Impact of Inflation on the Growth of Indian Economy

Steven Smith

Impact of Inflation on the Growth of Indian Economy

Steven Smith * §

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King Abdullah University of Science and Technology

Impact of Inflation on the Growth of Indian Economy

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Abstract

Inflation and economic growth have one of the most mysterious relationship in economic theory. The appropriate level of inflation required for economic growth is hard to define. This paper uses annual data from 1961-2019 to investigate the causal relationship between inflation and economic growth in India. Time series data has been collected from International Monetary Fund database. The study uses Vector Error Correction Model and Vector Auto-regression Model identifies the short-run and long-run relationship between inflation and economic development. The study concludes that inflation negatively affects the GDP in the short run but maybe a positive association in the long run. Granger Causality test was also performed to calculate the bidirectional relationship. The examination revealed that that inflation does not granger cause GDP growth. However, it also shows that GDP growth does not cause granger to cause inflation as well.

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Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

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No ethics committee approval was required for this article type.

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How to Cite This Article

Steven Smith. 2021. "Impact of Inflation on the Growth of Indian Economy". Global Journal of Human-Social Science - E: Economics GJHSS-E Volume 21 (GJHSS Volume 21 Issue E2).

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GJHSS Volume 21 Issue E2

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Journal Specifications

Crossref Journal DOI 10.17406/GJHSS

Print ISSN 0975-587X

e-ISSN 2249-460X

Keywords

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Classification

GJHSS-E Classification FOR Code: 149999

Submission ReceivedApril 7, 2021
Peer Review Double Blind
Handling Editor
Accepted April 30, 2021
Published May 15, 2021

Version of record

v1.2

Issue date

May 11, 2021

Language

English

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