International Journal of Management Studies ISSN(Print) 2249-0302 ISSN (Online)2231-2528 http://www.researchersworld.com/ijms/ Vol.–VI, Issue –1(2), January 2019 [102] DOI : 10.18843/ijms/v6i1(2)/11 DOI URL :http://dx.doi.org/10.18843/ijms/v6i1(2)/11 Impact of Public Debt on Economic Growth in Case of India: A Co-Integration Based Study Shah Husain, Ph.D Scholar, Department of Economics, Aligarh Muslim University Aligarh, U.P. India. Dr. Mohammad Asif, Associate Professor Department of Economics, Aligarh Muslim University Aligarh, India. ABSTRACT The present study has investigated the impact of public debt on economic growth from the period of 1990 to 2017. We applied data on public debt (internal &external) and per capita income as a proxy for economic growth. ARDL co-integration test has been used in this study to check long-run relationship between the variables. The co-integration test verified long-run relationship between public debt and economic growth. Public debt has significant impact on economic growth in long - run as well as short-run. The study also used Granger causality test which ravelled unidirectional causality. Only debt caused economic growth. Keywords: Public debt; Economic growth; ARDL bound test. INTRODUCTION: Government of a country goes for debt (Domestic and External) to bridge the gap between revenues and expenditures. Most of the country prefers domestic debt as it bears less burden as compare to external debt. External sources of debt are used if domestic markets for borrowing are not well developed. A continuous increase in fiscal deficit and rate on borrowings have raised question about debt sustainability and solvency of state to attain macroeconomic stability. Recently, concern about debt sustainability emerged due to high public debt, high fiscal deficit and lower economic growth. More attention over debt sustainability were raised by 12 th finance commission in 2004 (Government of India 2004) as rate of debt was faster than GDP (Gross Domestic Product) from 1996 to 2003. Public debt sustainability to India came into concern by the late 1980s with high fiscal deterioration both centre as well as states levels. For sustainable economic growth with macroeconomic stability, reducing public debt is an important component. Government borrowing to meet its expenditures can reduce private investment due to high rate of interest. High rate of interest may also tend to attract foreign capital which leads to appreciation of exchange rate, which reduces export. Expenditures always more than revenues for India, gap between both (expenditure & revenues) becoming widening year by year. In 1990-91 the gap was 0.22 million USD, till 2014-15 it became 3.41 million USD. Fiscal deficit in last 25 years has got multiplied almost by 15 times. Lacking of resources problem particularly concern to underdeveloped countries, but developed countries also indulged in deficit financing .In case of developed countries deficit financing used to stimulate the economy. On the other hand, under developed countries raise borrowings for investment which is supposed to increase the productivity leads output in the economy. The major problem related to debt is that major portion of India’s revenues is incurred on amount of debt and debt servicing cost, very less money are left for developmental purposes after paying debt. So there should be debt control mechanism in India. Still, no direct control of borrowings is being used in India. In the present study our focus are investigate the impact of public debt on economic growth in case of India.