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Impact of Debt on Short-Run and Long-Run Growth: Empirical Evidence from India

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Abstract

This study tries to analyse the impact of internal and external debt on economic growth in India during the period 1980–2014. Employing ARDL technique of co-integration, the study finds the negative impact of both internal as well as external debt on Indian economy in long run, thereby controlling for other variables namely trade openness, investment and population growth. The results of the error correction model (ECM) show that internal debt, external debt, investment, population growth and trade openness affect the economic growth both in short and long run. The relationship between debt (both internal and external) and economic growth turns out to be negative in long run. However, the short-run impact of internal debt is fluctuating; whereas external debt is negatively related to growth.

Keywords

Economic growth Internal debt External debt ARDL bound test approach India 

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© Springer Nature Singapore Pte Ltd. 2017

Authors and Affiliations

  1. 1.EconomicsMysore UniversityBangaloreIndia

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