Relationship between Industrial Expenditure and Industrial Growth Rate: The Case of India

By : Koti Reddy Tamma

Page No: 100-106

Abstract
The study aims at testing the relationship between industrial expenditure and industrial growth rate for the period 1950–51 to 2013–14. The study applies Johansen Co-integration and Vector Error Correction Model to test the long-term relationship between industrial expenditure and industrial growth rate. The National Accounts Statistics (NAS) was used for the data on private investment for the analysis of this study. The study reveals that during the post-reform period, the rate of capital formation had decreased in the public sector and increased in the private sector. The study concludes that there is a long-term association between industrial expenditure and industrial growth rate, implying that the industrial expenditure contributes significantly to the industrial growth rate. The author suggests that in order to expand the scope of long-term finance for industrial sector, securities market needs to be developed and strengthened.

Author :
Koti Reddy Tamma : Professor in Economics, IBS Hyderabad (A constituent of the ICFAI Foundation for Higher Education), India.