Accounting for the Efficacy of Defense Expenditure to Economic Growth in India

Abstract

In present era, to preserve a security and sovereignty of the country, it is necessary to spend a significant amount of national income on defense sector. This study instigates the increasing demand of defense expenditure and also to study the growth performance of India’s with special focus on the efficacy of defense expenditure on economic growth. This study adopts an Autoregressive Distributed Lag and Toda-Yamamoto granger non-causality model during the period 1961 to 2017. Overall, the results suggest that India is affected both internally and externally issues and also verifies that defense expenditure and economic growth are positively and significantly affect to each other in both period short run and long run. It advocates that increment in defense expenditure by 1% in current period will help to boost economic growth by 1.15 per cent in the long run. For to the directional relationship the Toda-Yamamoto Granger causality outcomes suggest that causality running form DE to GDP which means shows the unidirectional relationship. Accordingly, this designates that defense sector has a crucial efficacy in the development of Indian economies.

Keywords

• defense expenditure
• gross domestic product
• demand, ardl, co-integration, toda-yamamoto granger causality, india