Does Financial Development Promote Economic Growth in India?

Authors

  • Sarbapriya Ray ASSISTANT PROFESSOR, SHYAMPUR SIDDHESWARI MAHAVIDYALAYA,UNIVERSITY OF CALCUTTA,INDIA &GUEST FACULTY, DEPT. OF COMMERCE,UNIVERSITY OF CALCUTTA, INDIA

Keywords:

Keywords, Financial development, economic growth, India, granger causality, unit root test.

Abstract

The association between economic growth and financial development has been a wide-ranging subject of experiential research. The practical evidence suggests that there is a significant positive relationship between financial development and economic growth. However, these findings do not establish the direction of causality between the two. The question, therefore, is whether financial development causes economic growth or vice versa.     In view of the above discussion, the article attempts to explore the relationship between financial development and economic growth in Indian context using granger causality test for the period, 1990-91 to 2010-11. The estimated results confirmed that financial development, measured by ratio of gross domestic capital formation to GDP , ratio of gross domestic savings to GDP, etc   are non-stationary at the level data and  at the first differences when using ADF test but attains stationary at first difference while using PP test. The Granger- causality test finally confirmed that financial development granger causes economic growth in India between time span of 1990-91 to 2010-11. Therefore, financial development in India has a stronger role in the growth process. The implication of the above is that India is in a better state of affairs as far as the growth potential is concerned by way of a more efficient financial system that is likely to evolve in the upcoming years to suit the changing global pursuit.

 

Author Biography

Sarbapriya Ray, ASSISTANT PROFESSOR, SHYAMPUR SIDDHESWARI MAHAVIDYALAYA,UNIVERSITY OF CALCUTTA,INDIA &GUEST FACULTY, DEPT. OF COMMERCE,UNIVERSITY OF CALCUTTA, INDIA

Biographical note: Dr.Sarbapriya Ray is an Assistant Professor in Commerce at Shyampur Siddheswari Mahavidyalaya (College), University of  Calcutta, West Bengal, India. He received his undergraduate and Master degree from Calcutta University. He stood third in the first class in M.Com (Taxation and Finance). After he received his M.Phil from Calcutta University and Ph.D from Vidyasagar University MBA(Finance) from Sikkim Manipal University, India, he is now further doing his research job in the field of corporate finance, industrial productivity and capacity utilisation. He has been teaching economics, financial management, accounting, etc. since 2001 in the college. He has published several articles in reputed national as well as international journals and presented papers in national and international conferences.

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Published

2013-07-01

How to Cite

Ray, S. (2013). Does Financial Development Promote Economic Growth in India?. International Journal of Economic Practices and Theories, 3(3), 140-151. Retrieved from http://ijept.eu/index.php/ijept/article/view/Does_Financial_Development_Promote_Economic_Growth_in_India

Issue

Vol. 3 No. 3 (2013)

Section

Articles

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