Abstract
The study attempts to examine the impact of social sector development on inclusive growth in India. Ever since Independence, India’s encounter with gnawing poverty and stark deprivation, particularly of the weaker and the marginalised sections of society, cajoled India’s planners to moot the development policies with the sole objective of exacerbating growth with equity. That is why since the beginning of the planning era, the stress had been laid on strengthening and expanding the social sectors with the premise that it would boost the inclusive growth agenda, manifesting in equal access to employment and economic opportunities; equal participation in decision-making and reduction in poverty and inequality. In conformity with the objective of our study, we intend to gauge the effect and contribution of different components of social sector development in India, on inclusiveness of growth using time series data for the period of 1985–1986 to 2015–2016. It was found that the expenditure related to ‘social security and welfare’ contributes significantly towards inclusive growth in India while the expenditure incurred on ‘welfare of marginalised class’ and ‘rural development’ exudes negative association with inclusiveness of growth.
Keywords
Introduction
Elimination of poverty and employment generation has remained the central pivot around which the development policy has revolved in India. Since Independence, India ardently intended its growth spectrum to be inclusive so that the people even at the grass-roots level could be associated in the development process. This process of development would lead to elimination of hunger, disease, deprivation and reining in inequality. To achieve this, growth had to be inclusive and broad based. Even when India based its development policy on Nehruvian tenets involving extensive investment, heavy industrialisation, import substitution, indigenisation of goods and services, even then employment generation and participation was not side tracked. India intended to evolve a people-centric approach to development (Balkrishnan, 2013). Elimination of monopolies, prevention of concentration of economic power, socio-economic justice and participative growth have all veered round the poorest of the poor. The failure of the trickle-down approach further strengthened India’s resolve to reinforce the inclusiveness of growth. Following Sen’s approach, social sector development had been given precedence to build the capacity and capability of the people (Fukuda-Parr, 2003).
Social sectors comprise social and economic services. ‘Social services’ include education, art and culture, medical and public health, family welfare, water supply and sanitation, housing and urban development, welfare of the underprivileged classes, labour and employment, social security and welfare and other social services. On the other hand, ‘economic services’ relate to rural development and food storage and warehousing. All this social sector expenditure is geared towards the achievement of a broader objective of expanding social opportunities and improving the social indicators of education, health and nutritional standards of the general population (Dev & Mooij, 2004). Social sector development focused on greater livelihood opportunities, modern amenities and services for decent living in rural areas as well as in urban areas, which would increase the opportunities for equal economic participation and thus promote inclusiveness. The social sector development approach of growth policy hinges on human development and human welfare and therefore exacerbates inclusive context of growth (Government of India, 2011).
Government of India (2008) shifted its conventional strategy of high investment and growth to new strategy of achieving faster growth with inclusiveness. India’s commitment to planned economic development was to improve the economic conditions of the people and to achieve the broad-based development for higher living standards of people. The growth must be widely spread so that its outcome in terms of income and employment would be shared by the poor and deprived sections of the society.
Both social sector development and inclusive growth are synergetic in nature. Increasing expenditure on social sector would improve the conditions of the deprived and marginalised sections of society. By improving their income and equal access to employment and productive activities, the deprived sections would be empowered to become equal partners in the growth process. Social sector development would mitigate poverty, inequality, deprivation and diseases. This would promote the inclusiveness of development.
This study is an attempt to gauge the impact of social sector development on inclusive growth in India. The paper is divided into four sections. After introducing the theme in Section 1, Section 2 elaborates data sources used and lays down the conceptual framework and model estimation to arrive at findings and inferences. Section 3 is devoted to the analysis of the impact of different components of social sector development on a composite index of inclusive growth and digs out findings and inferences. Section 4 puts forth main policy implications emanating from the analysis and concludes the paper.
Database and Methodology
The importance of the study lies in both theoretical and practical aspects. On the theoretical aspect, the study is expected to analyse the relevance of social sector development in India for rendering development inclusive. On the practical side, the analysis of the relative significance of the different components of social sector in effecting change in inclusive growth can be indicative for policy makers to focus on those social sectors that would exacerbate inclusive growth.
Data for the present study have been taken from various reports of the World Bank, the Planning Commission, Economic Surveys, Annual Budgets, Statistical Abstracts and so on. Time reference of the data and analysis is the 1985–2016 period. All the monetary values have been expressed in constant prices of 2004–2005.
To measure the impact of different components of social sector development on the inclusiveness of India’s growth, a composite index of inclusive growth was constructed by deploying the principal component analysis approach.
Conceptualising Inclusive Growth: Components and Indicators
Deciphering the concept of inclusive growth, precisely it implies the reduction of poverty and inequality, and equal access for all in social and economic opportunities. In other words, inclusive growth will manifest in employment generation and participative decision-making both at micro village level and the macro level of the whole economy. In the present study, the concept of inclusive growth is represented by three components, namely, (a) poverty reduction, (b) equal access to employment opportunity and (c) social and economic inclusion in the growth process (Ramos et al., 2013). These three components of inclusive growth are further represented each by a subset of indicators to generate the index of inclusive growth as depicted in Figure 1.
Constructing Composite Index of Inclusive Growth: The Model
A composite index of inclusive growth is generated based on a scoring methodology and a weighing scheme. The present study employed principal component analysis to the nine indicators Figure 1 for constructing a composite index of inclusive growth. Principal component analysis is a useful technique for transforming a large number of variables into a smaller set of uncorrelated factors the principal components. It attempts to identify the underlying variables or components that explain the pattern of correlation within a set of observed variables (Anthony & Rao, 2007).

In the present study,
X1 = ß1(0)+ ß1(1) F1+ ß1(2) F2+ e1
X2 = ß2(0)+ ß2(1) F1+ ß2(2) F2+ e2
… … …
X9 = ß9(0)+ ß9(1) F1+ ß9(2) F2+ e9
where X1,X2, … , X9 are the nine variables representing inclusiveness; F1 and F2 are the two components extracted; ß1(1) is the loading of variable X1 on factor F1 and so on; and e1, e2,…, e9 indicate that the hypothesised relationships are not accurate.
The data set is further aggregated into the composite variables by providing weights known as ‘component loadings’. Component loadings are equivalent to the correlation between components and variables when only a single common component is involved. High loadings provide meaning and interpretation of factors. By applying principal component analysis, as many principal components can be obtained as the number of indicators. The first principal component explains the maximum variance in the set of standardised indicators, while the second component explains the maximum in the residual variance, that is, the variance not explained by the first principal component and so on. The second factor represents the majority of the residual variance, subject to being not related with the first factor (Pradhan & Puttuswamaiah, 2005).
A combined weighted inclusive growth index was calculated using the proportion of these percentages as weights on principal component score coefficients (Sekhar et al., 1991). It was formulated using the following formula:
Non-standardised inclusive growth index = (73.243/84.125) × (PC1 score) + (10.943/84.125) × (PC2 score)
The values of the index thus constructed come out to be positive or negative. Therefore, in order to make an easy interpretation, a standardised index was developed, the value of which ranges from 0 to 1 (Anthony & Rao, 2007), using the following formula:
Components of Social Sector as Independent Variables
The following components of social sector have been chosen, representing independent variables in our regression model, to infer about the significance of each in influencing inclusive growth in India.
Expenditure incurred on education, sports, arts and culture as a proportion of total central government plan outlay (lnPOED); Expenditure on medical and public health and family welfare as a proportion of total central government plan outlay (lnPOHFW); Expenditure on water supply and sanitation as a proportion of total central government plan outlay (lnPOWSS); Expenditure on housing and urban development as a proportion of total central government plan outlay (lnPOHUD); Expenditure on welfare of under privileged classes as a proportion of total central government plan outlay (lnPOWPC); Expenditure on labour and employment as a proportion of total central government plan outlay (lnPOLE); Expenditure on social security and welfare as a proportion of total central government plan outlay (lnPOSSW); Expenditure on rural development as a proportion of total central government plan outlay (lnPORD); Expenditure on food storage and warehousing as a proportion of total central government plan outlay (lnPOFSW).
Variables with Respective Data Sources
The Model to Estimate the Impact of Social Sector Development on India’s Growth Inclusiveness
After constructing a composite index of inclusive growth, backward stepwise multiple regression analysis is deployed by regressing expenditure incurred on various components of social sector in India, on inclusive growth index as the dependent variable. In the backward elimination method, variables are successively removed, which contribute less in the model. It is a systematic mode of removing the multilinear variables from the model based on their statistical significance in regression. This method discontinues when no variable significantly improves the model (Gujarati, 2003). Backward stepwise multiple regression is challenging if there are a large number of candidate variables, and impossible if the number of candidate variables is larger than the number of observations (Smith, 2018). This technique also has few limitations, such as the presence of biasness in parameter estimation, inconsistencies among model selection algorithms, and problem of multiple hypotheses testing (Whittingham et al., 2006). Because of these limitations, all the assumptions of the regression model used in the present study were checked.
Natural log transformations of the variables are preferred to avoid the problem of heteroscedasticity and cumbersomeness while framing the model. This transformation compresses the scale to a twofold difference from tenfold differences between the values in which variables are measured (Gujarati, 2003). Anand et al. (2013) constructed a model to measure the inclusive growth by incorporating indicators of economic growth performance. In that model, inclusive growth was considered as a dependent variable and indicators of economic growth as independent variables by taking log differences of both independent and dependent variables.
In the present study, the formulation of the model is based on log differences of both independent and dependent variables. Regression estimations have been carried out using SPSS. The model is shown as follows:
lnIGI* = a + b11 lnPOED* + b12 lnPOHF* + b13 lnPOWSS* + b14 lnPOHUD* + b15 lnPOWPC* + b16 lnPOLE* + b17 lnPOSSW* + b18 lnPORD* + b19 lnPOFSW* + u1t
Here,
ln = natural logarithm
lnIGI = inclusive growth index
lnIGI* = ln (IGIi,t –IGIi,t−1)
lnPOED* = b1ln (POEDi,t − POEDi,t−1) and so on.
a = constant;
b11, b12, b13, b14, b15, b16, b17, b18 and b19= regression coefficients;
ut = white-noise disturbance term.
India’s Composite Index of Inclusive Growth
The idea for constructing an inclusive growth index for India during the period 1985–2016 as per the methodology delineated above is to aggregate these multiple variables into a single index which best represented the set of information. This reduces the data from a complex, multidimensional frame to a single dimension which is easier to interpret. Table 2 explains the descriptive statistics of the variables after standardisation of data. The data set for all the variables was standardised in order to avoid the influence of one variable upon principal components. The variables after standardising had zero mean and unit variance (Pradhan & Puttuswamaiah, 2005).
The next step is to assess the strength of the relationship between the variables by examining the partial correlations through the Kaiser–Meyer–Olkin measure and to study the coefficient correlations using Bartlett’s Test of Sphericity. Table 3 shows the Kaiser–Meyer–Olkin (KMO) measure at 0.829. It indicates a good measure, and Bartlett’s test of sphericity shows a significance level of 0.000, a value that is small enough to reject the null hypothesis.
The total variance explained how the variance is divided among the possible components. For the present data set, the first two principal components explained more than 80 per cent of the variation (Leech et al., 2014). Table 4 projects that the first principal component explains 73.243 per cent of the variation, and the second principal component explained 10.943 per cent of the variation which shows the importance of principal components and leads to the construction of inclusive growth index.
Descriptive Statistics of the Variables after Standardisation of Data
Descriptive Statistics of the Variables after Standardisation of Data
KMO Measure of Sampling Adequacy and Bartlett’s Test of Sphericity
Principal Components, Eigenvalues and Total Variance
Varimax Rotated Matrix: Values of Components Loadings after Rotation
2. Rotation method: VARIMAX rotation with Kaiser normalisation.
3. Rotation convergence in three iterations.
4. The significance of bold values has been explained in the second paragraph on page 8.
By using the SPSS procedure, component scores were carried out, which were saved as variables in calculating the index value. Using the proportion of these percentages as weights on the component score coefficients, a non-standardised index was developed for two extracted components. The values of the index thus constructed come out to be positive or negative; therefore, in order to make an easy interpretation, a standardised index was developed (Krishnan, 2010).
In spite of the positive trend of gross domestic product (GDP) in earlier plan periods, still the Indian economy lagged behind in the development because it was not perceived as being sufficiently inclusive for many groups, especially SCs, STs and minorities. Gender in equality also remained a pervasive problem. The lack of inclusiveness was proven in earlier years (Government of India, 2008).
Composite Index of India’s Inclusive Growth
Government of India (2008) explained that though the percentage of the poor below poverty line had decreased, the rate of decline in poverty had not accelerated along with the growth in GDP. The incidence of poverty had hardly declined among the marginalised groups. The chasm between the rich and the poor had been nudging rapidly. The indicators of human development had shown the lagged, but steady improvement. Total employment in the economy has improved, but the labour force has grown even faster that led to an increase in the unemployment rate. The standardised inclusiveness index of growth reveals increasing trend initially till 2009–2010, when it starts showing decreasing trend again. The analysis shows a slower trend growth rate of inclusiveness in India.
India has experienced rapid growth over the past decade, but the income inequality had also inflated. There exists vast disparity in education and health conditions across different strata of the population. Inequality of opportunities among different sections of society hinders the growth inclusiveness and thus should be surmounted. Equalising of opportunities will improve the equality in access to benefits that would strengthen the livelihood strategies through empowerment. With the implementation of policy of National Rural Health Mission in 2005, there has been some improvement in the growth phase. The National Rural Health Mission (NRHM) focused on providing equitable, affordable health care facilities to the rural population, specifically the vulnerable groups. Government of India reported that NRHM reduced infant mortality rate at higher rate than earlier (during 2003–2006), increased institutional deliveries, raised the figures of full immunisation, constituted Rogi Kalyan Samitis, appointed and trained accredited social health activists (ASHAs), constituted village health committees, created village health and nutrition days, provided mobile medical units and co-located Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy (AYUSH) in a number of health facilities (Sharma, 2014). With the launching of numerous programmes, appropriate steps must be taken for implementation and governance problems to bolster inclusiveness (Government of India, 2013).
Impact of Components of Social Sector on Inclusive Growth
The inclusive growth has remained the prime agenda for India’s development policy, and social sector development reinforces this mission. In fact, social sector development and inclusive growth are both interdependent and synergetic in nature. Social sector development stimulates the achievement of inclusive growth, while the realisation of inclusive growth manifests in social sector development. Since Independence, emphasis had been laid on the development of education, health, and rural sectors with the objective of eliminating poverty and hunger and empowering the weaker section of society. Continuing the same endeavour, in the Eleventh Plan, new priorities were set related to revitalising dynamism in agriculture and building an appropriate infrastructure in rural areas. Similarly, it emphasised undertaking programmes for improving living conditions for the marginalised sections, and improving their access to economic opportunities for social and economic empowerment. Likewise, greater access to education and health was much needed for the removal of chronic poverty, ignorance, disease and inequality. Although the target of multifaceted inclusive growth may be difficult to achieve in a heterogeneous society like India, yet it remains a mandated goal of India’s economic policy (Government of India, 2008).
The Regression Results
To estimate the impact of various components of social sector development on inclusive growth in India, the backward approach of multiple stepwise regressions is deployed. The first step is to check the minimum and maximum values of the independent variables, so that implausible values (outliers) can be detected. Table 7 shows the minimum, maximum, mean and standard deviation values of the independent variables. The average values of lnPOED, lnPOHF, lnPOWSS, lnPOHUD, lnPOWPC, lnPOLE, lnPOSSW, lnPORD and lnPOFSW are 0.303, 0.076, −0.013, 0.180, 0.123, −0.024, 0.100, 0.067 and 0.003, respectively. The values of standard deviation of lnPOED, lnPOHF, lnPOWSS, lnPOHUD, lnPOWPC, lnPOLE, lnPOSSW, lnPORD and lnPOFSW are 0.524, 0.668, 0.410, 0.584, 0.590, 0.166, 0.235, 1.230 and 0.210, respectively. None of these components has any missing values with no presence of outliers in the data.
Descriptive Statistics of the Independent Variables
Variable Entered/Removed as per the Backward Elimination Method in Model
Summary of the Model
ANOVA Test of the Model
Table 10 explains the analysis of the variance (ANOVA). If the improvement in prediction to fit the regression is much greater than the inaccuracy within the model, then the value of F will be greater than 1. In the present case, the F ratio is 4.825 in the first model, which increases to 15.845 in the seventh model, which is very unlikely to happen by chance. The p-value is also highly significant.
Results of the Stepwise Regression-Backward Elimination Method of the Model
(2) Robustness of regression model has been thoroughly tested by applying various tests as elaborated in appendix I.
For the β values of these variables, it may be inferred that a 1 unit increase in ‘Expenditure on welfare of marginalised classes’ (lnPOWPC) and ‘Expenditure on rural development’ (lnPORD) will cause a decline of 2.032 and 0.30 units in inclusiveness, respectively. The results ironically exude a decline in inclusiveness due to an increase in expenditure on ‘welfare of marginalised section’ (lnPOWPC) and ‘rural development’ (lnPORD) despite augmentation of welfare expenditure. This is so because the benefits fail to percolate down to the grass-roots level due to various leakages and corrupt practices, as well as due to lack of awareness and publicity, which results in many targeted underprivileged beneficiaries remaining bereft of the benefits of the schemes (Fan et al., 2000; Thorat & Dubey, 2013). That is why despite increasing expenditure on the welfare of marginalised sections and on rural development, inclusiveness is at bay. Also, a 1 unit increase in ‘Expenditure on social security and welfare’ (lnPOSSW) will augment 2.646 units in inclusiveness, that is, inclusiveness will more than double due to an increase in ‘Expenditure incurred on social security and welfare’ (lnPOSSW).
The regression model uses the un-standardised coefficients depicted in Table 12. The model is:
Coefficients: The Final Model
Collinearity Statistics and Diagnostics of Entered Variables in the Model
In this model, tolerance is 0.362 (1 − R2) and variance inflation factors (VIF) is 2.762 (1/ tolerance limit); hence, it implies there is no problem of multicollinearity as depicted in Table 13. Even the values of the condition index are also less than 15, indicating that there is no multicollinearity in the final model.
The results of this model are substantiated and corroborated by the fact that social exclusion among Dalits is still high, even though untouchability had been constitutionally removed in India (Sangeeth, 2016). In spite of numerous efforts, still there are 170–200 million SCs/STs at the bottom of the caste system, constituting 17 per cent of the population. Many SCs/STs had been living in extreme poverty without adequate opportunities for employment as well as education. Their vulnerability further accentuates due to discrimination and violence. Only a small minority of this class is getting benefits under the programmes and policies for the welfare of marginalised class (Panda, 2016). Divakar (2017) highlighted that the entire schemes for SCs and STs had been reduced from 294 to 256, and 307 to 261, respectively, in 2016. The allocation for SC amounted to ₹91,863 crore, that is, 16.6 per cent of the plan outlay, but only 4.62 per cent was actually disbursed. Similarly, only ₹47,276 crore, that is, 13.76 per cent, was apportioned but only 2.32 per cent was actually distributed during 2015–2016.
In our model, ‘social security and welfare expenditure’ has been found to be positively associated with inclusive growth. There is evidence that the scheme has been reaching its intended beneficiaries. Almost 76 per cent of beneficiaries were receiving their pension amount in the post office and bank accounts. In 2015, three new schemes were simultaneously launched at 115 locations in the country. These schemes were aimed at mainly for the unorganised sector and reached to 10 crore people in the country in a very short span of time (Shivangi, 2017).
In our study, the relationship between the expenditure incurred on ‘rural development’ and inclusive growth has found to be negative and significant. Fan et al. (2000) and Jha and Acharya (2011) also explained that the expenditure incurred on the growth for the rural economy in India reduced noticeably. In the early 1990s, 10.9 per cent was dispensed for rural development, which was reduced to 8 per cent in 2016. The neoliberal economic framework had turned conditions much worse as state governments had been compelled to reduce their rural development expenditure in order to reduce the budget deficit. Programmes exclusively for rural development had helped to reduce rural poverty, but its impact was negligible. This restricted the impact of rural development contribution in promoting inclusiveness.
Despite numerous efforts made by the government for the welfare of marginalised sections, they continue to suffer social and financial exclusion. Inequalities had also adversely affected the poverty eradication process, since equal access to employment and income-generating opportunities were denied to the underprivileged. Benefits of growth have not been evenly distributed. Inclusive development must encompass social inclusion as well as financial inclusion. Major dimensions of an egalitarian welfare society, such as eradication of poverty, productive employment generation, better healthcare, access to education, social protection and social welfare, have to be evenly distributed among all segments of the population (Government of India, 2012; Mukhopadhaya & Saha, 2005; Shukla & Mishra, 2013; Thorat & Dubey, 2013).
The concept of inclusive growth constituted the basic foundation of India’s economic growth policy. India has been envisaging the strategies which focused on fostering a socialistic pattern of society oriented with self-reliance, social justice and reduction of poverty. Therefore, Indian planners contemplated to jack up social sector allocations to induce inclusive growth. This paper has attempted to assess the impact of components of social sector development on inclusive growth for the period from 1985–1986 to 2015–2016. The analysis reveals a sluggish progress towards rendering the growth inclusive. Further, on measuring the impact of social sector development on growth inclusiveness, three components—‘expenditure incurred on welfare of underprivileged classes’, ‘expenditure incurred on social security and welfare’ and ‘expenditure incurred on rural development’—are found to contribute towards inclusive growth. Two out of these, viz. ‘expenditure incurred on welfare of underprivileged classes’ and ‘expenditure on rural development’ were expected to ameliorate the marginalised sections and contribute to rural development for inclusive growth. However, our results show a negative relation of these two variables with inclusiveness. The probable reasons are leakages in the process of disbursements, corruption, lack of proper management and awareness, lack of monitoring of developmental programmes and shortcomings in implementation of schemes such as favouritism in selection of beneficiaries, allocation of schemes without looking into basic needs and lack of follow-up. Earmarking of funds needs to be done effectively so as to plug the gaps in allocations and actual utilisation and circumvent squandering of scarce resources. Dev (2016) suggested that the expenditures incurred on the social sector needed to be increased. The delivery systems must be improved for social sector components. The role of states for judicious allocation of funds is considered equally important, particularly in infrastructure, health and education and agriculture, to make the growth more inclusive. Although literacy, education, health, maternal and infant mortality rates have shown improvement, the pace has been sluggish.
The development of rural India is considered imperative for the growth to be equitable and inclusive. The Government of India runs various programmes to mitigate poverty and to render growth inclusive. Social sector development programmes, such as Pradhan Mantri Gram Sadak Yojana, Indira Gandhi Awas Yojana, National Rural Drinking Water Programme, Accelerated Irrigation Benefit Programme, National Rural Employment Guarantee Programme, NRHM, Integrated Child Development Programme (ICDS), Sarva Shiksha Abhiyaan, Mid-day Meal, Total Sanitation Campaign and so on, ensured better employment opportunities with an improvement in basic amenities in both rural and urban India. However, despite such efforts, India needs to buckle up so that desired results of inclusiveness and equity are achieved. There is a lack of public awareness about programmes. Raising the level of community participation, programme design modifications, community base with strong community participation, social mobilisation through advocacy, information and communication need to be reinforced (Dhaked & Gupta, 2016).
Committees and subcommittees should be formed to evaluate the implementation of schemes for achieving the desired results. The whole ground of policy framework, which has been astutely designed by policy makers for an inclusive growth, must be clearly monitored for effective implementation. Strict monitoring and overseeing of implementation and devolution of funds to the targeted beneficiaries must be vigilantly effected. While the various measures enumerated above will help reduce the likelihood of corruption, they need to be supplemented by creating stronger mechanisms for investigating, inspecting and punishing those found to be involved in corrupt practices.
Appendix 1. Check of Robustness of Regression Model
To substantiate the results, some additional tests have been carried out. The results reveal that the selected model has no serial correlation, no heteroscedasticity and is normally distributed and well specified. These additional tests were as follows:
1. Breusch–Godfrey Serial Correlation LM Test, LM stands for Lagrange Multiplier which is Test Statistic nR2, used to Check Serial Correlation in the Model
One diagnostic test is the Breusch–Godfrey serial correlation Lagrange Multiplier (LM) test, which flogs or rejects the presence of serial correlation in the residual. The null hypothesis of the model is that there is no serial correlation up to the specified order of lag. Thus, if the model fails to reject the null hypothesis up to the lag value, then there is no autocorrelation (Kolawole, 2016).
Breusch–Godfrey Serial Correlation LM Test of Model 1
2. Breusch–Pagan–Godfrey Test
To check the heteroscedasticity in the model, the Breusch–Pagan–Godfrey test is employed. The null hypothesis of this test is that homoscedasticity is present in the series. So, if this test fails to reject the null hypothesis, then there is absence of heteroscedasticity in the residuals of the model (Kolawole, 2016).
Heteroscedasticity Test: Breusch–Pagan–Godfrey of Model 1
3. Ramsey RESET Test
The Ramsey RESET test is carried out to test specification errors and to check the linearity of the model. This test also suggested that the model is well specified. The null hypothesis of this test is that the model is correctly specified. The RESET F-statistic has a p-value of 0.3225, explaining that there is no need to reject the null hypothesis. Hence, the functional form of the model is correctly specified (EViews 10, 2017).
Ramsey RESET Test of Model 1
Specification: lnIGI C lnPOED-1 lnPOHF-1 lnPOWSS-1 lnPOHUD-1 lnPOWPC-1 lnPOLE-1 lnPOSSW-1 lnPORD-1 lnPOFSW-1
Omitted variables: Squares of fitted values
4. Jarque–Bera Test
The null hypothesis of residuals as per the Jarque-Bera (JB) test is that the residuals are non-normally distributed.
Figure 2 shows that values of the JB test and p-value at 0.5120 and 0.7741, respectively, which rejects the null hypothesis as the p-value is more than the assumed level of significance. Hence, the residuals are normally distributed. If the residuals are normally distributed, then the JB normality test should not be significant and the histogram is bell-shaped (EViews 10, 2017).

Footnotes
Declaration of Conflicting Interests
The authors declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.
Funding
The authors received no financial support for the research, authorship and/or publication of this article.
