is the same as saying that it is doubtful that all of India's growth has been self-generated.What lies in the immediate future? At the time of this publication, the global economy is beginning to moderate, as a slowdown in U S consumer spending spreads from country to country. Softer global demand is expected to dampen demand for India's exports to some extent. However, the slowdown is bound to increase competitive pressures in global markets, which means that India's relatively low cost base will still be eagerly sought by globalizing companies. Further, the rapid growth of recent years is expected to translate into stronger domestic consumer spending, while ample business opportunities and improvements to the investment climate will combine to maintain robust investment spending growth. On balance, then, we see a solid cyclical outlook for India, sufficiently so that, fearing an onset of inflation, the central bank has raised short-term interest rates to the highest level in six years. Export Development Canada (EDC) is expecting India's growth to ease to 7.5 percent by the end of 2007, less than seen in the past three years but still well ahead of the longer-term average.INDIA'S THEORETICAL LONG-TERM GROWTH TRACKComparing India's recent growth track to its longer-term trend-or to the performance of other countries-is of limited use. …

India is one of the largest producer and consumer of electricity in the world owing to being one of the most populous country in the world signifying the demand for electricity is only set to grow further. World has witnessed an era of economic growth aided pertinently by electricity consumption and growing demand. With FDI indorsed downright to this vital utilities sector, it becomes imperative to cognize the relationship of Electricity Consumption, Economic Growth and FDI in India. In this study we investigate the causal direction of relationship among Foreign Direct Investment, Electricity Consumption and Economic Growth in India by using time-series data for the period 1986–2021 and employing econometric models. We find two uni-directional causalities running from Electricity Consumption to Economic Growth and Economic Growth to FDI and a bi-directional causality between Electricity Consumption and FDI. The results of the study provide a novel perspective for policy makers while formulating policies related to the power sector and foreign direct investments in India. The focus of Policy makers should be on enabling electricity service providers to offer best services to commercial and non-commercial participants as it aids in Economic growth of the country. For enhanced economic growth a country like India must have good and world-class infrastructure, efficient and effective regulatory mechanism equitable for all stakeholders, an improved living standard for people of all economic strata and a stable, healthy business friendly environment coupled with policy stability through stable government.

PurposeThis paper aims to present a review of the main features of India's economic growth and human development during nearly 50 years of India's planned development.Design/methodology/approachThe paper examines all major aspects of India's growth such as growth in net total national product and per capita product, changes in the production and occupational structure resulting from growth, changes in government revenue, infrastructure and social services, in income distribution and in poverty.FindingsAlthough the growth was uneven and low up to 1980, the country recorded a reasonable and steady improvement in most aspects of growth. Nevertheless the effects of growth have not produced better results in poverty alleviation.Originality/valueReviews the main features of India's economic growth and human development.

ABSTRACTThis study examines the role of regulatory quality toward the achievement of India's sustainable economic growth. India's economy is known for its policy structure that guarantees infrastructural development and ease of doing business (EOD). EOD is a mechanism for achieving a structural development that stems from the informal economy. This has impacted India's economy positively through the increase in the small and medium businesses and enterprises (SMEs) because of the increasing participation of private agents in building and developing the entire economy. Hence, this study chooses India's economy as a specimen to examine the possible contribution of the selected variables as they are considered prevailing economic factors in India's economic performance. The direct motive of this study is to test and compare the impact of regulatory quality on EOD and economic growth in pursuit of sustainable economic development. While the focus is on the role of regulatory quality on EOD and economic growth, other vital and prevailing economic factors (banking efficiency, FDI and labor force participation rate) in India are introduced to the modeling of this study. India's economy is known for its policy structure that guarantees infrastructural development and EOD. It will add to the growth and sustainability literature to investigate the economy with respect to the implication of regulatory quality and EOD toward achieving sustainable economic growth; hence, the need for this study. For insightful research into the objectives, this study adopts a two‐model approach centered on economic growth and EOD. The study adopts Augmented Least Squares (RALS), newly developed RALS‐EG (Engle and Granger test), fully modified ordinary least squares (FMOLS), and autoregressive distributed lag (ARDL) techniques for effective analysis and justification of the objectives of this study. The findings from this analysis revealed the importance of regulatory quality to both economic growth and EOD for India through a positive interaction with the two targeted variables (i.e., economic growth and EOD). EOD has a positive link with economic growth; bank efficiency has a positive link with both economic growth and EOD; FDI has a positive link between economic growth and EOD. This shows that FDI, bank efficiency, and EOD policies will foster sustainable economic growth for India.

This article aims to review India's long-term growth experience with a view to understanding the determinants of growth and the underlying political economy. The article looks specifically at the political economy of India's growth transformation from a low-growth environment (pre-1980s) to a rapid growth environment (post-1980s) and asks how sustainable the new transformation is. Following the introduction, the second section looks at the evolution of India's growth, and the third section reviews this growth experience in terms of its affect on employment and poverty. The fourth section briefly reviews the policy framework underlying this growth. The fifth section takes a political approach to understanding the process and politics of policy making in India. This framework is then applied in the next section to explain India's growth transformation. In the seventh section, the article looks at inclusiveness, which is arguably at the heart of the sustainability of economic reforms and long-term growth. Finally, some concluding remarks are provided.

This study investigated the impact of the people category of the Sustainable Development Goals (SDGs) on sustainable and conventional economic growth in Asia and the Pacific region, using a sample of 52 selected countries between 2000 and 2023. Employing two distinct models, model A1 for conventional economic growth and model A2 for sustainable economic growth, we explained the relationships between five SDG indicators: employed poverty rate, stunted children, expenditure on health, expenditure of education, and % of women MNAs on economic growth. This study employed a fixed-effect model and random-effect model to investigate the impact of the people category SDGs on traditional and sustainable economic growth. The comparative analysis of each SDG in both models revealed valuable insights. SDG 1, “employed poverty rate”, has a positive impact on economic growth in both models, while SDG 2, “percentage of stunted child”, did not significantly influence economic growth in either model. Moreover, SDG 3 and SDG 4, relating to “government’s health expenditure per capita” and “government’s Education education expenditure per capita”, respectively, exhibited a positive impact on traditional and sustainable economic growth. Conversely, SDG 5, “percentage of women members of national parliament”, displayed an insignificant impact on traditional and sustainable economic growth models. In conclusion, this study suggests that policymakers should prioritize targeted interventions to alleviate employed poverty, enhance healthcare, and boost education spending. Moreover, promoting women’s representation in national parliaments should be approached with context-specific strategies to maximize its impact on economic growth.

Introduction After three decades of generally low growth, the Indian economy experienced a growth acceleration that started in the 1980s. Growth in gross domestic product per capita, only 1.4 per cent annually from the 1950s through 1970s, accelerated steadily from average annual growth rates of 3.5 per cent in the 1980s, to 3.7 per cent in the 1990s, and 5.5 per cent in the new millennium. While a slowdown in growth since early 2011 has led to a vigorous debate about the Indian economy's ‘growth potential’ and its ability to sustain growth rates of around 6 per cent and higher (in per capita terms) for long stretches of time, a more enduring debate has been about the inclusiveness of India's growth. What has been the impact of India's growth on poverty? What factors explain the strength of the growth–poverty relationship in India? What, if anything, can be done to make the growth process more effective in reducing poverty? This chapter examines these questions through the lens of structural transformation – i.e. changes in an economy's structure of output and employment. Such an approach is important since, although there are many causes of poverty, ultimately the poor are poor because the work they do earns them so little. Consequently, understanding the relationships between growth, changes in the structure of output and employment, and poverty reduction is crucial for policymaking. The chapter provides a snapshot of the empirical relationship between economic growth and poverty reduction in India since the 1980s. (A detailed discussion of data and variable construction is provided in the Appendix.) The snapshot indicates that while growth in India has been associated with an unambiguous decline in poverty, the extent of poverty reduction in India has been considerably less than in other high-growth economies in Asia. The next section then considers the proximate factors that can explain the relatively weak link between growth and poverty reduction in India.

India’s sustained and rapid economic growth offers an opportunity to lift millions out of poverty. But this may come at a steep cost to its environment and natural resources. This insightful book analyses India’s growth from an economic perspective and assesses whether India can grow in a "green" and sustainable manner. Three key issues are addressed.  The first is the physical and monetary costs and losses of environmental health and natural resources driven by economic growth. The authors undertake a monetary valuation and quantification of environmental damage, using techniques that have been developed to better understand and quantify preferences and values of individuals and communities in the context of environmental quality, conservation of natural resources, and environmental health risks. The second part estimates the value of ecosystem services from the major biomes in India using state-of-the art methods with a view to preserving them for the future. The third section provides a menu of policy instruments to explore trade-offs between economic growth and environmental sustainability using a Computable General Equilibrium approach with particular attention to air pollution.  The conclusions focus on the way forward in terms of policies, measures and instruments as India has to balance the twin challenges of maintaining economic prosperity while managing its environmental resources.

Economic development in the traditional economy is only measured using GDP growth, both in aggregate and per capita. Further increases in GDP will create the necessary conditions for a more equitable distribution of economic and social growth results. However, orientation only to economic growth in building national economy has drawn considerable criticisms. From this point, new economic views have emerged. According to Todaro (2006), the main objective of the new views is GDP growth with simultaneous improvements in poverty alleviation and inequality reduction. High economic growth is often followed by high poverty. Therefore, sustainable economic growth, known as the inclusive growth, is required. In Indonesia, there are still provinces that have not achieved a good level of inclusiveness, one of which is East Java. The rate of its economic growth is very high, but the number of poor people in the area is above the national average. This study aims to analyze the effect of labor and human capital on economic growth in poverty alleviation in East Java using the case study method of 38 regencies and cities during the 2011-2020 period. The panel data was analyzed simultaneously in E-views. This study finds that labor does not affect economic growth, but human capital described by health and education affects economic growth. Further, negative economic growth positively and significantly affect poverty, which means that increasing human capital has a good impact on economic growth and will further reduce poverty.

This article looks at issues concerning environmental sustainability and economic growth in India using both micro- and macro-level evidence. The article highlights two environmental challenges of India's rapid growth: urbanization and forest cover change. With respect to urbanization, the article suggests that there is a role for economic instruments in reducing air pollution related to increasing urbanization. With respect to forest cover, it notes that whereas overall forest cover has marginally increased in India, in the bulk of forests, which are moderately dense, there is a decline. The article then asks if it is reasonable to expect forest dependence to decrease as India grows and rural wealth increases. From a broader perspective, it argues that there exist crucial environmental thresholds to India's growth strategy. The article ends with a discussion about governance issues surrounding Indian environment policy to make growth more environmentally sustainable.

The Indonesian government policy in encouraging sustainable economic growth to reduce unemployment, poverty and inequality is threatened to fail, because economic growth does not reach targets and is not of quality. The purpose of this research is to explain the four pillars of growth and development namely; human capital, social capital, institutional economics and entrepreneurship as the main drivers of quality and sustainable economic growth. This research method used primary data on entrepreneurship and SMEs in the provinces of Central Java and Yogyakarta. The correlational form of recursive model path analysis was used as analytical method. The research results show the very strong role of human capital as the main key in driving economic growth both directly and indirectly. The existence of human capital and social capital will further encourage new economic institutions, furthermore new economic institutions will encourage the competitiveness of productive entrepreneurship and high, quality, and sustainable regional economic growth. The policy implication is that high, quality, and fundamentally sustainable economic growth must be built on the four main pillars basis namely; human capital, social capital, institutional and entrepreneurship in order to be more successful in reducing development problems; unemployment, poverty and income inequality.