Incorporating Factor Productivity Gains in the Relationship between Export Growth and GDP Growth: Empirical Evidences from India

Taking cognizance of a rapidly globalising world, this paper attempts to determine the relationship between the “growth rate of exports” and the “growth rate of Gross Domestic Product (GDP)” by taking empirical evidences from India. An annual time-series data of 30 years (1992 to 2022) is taken to conduct an in-depth analysis of how export growth has impacted GDP growth after India’s New Economic Policy of 1991. The methodology of this paper leans towards a model that encapsulates the endogenous growth theory by incorporating the “growth rate of labour force” and the “growth rate of capital stock” as the independent variables in addition to the growth rate of exports. Accordingly, a multiple regression model, adjusted to make its time-series components stationary, is used. Rigorous diagnostic tests to rule out the presence of spurious regression, autocorrelation, heteroskedasticity and multicollinearity are then conducted to ensure that the estimates of the model are best linear unbiased estimators (BLUE). The resulting analysis confirms that export growth has a “positive significant impact” on GDP growth for India. This paper also finds that capital stock growth positively impacts GDP growth, but only at the 10% significance level. This paper also explains the trend of jobless growth in India during the time period, 1992 to 2022. JEL: C32, F14, F43, O40, O47