Role of exports in economic growth: Evidence from India

The study attempts to examine the causal relation among export growth, inflation, foreign direct investment and real GDP growth rate for the period 1990–91 to 2018–19 using Vector Auto Regressive (VAR) model and Granger Causality test. Both the statistical techniques employed show similar results pertaining to the causal relationship among the variables selected for the study. The results show that FDI & Real GDP growth have positive effect on export growth and there is no evidence of inflation alone causing export growth, but inflation along with FDI and Real GDP cause the Export growth. There is also evidence that export growth, inflation, real GDP growth together cause FDI. The results also indicate that none of the aforementioned economic variables either individually or jointly cause real GDP growth. The authors opine that slow growth in exports had been compensated by domestic demand and services-led growth in the process of economic growth during the period of study. The study stressed the need for introducing structural reforms to enhance the competitiveness of Indian products in the international markets. The focus should be on designing a new strategy for technology-driven export-oriented sectors as the export stability is positively associated with economic growth.

Highlights

The paper aims at analyzing the role of exports in economic growth and suggesting the suitable recommendation to the technology driven export-oriented sectors.