SMEs and Economic Growth in India: Cointegration Analysis

Abstract:     
Available studies on Small and Medium Enterprises (SMEs) have mainly focused on performance indicators, role of financial institutions and sources of growth in many developing countries. The present study utilizes the cointegration analysis to examine the causal relationship between SMEs output, exports, employment, number of SMEs and their fixed investment and India’s GDP, total exports and employment (public and private) for the period 1973-74 to 2006-07. The result reveals positive causality between SMEs output and India’s GDP. Error Correction Mechanism (ECM) was employed for analyzing the short-run relationship between the variables relating to SMEs and India’s growth. The ECM results indicate that independent variables positively affect the dependent variables in the short run.

Accepted Paper Series