*Assistant Professor (Senior Grade), Department of Humanities and Social Sciences, Jaypee Institute of Information Technology, Sector - 128, Noida, Uttar-Pradesh, India
**Research Scholar, Department of Humanities and Social Sciences, Jaypee Institute of Information Technology, Sector - 128, Noida, Uttar-Pradesh, India
Online published on 4 March, 2016.
The present paper focused on fiscal deficit in India and tried to identify its relationship with capital expenditures and plan and non-plan expenditures. The present paper evaluated two models which examined the relationship between fiscal deficit and key public finance indicator of expenditures. Results from the Johansen Cointegration test concludes there exist one cointegrating relationship among variables in Model1 (fiscal deficit, revenue expenditure and capital expenditure) and those in Model2 (fiscal deficit, plan expenditure and non-plan expenditures). It reflects there is long run causality running from plan and non-plan expenditure to fiscal deficit and short run causality running from capital and revenue expenditure. The finding of the paper indicates that higher level of revenue expenditure leads to higher levels of fiscal deficit; whereas capital expenditures are low and helps in lowering the deficit, which has been shown by the Vector Error Correction model.
Fiscal Deficit, Capital Expenditure, Revenue Expenditure, Plan Expenditure, Non-Plan Expenditure, Economic Growth
