Purpose – This paper aims to analyse the relationship between exports and non‐export gross domestic product (GDP) in the context of Indian economy during 1988‐2012. It considers export both at aggregate and disaggregated levels to examine whether export‐led growth (ELG) hypothesis is sensitive to types of goods India exports. Design/methodology/approach – The OLS‐based autoregressive distributed lag (ARDL) model has been employed to analyse the potential long‐run equilibrium relationship. Further, the error correction model within the ARDL framework is applied to examine the short‐run and long‐run causal relationship between non‐export GDP, export and other variables. The study is based on secondary data. Findings – The study indicates that at aggregate level, exports do not have any significant impact on output of non‐export sector, and therefore, it is maintained that ELG hypothesis is not valid at aggregate level in India; when the authors disaggregate exports into merchandise and services exports, the latter has been found to have positive spillover effects on non‐export sector of the economy. However, the association between merchandise export and non‐export GDP is found to be statistically insignificant. When the authors further disaggregated merchandise exports, the authors observed that primary‐product export has a negative association with non‐export GDP, but export of manufacturing products found to have a significant positive impact on non‐export GDP. Finally, export of petroleum product shows a negative long‐run association with non‐export GDP, but the association is statistically insignificant. Originality/value – It is not the case that India can simply increase its exports per se and be sure of witnessing economic growth, but instead it is the composition and the concentration of these exports that matters.
Journal of Chinese Economic and Foreign Trade Studies – Emerald Publishing
Published: Jan 28, 2014
Keywords: India; ARDL model; Export composition; Export‐led growth; Non‐export GDP
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