The Dynamics of the Relationship between Imports and Economic Growth in India

Abstract

In a developing country like India, the role of international trade is very significant. And, the relevance of export-led growth hypothesis in India has been the major issue of many empirical studies. But, the other aspect concerning the importance of imports in the economic growth of the country is yet a moot point. This article is an attempt to investigate the dynamics of the relationship between imports and economic growth in India for the period 1970–1971 to 2009–2010. Using time series techniques such as vector error correction estimates and Granger causality tests, we show the existence of a two-way relationship between import growth and income growth in the long run.