EMPIRICAL RELATIONSHIP BETWEEN FINANCIAL GROWTH AND ECONOMIC GROWTH IN INDIA

RAZACK S.¹, THIMMAIAH N.², INDUMATI S.^3
1Department Studies in Economics and Co-operation, University of Mysore, Mysore-570 005, Karnataka, India.
²Department Studies in Economics and Co-operation, University of Mysore, Mysore-570 005, Karnataka, India.
³Department Studies in Economics and Co-operation, University of Mysore, Mysore-570 005, Karnataka, India.

Received : 07-11-2013     Accepted : 05-12-2013     Published : 31-12-2013
Volume : 3     Issue : 1       Pages : 62 - 65
Bioinfo Financ Manag 3.1 (2013):62-65

The paper examines the causal relationship between financial growth and economic growth in India. The empirical analysis is based on Granger Causality test. The test finds that the direction of causality runs from economic growth to financial growth. Variables like Real Gross Domestic Product (RGDP), Gross Fixed Capital formation (GFCF), Exports (X), Stock of liquid liabilities (M3) have been used over a 20 year period to derive the results. The policy implications of the study is that economic growth is considered as a policy variable to enhance financial growth.