The Relationship between Unemployment and Economic Growth in India: Granger Causality Approach

Abstract

The primary objective of this study is to investigate the relationship between unemployment and economic growth in India, with a particular focus on the impact of economic growth on unemployment from 1990 to 2020. Before and after the Hodrick-Prescott filter was used to correct for non-stationarity in the time series data used for the study, descriptive statistics, Granger causality, and the Ordinary least squared model were used to study the impact of economic growth on unemployment. The Granger causality test found no link between the two variables, indicating that neither UNEMP causes GDP and nor GDP causes UNEMP. The results of the estimated regression of unemployment and economic growth as an explanatory variable, on the other hand, exhibit that only 6 per cent of the impact of economic growth on unemployment and are inversely related to each other, while the remaining 94 per cent is caused by other factors that are detrimentally affecting India's unemployment rate.