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VOL. 12, ISSUE 3 (2025)
Relationship between inflation and economic growth in India
Authors
Yashila Sharma, Lalit Kumar, Sanjeet Singh
Abstract
Inflation has always been considered to be
unhealthy for the growth and development of a country. It has been a topic of
debate whether inflation causes economic growth or adversely affects it. The
existence literature hinted toward some countries exhibiting positive
relationship between the two, however it cannot be concluded for all the
countries. Hence, this study is focused on assessing whether a relationship
between Inflation and Economic growth rate exists in India. The main objectives
of the study are to find out a meaningful relationship between the two and to
find the nature and direction of the relationship. For analyzing, four decadal
data from year 1961 to 2020 is used, which is extracted from the World Bank’s
database. After using Linear Regression Model and Correlation, it is found out
that a weak negative relationship exists between the two. Further, to check the
nature and direction, Dickey-Fuller test, Engle-Granger Test and Granger
Causality test are employed. The analysis of these tests showed that the
variables are stationary and there exists a long-term relationship between
Inflation and Growth rate. Moreover, the direction of the result is found to be
bi-directional. Therefore, in the Indian context, there exists a negative long
run bi-directional relationship between Inflation and Economic growth.
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Pages:125-129
How to cite this article:
Yashila Sharma, Lalit Kumar, Sanjeet Singh "Relationship between inflation and economic growth in India". International Journal of Multidisciplinary Research and Development, Vol 12, Issue 3, 2025, Pages 125-129
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