Open Access Journal of Economic Research
- ISSN: 3065-9035
Jitendra Kumar Sinha
Gross Fixed Capital Formation (GFCF) represents a critical element of domestic investment essential for fostering economic growth and addressing unemployment challenges. However, the relationship between investment and economic growth remains a subject of ongoing debate in empirical studies, yielding divergent findings. Similarly, the nexus between employment and economic growth remains inconclusive. Despite moderate rates of investment and economic growth, the Indian economy grapples with elevated levels of unemployment. This study delved into the dynamics of investment, economic growth, and employment in India, utilizing data from reputable sources such as the Ministry of Statistics and Programme Implementation (MoSPI) and the Government of India. Employing the Johansen Co-integration and Vector Error Correction Model (VECM) framework, the investigation aimed to elucidate the nature of these interrelationships. The findings revealed the existence of a long-term relationship among these variables, providing evidence supporting bidirectional causality between employment and economic growth. Notably, economic growth was observed to precede investment, indicating its pivotal role as a driver of investment and employment over the long term within the Indian context. Moreover, the study corroborated the hypothesis of jobless growth during the post-economic reform period. It underscored the necessity of fostering a more conducive economic environment through enhanced infrastructural development and diversification of the economy, particularly into labor-intensive sectors such as agriculture and allied industries. Such measures are deemed essential for stimulating investment levels and mitigating unemployment challenges in the country.