An Econometric Analysis of Public Expenditure and Agriculture Output: An Evidence from India

In the present era, the agricultural sector played a significant role in the development of the nation by creating jobs for rural people and developing of agricultural sector needed in labour-intensive nations like India. Hence, the study examined the relationship between public expenditure on agriculture and economic growth, public expenditure on agriculture and agricultural output in the context of India. Therefore, the study used the Unit root test, Cointegration test, Var, and ECM for analysis. The results show that there is no cointegration vector between public expenditure and economic growth and found that negative relationship between public expenditure and economic growth. But, the study reveals that there is a cointegration vector between public expenditure and agricultural output. Significant Error Correction term (ECt-1) indicates that 85.2 per cent of total disequilibrium in public expenditure on agriculture and agriculture output is corrected each year in India. The coefficient of the EC2t-1 term is statistically insignificant. shortrun coefficients are also insignificant, which concludes that there is no short-run causality between public Expenditure and agriculture output in any direction. One way causality exists from agriculture output to public expenditure in the long run and is supported the Wagner’s hypotheses instead of Keynesian Hypotheses in India.