2072-64142411-1406

10.17059/ekon.reg.2023-4-25

Impact of Deficit Financing and Trade Openness on Private Consumption in India

Влияние финансирования дефицита и открытости торговли на личное потребление в Индии

https://orcid.org/0000-0002-6783-0506

Mehta

Dhyani

Мехта

Дхьяни

dhyani.mehta@sls.pdpu.ac.in

https://orcid.org/0000-0002-1295-8481

Mallikarjun

Малликарджун

М.

mmallikarjun@nirmauni.ac.in

Pandit Deendayal Energy UniversityЭнергетический университет Пандита Диндеяла

Nirma UniversityУниверситет Нирма

19412931305

2023

Dhyani Mehta, M. Mallikarjun

Дхьяни Мехта, М. Малликарджун

CC BY 4.0

https://www.economyofregions.org/ojs/index.php/er/article/view/347

https://www.economyofregions.org/ojs/index.php/er/article/download/347/268

The Ricardian equivalence hypothesis claims that private consumption is neutral to the fiscal deficit and its mode of financing (debt vs tax). The study reinvestigates the Ricardian equivalence hypothesis in India by taking private consumption as the dependent variable, whereas government expenditure, government debt, tax, domestic income, and trade are considered as independent variables. In the Indian context, the Ricardian view raises an interesting point. If the Ricardian equivalence holds in the Indian economy, households alter their spending patterns and consequently increase their savings, making the policy changes ineffective. The autoregressive distributed lag (ARDL) bound testing approach was applied to the annual time series data from 1988 to 2021. The estimates confirm a significant long-run and short-run relationship between the variables; the results reject the Ricardian Equivalence and propound the Keynesian approach that the mode of financing the fiscal deficit (debt vs tax) does matter to the private consumption expenditure. The estimates also assert the long-run relation between trade openness and private consumption spending. The positive and significant coefficient shows that an open economy leads to an increase in consumption, which indirectly supports the Compensation Hypothesis. Given that deficit financing and trade openness have a substantial influence on India’s consumer spending, it can be concluded that expansionary fiscal and liberal trade policies should be carefully devised and supported. This study contributes to the existing literature on the Ricardian equivalence and trade openness by presenting new evidence on designing sustainable fiscal policy by spending wisely without imperilling the country’s consumption expenditure and global presence.

Согласно теории рикардианской эквивалентности, бюджетный дефицит и способ его финансирования (за счет налогов или займов) не оказывают влияния на личное потребление. В данной статье гипотеза рикардианской эквивалентности исследуется на примере Индии. В качестве зависимой переменной выступает личное потребление, тогда как государственные расходы, государственный долг, налоги, внутренний доход и торговля рассматриваются как независимые переменные. Если принять, что рикардианская эквивалентность справедлива для экономики Индии, изменение структуры расходов домохозяйств приведет к увеличению сбережений, снижая эффективность политических мер. Модель авторегрессии и распределенного лага (ARDL) была использована для анализа временных рядов данных с 1988 г. по 2021 г. Проведенный анализ подтвердил значительную долгосрочную и крат¬косрочную взаимосвязь между переменными; результаты исследования опровергают рикардианскую эквивалентность и поддерживают кейнсианский подход, согласно которому способ финансирования бюджетного дефицита влиет на личные потребительские расходы. Также была выявлена долгосрочная связь между личными потребительскими расходами и открытостью торговли. Положительный и значимый коэффициент указывает на увеличение потребления в открытой экономике, что косвенно подтверждает гипотезу компенсации. Учитывая существенное влияние финансирования дефицита и открытости торговли на потребительские расходы в Индии, можно сделать вывод о необходимости разработки экспансионистской фискальной и либеральной торговой политики. Статья дополняет существующие исследования по теме рикардианской эквивалентности и открытости торговли, предоставляя новые данные о разработке устойчивой фискальной политики с соблюденем принципа разумного расходования средств без ущерба для потребительских расходов и глобального присутствия.

ARDL, consumption expenditure, deficit financing, Ricardian equivalence, trade openness, fiscal policy, fiscal deficit, India

модель авторегрессии и распределённого лага, потребительские расходы, финансирование дефицита, рикардианская эквивалентность, открытость торговли, фискальная политика, бюджетный дефицит, Индия

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