Causal Nexus between Growth and Savings in India: Using Nonlinear Causality Approach

This paper analyses the nonlinear causal relationship between economic activities and savings over the period 1950-51 to 2011-12 for India. Empirical results from Gaussian second order Kernel density estimator highlights the nonlinear behaviour of growth and savings and suggest that there is no possibility of covariates to be linear as such. Further, to analyse the efficacy of the causal relationship between growth and savings, the study uses Himestra and Jones and Diks and Panchenko nonlinear causality approach. The results reveal a unidirectional causality that runs from savings to economic growth which suggests the need to accelerate domestic savings to promote higher income and growth.