An Empirical Study of Nexus between Export Performance and Economic Growth

Abstract

The relationship that exists between export and economic growth has always been a controversial issue. This paper investigates empirically how does the increasing exports affect the economic growth in India and whether the growth of India is a function of exports or not. The result of the paper via regression analysis highlights the fact that the increasing export has definitely its positive influence on the growth of Indian economy but in addition to it, there are several factors that contribute to the growth & development of the country. This paper also investigates the causal relation between export and GDP from 1961-2016 by using the data from WDI indices 2019. Time series data has been used to see whether the increasing real exports and real GDP are co integrated or not. The empirical results show the presence of cointegration relationship existing between exports and GDP. The long run relationship is also justified by VEC Model. The Granger Causality results show the bidirectional causality between export growth and economic growth in the long run. It means bi directional hypothesis is supported which suggests that growth of exports is bringing growth of GDP and growth of GDP helps in growth of exports so both are complementary. So, policy makers should take steps to enhance GDP which itself will help in growing the exports from India. The findings of the study will also help understanding why there is need for export promotion which will help in achieving sustainable growth in the long run.