Social Sector Expenditure and Economic Growth: Evidence from India

Abstract

This study examines the causal linkage between public expenditure on social sectors like education, health, family welfare, housing, urban development, water supply and sanitation, nutrition, social security and welfare, labour and labour laws and welfare of scheduled caste and tribes and economic development in India for the period 1972-2019. Using different econometric techniques, the study observesa bi-directional causality between GDP per capita and social sector expenditure in all sectors except for health, where unidirectional causality from health expenditure to growth is observed. This result indicates the significant impact of social spending on economic growth in India. Hence, to improve the country's ranking in the global human development index and poverty alleviation index, optimal management of social sector expenditure is vital for the Government of India. Furthermore, effective expenditure on social sectors aid the country to achieve broader objectives like growth, equity, employment creation, and poverty reduction

Keywords: Social expenditure, Per capita GDP, Social development, and Human development