IMPACT OF EXPORT AND IMPORT ON ECONOMIC GROWTH IN INDIA

In this paper we investigate the impact of exports and imports on economic growth over the period 1970-2012 in Indian economy. We try to explain how export and import leads to a higher growth in India. We know that economic growth is measured by increase in GDP. This paper tries to find out the relationship among export, import and GDP. It shows that there is a cointegrating relationship between GDP, export and imports when the real GDP is a dependent variable, total export and total import are considered as an independent variable. The main findings of this paper are that growth rate of GDP depends positively on growth of both export and import. According to the analysis, the increase in both exports and imports in India increases the country's gross domestic product (GDP). Every 1% increase in exports in the long run leads to a 0.1731% increase in gross domestic product; on the other hand every 1% increase in import in the long run leads to a 0.1504% increase in gross domestic product. The long-run effect of exports is stronger than the short-term effect. We also find that Imports have a negative impact on economic growth in the short run but have a positive effect on the long run