The objective of this paper is to examine Co-integration and the direction of causality between savings and growth as these have important implications for development policy. We estimate long run interrelationships between sectoral savings and their roles in the process for growth in India for the period 1952 to 2013. We also carry out an analysis of the direction of causality between savings and growth. We hypothesize that gross domestic household saving is more important in determining GDP. We find that gross domestic saving, their components such as HHS, PCS and PS and the sub sectors of HHS such as FS and PhS are co-integrated with GDP. However, the results of causality tests suggest that there is a one-way causation from growth of GDP to the total saving rates, HHS, Financial saving (sub sector of HHS), and PCS. In the case of Public saving, physical saving (sub sector of HHS) and the growth of GDP it is indicated that the causality does not run in any direction.
Savings, economic growth, trends, unit root, co-integration, causality
