The relationship between exports and economic growth has been analyzed by many empirical studies in the past. This paper examines the sources of economic growth for India for the period 1980 to 2020. It empirically investigates the relationships in the short run as well as the long run between exports and GDP, exports and GDP net exports. The latter half of the paper focuses on assessing the impact of diversification of exports on the growth of GDP, instead of just considering the level of exports. Using the inverse of the Herfindahl index to construct the diversification index, both short and long-run relationships between diversification and GDP growth are tested. Relevant variables such as Foreign direct investment, Capital formation, Human Capital (Secondary Enrolment ratio), etc. are used in the analysis. The following hypotheses are tested in this paper. (i) whether exports, imports, and GDP have a long-run relationship using the Johansen cointegration test; which showed no evidence of a long term relationship between exports and GDP growth, using a variety of control variables (ii) whether exports and GDP are cointegrated using the Breitung test; which also provided evidence against existence of a long term relationship (iii) if export growth Granger causes GDP growth; where through the Granger causality test, it was found that exports granger cause GDP growth but GDP growth does not granger cause Export growth (iv) whether diversification of exports has an impact on the growth of GDP; which through the use of the inverse of the Herfindahl index, evidence was found against the growth of GDP through diversification of exports (v) whether factors such as human capital and foreign investments cause an impact on GDP growth, where it was found that human capital and FDI have a positive impact on the GDP growth. Impulse response functions are also drawn for change in exports and diversification of exports, to assess the impact of macroeconomic shocks on the economic system, where it can clearly be seen that a one SD shock in exports, caused a change in the GDP, which eventually died out, indicating a more short- term impact and not long-term impact.
Naga Lavanya Desiraju (Wed,) studied this question.