Key Fiscal Drivers of Indian Economy: Analysing the Causality and Growth Rates of Fiscal Components and Their Direct Impact on India’s GDP

Abstract

This research article presents an econometric analysis examining fiscal components of India and their influence on the gross domestic product (GDP). The study’s objectives encompass measuring growth rates of fiscal components and GDP, determining causality between them and assessing the specific impact of government receipt and expenditure components on GDP growth. Methodologically, the analysis employs various statistical techniques, including year-over-year and Compound Annual Growth Rate calculations, descriptive statistics, Pearson correlation coefficient, Augmented Dickey–Fuller test, Granger causality test and regression analysis. Findings indicate that interest payments and capital outlay positively affect GDP, while subsidies and capital receipts have negative impacts. Additionally, lagged GDP demonstrates a significant positive relationship with current GDP. The regression model exhibits substantial explanatory power, though positive autocorrelation in residuals suggests scope for improvement. Implications extend to policymakers and investors, offering empirical insights for formulating effective fiscal policies and making informed investment decisions.