Causal Relationship between Exports and Economic Growth in India and China – A Comparative Study

In recent years, India and China has witnessed tremendous growth in exports with internal and external liberalisation. The export promotion policy has become an important stimulus of economic growth of the two nations leading to the dramatic changes over the last two decades. In this back drop the paper makes an attempt to examine the causal relationship between economic growth and export in India and China. The annual data from 1980 to 2013 is considered by employing Granger Causality co integration technique. The causality has been checked to see whether export causes growth or vice versa. The result shows that there is a long run relationship between economic growth and exports in both the nations. The Granger Causality test further confirms that in India, there is a bi-directional cause between the economic growth and exports. In China it is export which drives economic growth.