Causal Relationship between Exports and Agricultural GDP in India

Abstract

This article is an attempt to investigate the causal relationships between agriculture gross domestic product (GDP) and exports in India on the basis of time series data for forty year from 1970–1971 to 2010–2011. The empirical evidence reveals that the null hypothesis that the variables have a unit root is not rejected in the case of all the variables under study. However, the null hypothesis that the first-differences of these variables have a unit root is rejected. Hence we conclude that these variables are integrated of order one (I (1)). On the basis of trace and maximum eigenvalue tests of Johansen technique of cointegration, the study found that agricultural GDP and total exports of India were found cointegrated. The findings of the study have significant implications for India’s economic policy as both the variables have shown a strong long-run relationship. The study further found the existence of uni-directional Granger-causality between the total exports and agricultural GDP of India, which is running from total exports to Agricultural GDP.