THE PROXIMITY OF MUTUAL FUNDS DURING ECONOMIC GROWTH. Ratheesh.K.Nair &Abdul Salam K*

Abstract

Abstract A mutual fund is a mechanism for investors to invest their money. It plays a significant role in establishing a relationship between savings and economic growth by mobilising savings and investing them in productive ways. Long-term, higher economic growth guarantees more freedom to work, save, and invest. Retail investors will thereafter invest in mutual funds at an increasing rate, mobilising significant financial resources for the Indian financial market's long-term, stable, and sustainable expansion. By pooling money from consumers and investing in the stock and debt markets, mutual funds enable portfolio diversification and risk minimization. The mutual fund sector is the most important resource mobilizer in this process. In its capacity as a resource mobilizer, industry moves exportable surplus from economies with surplus-spending units to those with deficit-spending units. Such an event is quite relevant for India, a developing nation. The mutual fund sector is thought to operate as a resource mobilizer, lowering transaction costs and boosting investor purchasing power to support genuine economic growth. The purpose of this research was to investigate the dynamics of the connection between mutual fund inflows and real GDP growth in India from 1990–1991. Using time-series econometric methodologies with cointegration and error-correction estimations, the author concludes that Granger causes domestic product growth causes mutual fund resource mobilisation in the long run but not in the short run. This finding has important policy implications because it suggests that more significant resource mobilisation in mutual funds will contribute to India's real economic growth.