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Corresponding Author:
Sapana Sharma, Department of Economics, Himachal Pradesh University, Shimla, India

Coauthors:
Sanju Karol, ICDEOL, Himachal Pradesh University, Shimla, India

India's Defense Expenditure and Economic Growth

Volume 75 - Issue 1, February 2022
(pp. 51-74)
JEL classification: C01, C33, O30, O38, H50
Keywords: Defense Expenditure, Economic Growth, Gross Domestic Product, India, Cointegration, Causality

Abstract

This study investigates the relationship between defense expenditure and economic growth during 1961-62 to 2019-20 in India. For this purpose, this study uses the ARDL bounds test for cointegration and the Toda-Yamamoto approach to Granger causality to assess linkages between defense expenditure and economic growth. The analysis in this paper suggests that there is a long-run relationships between defense expenditure and economic growth. Furthermore, the causality results show that there is only unidirectional relationship between variables and running from defense expenditure to GDP growth. It is concluded that defense expenditure is a vital determinant for GDP growth in India. Defense expenditure affects economic growth through various channels and defense expenditure is, therefore, a key tool available to policy makers.


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