Bank Credit and GDP Growth in India: A Study of Causality

Journal of IMS, Ghaziabad, Volume 10, Issue 2, Pages 82 to 87 (2013)

Posted: 1 Jul 2018

See all articles by Dhiren Jotwani

Dhiren Jotwani

Nirma University

Shivangi Singh

Nirma University - Institute of Management

Date Written: July 29, 2013

Abstract

The factors that cause economic growth are varied and diverse. Theory has however managed to identify certain key factors, of which finance is one. In recent years, there have been studies using econometric time-series analysis to study the short-run and long-run relationships between finance and growth. This paper is a study of the Indian economy, where the causal relationship between bank credit and economic growth is studied. Data from 1972 to 2012 for the Indian economy has been used for this study, and tests of cointegration, causality and error-correction are run. The results suggest that provision of bank credit leads to economic growth. However, an increase in economic growth may not lead to further provision of bank credit in the economy. It does lead to an increase in bank credit to industry. In other words, there is unidirectional causality from bank credit to growth; and from growth to industrial credit.

Keywords: Economic growth, Causality, Time-series analysis, Bank credit

Suggested Citation

Jotwani, Dhiren and Singh, Shivangi, Bank Credit and GDP Growth in India: A Study of Causality (July 29, 2013). Journal of IMS, Ghaziabad, Volume 10, Issue 2, Pages 82 to 87 (2013), Available at SSRN: https://ssrn.com/abstract=3195588

Dhiren Jotwani (Contact Author)

Nirma University ( email )

Sarkhej-Gandhinagar Highway
Gota
Ahmedabad, Gujarat 382 481
India

Shivangi Singh

Nirma University - Institute of Management ( email )

Sarkhej-Gandhinagar Highway
Via Gota
Ahmedabad, Gujarat 382481
India

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