Unravelling the Asymmetric Dynamics of External Assistance on Economic Growth in India

This study investigates the asymmetric relationship between external assistance, comprising external grants and loans, and economic growth in India from 1994 to 2022. Utilising a non-linear approach, we examine whether economic growth responds asymmetrically to external assistance. The findings reveal that economic growth exhibits a significant response only to negative shocks in grants, while increases in external grants or loans do not have a statistically significant effect. This asymmetry contributes novel empirical insights to the evolving knowledge on external assistance and economic growth. Furthermore, the results underscore critical policy implications, cautioning against the assumption that an increase in external assistance, whether in the form of grants or loans, will necessarily foster sustainable economic growth. JEL Codes: F34, F35, F63