Abstract
The paper tries to investigate the impact of external debt on time series quarterly data spanning from 2007:02-2017:03, on various macro-economic variables and to study the existence of relationship and causality between them in India. In order to derive the results various econometric tools such as ADF unit root test, Granger Causality test and Regression Analysis have been employed in the study. The null hypothesis for the study were that External debt does not granger cause various macro-economic variables which was accepted at 5% level of significance and External debt does not have statistically significant relationship with various macro-economic variables, which was accepted in case of all variables except Inflation. Thus, it was found that no granger causal relationship was found between external debt and macro-economic variables and vice-versa. There exists no statistically significant relationship between external debt and RGDP, G-Revenue, Export, and G-Spending and they have almost no impact on the external debt. However, in case of Inflation there exists a positive statistically significant relationship that has 10.27% impact on external debt. It was concluded that External debt does not play a significant role in the economic development of India for the period of the study.
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