Causality Analysis of Military Expenditure and Economic Growth in India : An Empirical Investigation

Military spending has impact on social and economic conditions of any economy. Though, there has been mixed response found for the increasing military expenditure and economic growth in many countries. In this study attempt has been made to examine relationship between military expenditure and economic growth for India during 1960-61 to 2013-14 time period. The findings indicated that there exist a long-run relationship between India's military spending and economic growth in Vector Autoregressive (VAR) environment. The Granger causality test detected bidirectional causality from economic growth to military expenditure. These results were further supported by findings from the impulse response function and variance decomposition. As a developing nation, India provides an example of an economy where increase in military expenditure accompanied with expansion and transformation of economy