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Impact of sectoral bank credit on economic growth in India - an empirical analysis

Author

Listed:
  • Mehak Gupta
  • Sonali Aggarwal

Abstract

The aim of the present study is on empirically testing the impact of sectoral credit amongst Indian sectors on economic growth. This was achieved by studying the relation between sectoral credit, liquidity and economic growth. The results of the study prove that the sectoral credit was seem to be working on the growth of Indian markets in the long run. On the contrary, it was found that in the short run not only credit was an important factor which impacted the growth of the economy but increase in broad money liquidity, i.e., M3 also impacted sectoral credit which was in favour of our research hypothesis. Similarly, it was also found that past volatility change in terms of different sectors growth was impacting current economic growth again showing the applicability of the concept of increase in sectoral credit and liquidity impacts the economic growth in the Indian markets. However, the external shocks in the variables affect the stable equilibrium in the short run while these stability in the markets were maintained in the long period of time.

Suggested Citation

  • Mehak Gupta & Sonali Aggarwal, 2022. "Impact of sectoral bank credit on economic growth in India - an empirical analysis," International Journal of Economics and Accounting, Inderscience Enterprises Ltd, vol. 11(1), pages 20-41.
    • Handle: RePEc:ids:ijecac:v:11:y:2022:i:1:p:20-41
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    More about this item

    Keywords

    sectoral credit; economic growth; vector error correction model; VECM; impulse response; M3; ADF stationarity test; regression.;
    All these keywords.

    JEL classification:

    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising

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