Scholarlink

<p>This study investigates the asymmetric and nonlinear relationship between fiscal deficit and economic growth in India over the period 1970 to 2022. The primary objective is to assess whether fiscal deficits act as a stimulus or a constraint on economic performance, accounting for the roles of foreign direct investment (FDI), foreign aid (AID), and human capital development (proxied by primary school enrolment, PSE). Using advanced econometric methodologies, including Autoregressive Distributed Lag (ARDL), Nonlinear ARDL (NARDL), and Multiple Threshold NARDL (MTNARDL) models, the study captures both long-run and short-run dynamics along with threshold and asymmetric effects. The findings reveal that positive shocks in fiscal deficit negatively impact long-run growth, whereas negative shocks (i.e., fiscal consolidation) enhance it. In the short run, however, moderate increases in deficit have an expansionary effect, especially when starting from low-deficit levels. Therefore, fiscal deficit constrains economic growth in the long run but stimulates it in the short term, but only when beginning deficit levels are low. Control variables such as FDI and AID exhibit positive long-term growth effects, while PSE contributes to growth primarily in the long run, highlighting the lagged effect of education investments. The study recommends a threshold-sensitive and growth-oriented fiscal policy, prioritizing capital expenditure and maintaining deficits within moderate, sustainable bounds. Policymakers should also foster FDI, improve aid effectiveness, and invest strategically in human capital to ensure long-term macroeconomic stability and inclusive growth.</p>

错误：搜索内容不能为空，请输入英文关键词
错误：关键词超出字数限制，请精简
高级检索

Is fiscal deficit stimulus or constraint for economic growth in India? Empirical evidence using asymmetric and thresholds approaches

  • 期刊论文

  • 发表日期：

    2026年6月23日

查看全文
  • Prakhar Pandey,
  • Vishal Sharma,
  • Rajnish Pande,
  • Pushp Kumar,
  • Vinay Joshi Chandniwala

摘要

This study investigates the asymmetric and nonlinear relationship between fiscal deficit and economic growth in India over the period 1970 to 2022. The primary objective is to assess whether fiscal deficits act as a stimulus or a constraint on economic performance, accounting for the roles of foreign direct investment (FDI), foreign aid (AID), and human capital development (proxied by primary school enrolment, PSE). Using advanced econometric methodologies, including Autoregressive Distributed Lag (ARDL), Nonlinear ARDL (NARDL), and Multiple Threshold NARDL (MTNARDL) models, the study captures both long-run and short-run dynamics along with threshold and asymmetric effects. The findings reveal that positive shocks in fiscal deficit negatively impact long-run growth, whereas negative shocks (i.e., fiscal consolidation) enhance it. In the short run, however, moderate increases in deficit have an expansionary effect, especially when starting from low-deficit levels. Therefore, fiscal deficit constrains economic growth in the long run but stimulates it in the short term, but only when beginning deficit levels are low. Control variables such as FDI and AID exhibit positive long-term growth effects, while PSE contributes to growth primarily in the long run, highlighting the lagged effect of education investments. The study recommends a threshold-sensitive and growth-oriented fiscal policy, prioritizing capital expenditure and maintaining deficits within moderate, sustainable bounds. Policymakers should also foster FDI, improve aid effectiveness, and invest strategically in human capital to ensure long-term macroeconomic stability and inclusive growth.