This study tried to empirically test the causal relationship and the direction of causality between public expenditure and GDP in India, using annual data from 1966-67 to 2015-16. | Public expenditure and national income of India investigating Wagnerian law International Journal of Management IJM Volume 9 Issue 5 September October 2018 pp. 1 9 Article ID IJM_09_05_001 Available online at http ijm JType IJM amp VType 9 amp IType 5 Journal Impact Factor 2016 Calculated by GISI ISSN Print 0976-6502 and ISSN Online 0976-6510 IAEME Publication PUBLIC EXPENDITURE AND NATIONAL INCOME OF INDIA INVESTIGATING WAGNERIAN LAW Dhyani Mehta Assistant Professor Economics and Finance Institute of Management Nirma University India ABSTRACT This study tried to empirically test the causal relationship and the direction of causality between public expenditure and GDP in India using annual data from 1966- 67 to 2015-16. The methodology employed was econometric model of the cointegration and the Granger Causality test. The estimates shows that the variables are stationary at first difference and follows I 1 order of integrations. Causality test estimates shows bidirectional causal relationship running from GDP to Revenue Expenditure and from Capital Expenditure to GDP. The estimates do not support the existence of Keynesian hypothesis and Wagner s Law at the disaggregate level in India. Key words Public Expenditure Wagner s law Keynesian hypothesis Cointegration Granger Causality. Cite this Article Dhyani Mehta Public Expenditure and National Income of India Investigating Wagnerian Law. International Journal of Management 9 5 2018 pp. 1 9. http IJM JType IJM amp VType 9 amp IType 5 1. INTRODUCTION Can increase in public expenditure influence economic growth What evidence exists on the direct relationship between public expenditure and economic growth There is lot of debate in public finance literatures based on views of different school of thoughts in economics. There are both theoretical and empirical evidence on the relationship between public expenditure and Gross domestic product GDP .
