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Government Expenditure and Economic Growth in The State of Jammu and Kashmir: A Unit Root and Co-Integration Approach with Error Correction Model

Samir Ul Hassan, Biswambhara Mishra

Abstract



Over last three decades, the state of Jammu and Kashmir has witnessed an enormous increase of government expenditure both in its absolute and relative sense. Surprisingly, the increased level of public expenditure did not get translated in to a greater level of infrastructural development and improvement in living standards of the people. In order to study the dynamics of the casual relationship between the public expenditure and economic growth in Jammu and Kashmir state, study tries to apply Unit root test and Johansen Co-integration Test followed by Error correction Mechanism on the time series data to estimate the short-run and long-run relationships between government expenditure and economic growth. The results show the non existence of a casual relationship between aggregate government expenditure and economic growth. Further, the aggregate government expenditure and its main components have very week adjustment tendency towards long run equilibrium in economic growth. Expenditure on social, economic and general services has positive and significant impact on economic growth. Furthermore expenditure on education, health, industry and mining has significant and positive impact on economic growth while as expenditure on agriculture and allied sectors and expenditure on administrative services were found negative impact on economic growth.

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