Wagner's Hypothesis in India

What is it about?

Wagner's Hypothesis, is a hypothesis in public economics suggested by a German economist Adolf Wagner, states that as the economy will grow over a period of time state activities will bound to grow as well. By using ARDL (Auto Regressive Distributed Lag Model), we tried to test this hypothesis empirically in case of India for the period 1970-2013. Study concluded the weak evidence in support of this hypothesis for the time period and technique under connsideration.

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Why is it important?

In the India's economic history, the period 1991 is considered as the economic turmoil. The year divides the economic scenario into halves, the first half reflects the India under the old economic policies while the second half has seen the post reform Indian economy. The toughest, genuinely game changing decisions about the economy in modern Indian history were taken in 1991. Under such a liberalised era, India's economic growth became faster. Hence, it becomes necessary to check whether economy's growth leads to growth in state activities or not.