CORRESPONDENCE BETWEEN FINANCIAL EVOLUTION AND ECONOMIC GROWTH: A STUDY ON INDIAN PERSPECTIVE
Shiv Ranjan, Kanika Tomar, Dr Ruchika Gupta, Dr Anish Gupta
Journal Title:Cosmos An International Journal of Management
The paper aims at the impact of financial evolution in India upon the economical growth during the period of 1970 to 2019. The financial sector of India has evolved over the years and can be measured using variables like Credit made available to the Private Sector by the banks domestically, M3 Broad Money or Liquid Liability and Credit given by Financial sector involving the financial institutions across the country. The economic growth of a country can be measured using the real GDP per capita values. The study of the existence of co-integration and cause-effect relationship between financial evolution variables and economical growth measurement via real GDP per capita, we have used Johansen Test, Vector Autoregressive analysis and Granger causality respectively. We have observed a unidirectional flow from real gross domestic product to financial evolution. This confirms that economy’s growth causes the need for better and faster financial services and hence, follows demand hypothesis. Keywords: Financial Evolution, Growth, GDP Per Capita, Credit Availability, Liquid Liability, Credit to the Private Sector, Financial Sector, Economic Development, Broad Money, Vector Autoregressive Analysis, Granger Causality, Johansen Test, Ordinary Least Square Method.