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Government Spending With Public Debt, Economic Growth And Fiscal Balance: Evidences From India

Author

Listed:
  • JOYDEB SASMAL

    (DEPARTMENT OF ECONOMICS, VIDYASAGAR UNIVERSITY)

  • RITWIK SASMAL

    (DEPARTMENT OF ECONOMICS, UNIVERSITY OF CONSTANZ)

Abstract

This paper has examined the impact of public expenditure on economic growth and viability of fiscal policy when the public expenditure is financed by public borrowing. The ratio of gross fiscal deficit to net national product and the ratio of gross fiscal deficit to total expenditure have been considered as indicators of solvency in fiscal balance. The study is based on theoretical framework and results of econometric analyses. The basic argument of this paper is that if public expenditure is financed by government borrowing, but expenditure fails to generate sufficient growth in income, it will be difficult to repay the loan and fiscal balance will deteriorate. As a result, the viability of the fiscal policy will be under question. The data in the Indian context show that revenue expenditure has increased significantly over time. Since revenue expenditure includes many non-developmental and less productive components, it may not be helpful for economic growth. The results of time series analysis show that the ratio of gross fiscal deficit to net national product (NNP) has increased with increase in total expenditure of the government indicating non-sustainability of fiscal balance. The study also shows that private capital has significant positive impact on NNP but the effect of fiscal deficit on economic growth is not clear.

Suggested Citation

  • Joydeb Sasmal & Ritwik Sasmal, 2017. "Government Spending With Public Debt, Economic Growth And Fiscal Balance: Evidences From India," Proceedings of International Academic Conferences 5908111, International Institute of Social and Economic Sciences.
  • Handle: RePEc:sek:iacpro:5908111
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    References listed on IDEAS

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    More about this item

    Keywords

    government; budget; revenue expenditure; public debt; economic growth; fiscal deficit; interest payment; fiscal balance; sustainability;
    All these keywords.

    JEL classification:

    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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