Nexus Between Good Governance and Economic Growth: Econometric Evidence from India| Chapter 5 | New Advances in Business, Management and Economics Vol. 11

 

The concept of good governance refers to the way authority is exercised to manage a country’s economic, social and political resources. It highlights the importance of dynamic interactions between the state, civil society and citizens in processes of decision-making, implementation and accountability. When governments prioritise key sectors such as education, health and social protection, the outcomes directly enhance individual well-being and foster inclusive growth. This study investigates whether good governance helps drive economic growth in India, using annual data from 1996 to 2022. Economic growth is measured by per capita GDP, while governance is captured through three key indicators: control of corruption, political stability and voice and accountability. To get a clearer picture, other important factors such as the Human Development Index (HDI), government consumption, trade openness, foreign direct investment (FDI) and gross fixed capital formation (GFCF) are also included.

 

The analysis applies the Autoregressive Distributed Lag (ARDL) bounds testing approach, which is well-suited for exploring both short-run and long-run relationships, when variables are integrated of mixed order. The results confirm that good governance plays a significant role in supporting India’s long-term economic growth. Specifically, stronger control of corruption, political stability and voice and accountability are all linked with higher economic growth. Among the control variables, human development, government consumption and trade openness also show a positive impact on economic growth. On the other hand, FDI is found to have a negative but statistically insignificant impact, while GFCF has a negative but significant impact, suggesting that capital investments in India may not be translating efficiently into economic growth, possibly due to institutional or structural weaknesses.

 

Overall, the findings highlight that improving governance and investing in human development are crucial for India’s sustained progress. Policymakers should therefore focus on strengthening institutions, ensuring accountability and enhancing the quality of governance systems so that investments and reforms can produce stronger and more inclusive economic outcomes.

 

 

Author(s) Details

Ayushi Vashistha
Department of Economics, IIS (Deemed to be University), Jaipur, India.

 

C.R. Bishnoi
Department of Economics, IIS (Deemed to be University), Jaipur, India.

 

Please see the book here :- https://doi.org/10.9734/bpi/nabme/v11/6497