Mineral export and economic growth in India: evidence from VAR model analysis

Abstract

Mineral resource is one of the important natural resources of India which contributes to the national income through mineral export earnings and acts as an important input for the industrial sector of domestic economy. In this paper, an attempt has been made to explore the dynamic relationship among mineral export, economic growth and industrial production in India over the period from 1981 to 2010. The present study is based on secondary data which is extracted from the Reserve Bank of India database on Indian economy. We have adopted a vector auto regression (VAR) model analysis based upon impulse response function (IRF) and variance decomposition (VD) to find out the relationship among variables. The result of IRF suggests that economic growth responses positively to a shock in mining export, whereas industrial production responses in a negative way. It has been found that mining export is not contributing at large towards industrial production of India in the short run, but in the long run, a significant share of industrial production is caused by mining export. It is also found that both industrial production and economic growth explain for variation in mineral export in India in the long run.