ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Structural policy reformsSubscribe to Structural policy reforms

Understanding the Structural Dynamics of Aggregate Demand Components and Economic Growth in India

A significant fluctuation in the growth rate of gross domestic product is observed, which comes along with the fluctuations of other demand components from 1951–52 to 2019–20. Applying autoregressive distributed lag to the co-integration model, and incorporating the structural changes in policies since 1991, it is found that in the long run, out of the five components that significantly influence the aggregate demand and hence the economic growth of India, the private final consumption expenditure plays the most significant role followed by private fixed investment—a 1% increase in the PFCE leads to an average 0.96% increase in the GDP. The result also reveals that the structural policy reforms implemented since 1991 have created the virtuous cycle of economic growth in the economy and should be a policy priority.

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