On productivity differential of export composition: evidence from India

Date28 January 2014
DOIhttps://doi.org/10.1108/JCEFTS-01-2013-0002
Pages38-50
Published date28 January 2014
AuthorAvijit Debnath,Niranjan Roy,Priyanka Dasgupta,Nazira Mazumder
Subject MatterEconomics,International economics
On productivity differential
of export composition:
evidence from India
Avijit Debnath, Niranjan Roy, Priyanka Dasgupta and
Nazira Mazumder
Department of Economics, Assam University, Silchar, India
Abstract
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.
Keywords India, ARDL model,Export composition, Export-ledgrowth, Non-export GDP
Paper type Research paper
1. Introduction
On account of a serious balance of payments crisis, India adopted a series of trade
reforms since 1991. These include sharp cutbacks in the number of goods controlled by
licensing and other non-tariff barriers, reductions in export restrictions, and tariff cuts
across all industries. As a result, Indian economy has become more outward looking in
post nineties. Export ratio which was merely 3.5 percent of gross domestic product
(GDP) in early 1970s and 5 percent in late 1980s jumped to around 17 percent in 2012 in
just ten years time. Similarly, import as ratio of GDP increased from 3.6 percent in 1971
to 28.5 percent at the end of 2011-2012. These in turn caused trade ratio to increase from
7 percent of GDP in 1971 to almost 46 percent at the end of 2012[1]. This clearly indicates
that India’s trade integration has dramatically increased in liberalization period.
However, this is only a part of the story. If we look at the composition of export, we would
observe that the commodity composition of export baskets has also changed radically
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1754-4408.htm
Received 23 January 2013
Revised 14 June 2013
Accepted 17 June 2013
Journal of Chinese Economic and
Foreign Trade Studies
Vol. 7 No. 1, 2014
pp. 38-50
qEmerald Group Publishing Limited
1754-4408
DOI 10.1108/JCEFTS-01-2013-0002
JCEFTS
7,1
38

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