Inter-Relationship of Major Sectors of Indian Economy: Co-Integration and Granger Causality Analysis

The study has investigated country’s GDP integration across five major sectors of Indian economy, viz. agriculture, service, industry, manufacturing and mining and quarrying by adopting Johansen’s multivariate co-integration approach. The study has confirmed the presence of co-integration, implying the long-run GDP association among the Sectors. To get the additional evidence as to whether and in which direction GDP transmission is occurring between the sector pairs, Granger causality test has been used, which has confirmed agriculture and service has the bidirectional cause, service has unidirectional cause on manufacturing, industry has unidirectional cause on service and agriculture has unidirectional cause on manufacturing so this sector has the significant effect. The major implication of the study is for the designing of a network of GDP interaction among the major sectors of Indian economy and to know in which direction one sector is influencing another