Relationship between Agriculture Expenditure and Agriculture Growth in Rajasthan

Abstract

This study examines the dynamic relationship between government expenditure on agriculture and agricultural growth in Rajasthan using annual time-series data for 1980–2018. Four functional specifications were estimated to assess the relationships among agricultural expenditure, agricultural net state domestic product (NSDP), total government expenditure, and total NSDP. The analysis employed the autoregressive distributed lag (ARDL) model, vector autoregression (VAR), and vector error correction model (VECM), following unit-root and cointegration testing. Model selection and diagnostic tests were used to assess the adequacy of the estimated specifications. The Johansen–Juselius results identified one cointegrating relationship between total government expenditure and total NSDP, while no Johansen cointegration was detected for the other model specifications. However, the ARDL bounds test indicated a long-run relationship between agricultural expenditure and agricultural NSDP. The VECM results revealed unidirectional short- and long-run causality from total NSDP to total government expenditure. The VAR estimates further showed unidirectional causality from total NSDP to agricultural expenditure and from agricultural expenditure to total government expenditure. Overall, the findings indicate that the direction and persistence of the expenditure–growth relationship vary across the variables and econometric specifications considered. The results imply that agricultural expenditure should be allocated and monitored carefully, with greater attention to productive capital expenditure, so that public spending can support sustained agricultural development in Rajasthan.