Dynamic interaction between savings, investment and economic growth in India: Evidence from ARDL approach

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Year	2025
Volume/Issue/Review Month	Volume-XVIII \| Issue-I \| Jan.-Jun.
Title	Dynamic interaction between savings, investment and economic growth in India: Evidence from ARDL approach
Authors	Liya Varghese, Dr. Swami Prasad Saxena
Broad area	Finance
Abstract	Abstract: The study of economic growth, savings and investment has been a cornerstone of macroeconomic analysis due to its central role in fostering long-term development and stability. This paper aims to address the issue by investigating the relationship between savings, investment, and economic growth in India using annual time series data spanning from 1991-92 to 2022-23. The study applies the Autoregressive Distributed Lag (ARDL) model to test cointegration and utilizes Error Correction-model to explore short run dynamics. Granger causality test is used to explore the causal connections between the variables. Findings of the study indicate a long-term cointegration between savings (GDS), investment (GFCF), and economic growth (GDP) when alternatively, each variable is taken as the dependent variable. The results of ECM revealed no short run impact of GDS and GFCF on GDP, but GDP has short run impact on both savings and investment. The Granger causality test concludes with bidirectional causality between investment and GDP. However, no causality is observed between GDS and GDP, and GDS and GFCF. The study suggests that promoting investment can contribute to economic growth.
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