PUBLIC EXPENDITURE FOR AGRICULTURAL DEVELOPMENT & THE ECONOMIC GROWTH OF BIHAR (1981- 2019)

Abstract

This study explores the relationship between public expenditure on the agricultural sector and economic growth in the agriculturally underdeveloped states of Bihar over the period 1981-2019. In estimating the longrun model, first, the time series characteristic of the data is tested using ADF and the PhillipsPerron tests. Then, the Johansen cointegration test was conducted. Both The longrun and shortrun estimate result shows that public spending on the agricultural sector has a significant effect on the per capita real GDP. This study revealed that government spending on the agricultural sector has an insignificant effect both in the longrun and shortrun periods. While agriculture is the dominant sector and the majority of rural society is engaged in this sector, hence it needs to reduce unproductive government consumption expenditure and give attention to redirecting to productive activities. This will stimulate activities in the economic sectors and, perhaps, converse the insignificant effect on economic growth. The gross fixed capital formation has a positive and significant impact on per capita real GDP in Bihar during the period under review. This result seems to imply that the government should have to build up capital stock by the accumulation of capital formation regularly to improve the per capita real GDP. The labor force has an insignificant effect on the growth of per capita real GDP. Hence, improving the productivity of the labor force through technical and vocational training should have to be a prominent task.