How Political Stability Affects Economic Growth in India
This paper attempts to answer the question – ‘Whether the economic growth in India is affected by stability at the Central and States level political stability?’ A Political Stability Index (PLSI) is constructed using four political stability measures at Central and States level for both the Houses of the Legislatures. This index, the independent variable, is tested on two dependent economic growth variables Per Capita Income and Gross Capital Formation. The time for the study is 1981-2017 (37 years) at India (Central) level and 1991-2015 (25 years) at the States level according to the availability of data with a lag period of 1 year, as policies bear results, the following year. The analysis very modestly supports the hypothesis at the Central level. However, the impact is more robust at the States level, evident from continuous governmental stability of many States. Principal Component Analysis method is used to construct the index and then Regression Analysis is used to measure the impact on dependent variable.
