Does government expenditure on education promote economic growth? Empirical evidence from the northern hilly states of India

Using balanced panel data from 2004 to 2017, this study investigated the dynamics of education spending and economic growth in selected hilly northern Indian states. The findings revealed a positive and significant relationship between public educational spending and economic growth. The results demonstrated that public spending on higher education has a favourable and considerable impact on the growth process of the specifically classified states, even at a disaggregated level. This research, therefore, signifies that education is a crucial component of economic growth in the northern states of India. Hence, optimal resource allocation to the education sector by policymakers/governments will have a favourable impact on these states’ growth performance through improving knowledge output. Indeed, the government expenditure on various levels of education can be a vital factor for economic growth in the hilly states of India. States should develop policies that promote high-quality education for all citizens, which can only be done with increased government education investment. This would be one of the most sensible measures towards reducing India’s inter-state growth gaps and making “convergence” factors more fathomable.