Does Structural Transformation Foster Economic Growth? Empirical Evidence from Indian States with Reference to Assam

This study examines the association between structural transformation and economic growth for a panel of 19 states and UTs focusing on Assam. Employing dynamic panel econometric models from 1977-1978 to 2017-2018, the study indicated that the association between economic growth and structural transformation among the 19 states/UTs panel seems to be random. However, parametric techniques such as DOLS suggest a significant long-term relationship between structural change in output and economic growth across Indian states. Assam, being a key player in north-east India's economy, holds particular importance in India-South Asia trade dynamics. However, the state has been experiencing a simultaneous structural economic shift and adverse economic situation, evident from the existing literature. Thus, it is pertinent to examine the structural change-economic growth linkage for Assam, which will be helpful for policy-making to ensure sustained economic growth. For Assam, the vector auto regression and Granger causality test reveal significant results, showing a bi-directional causality between structural change and economic growth, supporting the Kaldor-Verdoorn's law.