The Impact of Money Supply on Economic Growth in India: An Empirical Analysis of Monetary Expansion, Inflation, and Real GDP

Abstract

Money supply plays a crucial role in determining the economic performance of a country by influencing investment, consumption, interest rates, inflation, and overall economic activity. In India, changes in monetary aggregates have become increasingly important as the economy has undergone significant structural transformation and experienced periods of rapid growth, inflationary pressure, and economic uncertainty. This study examines the impact of money supply on economic growth in India, with particular emphasis on the relationship between monetary expansion and real Gross Domestic Product (GDP). The study analyzes key monetary and macroeconomic indicators, including money supply, real GDP, inflation, interest rates, and investment, to evaluate how changes in the availability of money affect economic growth.The research employs an empirical analytical approach using historical macroeconomic data and appropriate statistical and econometric techniques to identify the relationship between money supply and economic growth. The study also considers the role of inflation and other macroeconomic factors that may influence the effectiveness of monetary expansion. The findings are expected to provide insights into whether an increase in money supply contributes to sustainable economic growth or primarily generates inflationary pressures when monetary expansion exceeds the productive capacity of the economy. The study highlights the importance of maintaining an appropriate balance between monetary expansion, price stability, and economic development.