Growth Determinants of India in Post-economic Reform Period

Abstract

The economic reforms of the 90s had furnished two props liberalization and globalization, which later changed the growth strategies of the Indian economy. Contextually, the present study made an effort to comprehend the growth rate prevailed in the gross domestic product, gross fixed capital formation, exports and imports via compound growth rate from 1990 to 2017. Further, the study also investigated how well the growth determinants were cointegrated in the post-1990 era. Therefore, a restricted vector autoregressive model was applied. The compound growth rate results articulated that the Indian economy enjoyed a high growth in exports and imports in the post-liberalized era. The findings of the VAR model state that gross fixed capital formation and Export's had a positive and significant impact on India's gross domestic product in the long run. On the contrary, imports had a negative and significant impact, implying that an increase in imports will lead to a decline in India's gross domestic product, which is a well-observed fact in the economic domain. The study observed one-way causality from Gross Domestic Product and Exports. Additionally, a bidirectional causal relationship was observed among export and gross fixed capital formation. The policy perception that the study suggested that government should utilize gross fixed capital formation in those sectors which have preferably more social outreach and potential to strengthen the exports and at the same time also minimize country dependence on imports.