اثر قوانین و مقررات تجارت بر عملکرد رشد هند

This study investigates the effect of terms of trade on economic growth of India by using the annual time series data from the period of 1980 to 2010. The ARDL bound testing cointegration confirms the significant positive relationship between terms of trade and economic growth in the long run as well as in the short run. Results of Granger causality, Toda and Yamamoto Modified Wald causality and variance decomposition tests confirm the bidirectional causal relationship between terms of trade and economic growth in India. Rolling window estimation indicates that the terms of trade is having positive long-run coefficients throughout the sample period. Results of CUSUM and CUSUM of square suggest that there is no structural instability in the residuals of equation of economic growth in short run. It is suggested that beneficial terms of trade is better for economic growth in India. At this stage we can set the direction of future research that the relationship between commodity groupwise and countrywise bilateral terms of trade with economic growth should be analyzed. These results would be helpful for policy makers of India to frame growth enhancing countrywise as well as commodity-wise trade policies.

In India during the last three decades, trend shows that terms of trade has improved. In the 1980's the average terms of trade was 84, in the 1990's it increased to 105 and in the decade of 2000 the average terms of trade marginally improved and became 107. Similarly, in the 1980's the average growth in real GDP was 6%, in 1990's it again sustained at 6% and in the decade of 2000's in increased to 7.3%. The question is that, is the commodity terms of trade correlated with economic growth? This study examines this question by using long time series annual data of India covering the period from 1980 to 2010. Most of the empirical studies have been conducted under Prebisch-Singer (PS) hypothesis.2 Perbish-Singer hypothesis3 argues that the terms of trade of primary product specialization countries will weaken over time as compared to the countries that specialize in manufactured goods. Declining of terms of trade is one of the main reason of income gap between developed and developing countries. Increase in terms of trade would lead to increase in investment and thus economic growth will increase. Many studies have been conducted to find Herzberger–Laursen–Metzler (HLM) effect.4 HLM effect5 argued that the declining in terms of trade will lead to reduce the real income and lower income will lead to lower savings and investment. Consequently, it affects the current account. Jawaid and Waheed (2011) explain the channel between terms of trade and economic growth. According to them, increase in terms of trade results in efficient allocation of resources which leads to high productivity and economic growth. Higher economic growth makes ground for a country to move their resources to research and development and this leads to quality improvement in the country. Consequently, export prices increase resulting to further improvement in terms of trade. In most of the empirical studies cross country data6 has been used to analyze the relationship between terms of trade and economic growth, India is mostly not included in these cross country studies. However, some time series are also done on the same subject.7 The objective of this study is to examine the effect of terms of trade on economic growth of India. The rest of the paper is organized as follows: following introduction Section 2 reviews some selected studies, Section 3 discusses empirical strategy, Section 4 shows estimations and results, Section 5 shows results of rolling window estimation, Section 6 discusses the results of cumulative sum and cumulative sum of square estimations, Section 7 shows the results of causal relationship between terms of trade and economic growth and the final section concludes the study and provides some policy implications.

This study investigates the effect of terms of trade on economic growth of India by using the annual time series data from the period of 1980 to 2010. The ARDL bound testing cointegration confirms the significant positive relationship between terms of trade and economic growth in the long run as well as in the short run. Results of Granger causality, Toda and Yamamoto Modified Wald causality and variance decomposition tests confirm the bidirectional causal relationship between terms of trade and economic growth in India. Rolling window estimation indicates that the terms of trade is having positive long-run coefficients throughout the sample period. Results of CUSUM and CUSUM of square suggest that there is no structural instability in the residuals of equation of economic growth in the short run. It is suggested that beneficial terms of trade is better for economic growth in India. At this stage we can set the direction of future research that the relationship between commodity groupwise and countrywise bilateral terms of trade with economic growth should be analyzed. These results would be helpful for policy makers of India to frame growth enhancing countrywise as well as commodity-wise trade policies