Name: Prakasha
Country: India

Year: 2025
Volume: Volume No: 12, Issue No: 2, Year: 2025 (Special Issue-2)
Page Number: 152-156
DOI: https://doi.org/10.5281/zenodo.17722932

ABSTRACT
India is one of the growing economies of the world. In terms of Gross Domestic Product
(GDP) India is in 5th position in the world. It has been found from the Keynesian
consumption theory that there is positive relationship between income and consumption.
Hence, the present paper examines the long-run relationship GDP with PFCE and GFCE. The
present study used secondary time series data with co-integration and Vector Error Correction
Models. It has been found from the study that The GFCE, PFCE and GDP are stationary with
second difference. GDP is co-integrating with PFCE. PFCE is also co-integrating with GDP.
Hence, GDP and PFCE in India are having long-run equilibrium and stable relationship. GDP
corrects the errors within GDP by 69.12 percent and 21.9 percent with PFCE in the second
year. PFCE corrects the errors within PECF by 7.41 percent and 19.68 percent with GDP in
the first year. GDP and GFCE in India will go together. Hence, GDP is co-integrating with
GFCE. GFCE is also co-integrating with GDP. Accordingly, GDP and GFCE in India are
having long-run equilibrium and stable relationship. GDP does correct 7.12 percent of the
errors in equilibrium within the GDP in the second period. GFGC does correct 289.4 percent
of the errors in equilibrium with the GDP in the second period. Therefore, income generation
process and consumption processes are having strong and long-run relationship. Accordingly,
there is a need to improve the consumption behavior of the people to have stronger economic
process. KEYWORDS: Income, Consumption Expenditure, Co-integration, Error Correction,
Long-Run Relationship and Stationarity