Impact of Rural Infrastructure on Agricultural Growth in Tamil Nadu: Econometric Analysis by VECM

Abstract

The present study examined the impact of rural infrastructure investment on the agriculture and economic growth of Tamil Nadu, applying the VECM. The study further examined the causal relationship between dependent and independent variables using the VECM Granger-causality test from 1990-91 to 2020-21. The study considered the influence of economic reforms on economic growth. The estimated results of co-integration showed that there was a long-run relationship among the variables. The VECM results confirmed a long-run relationship among the variables. The estimated results of the Granger-causality analysis indicated a unidirectional causal relationship between AC and GAP was significant statistically and no relationship between GSDP and AC. The decomposition results suggested that the economic growth variation was explained mainly by agriculture credit. The findings would be helpful to policymakers in developing appropriate strategies in the state.