Import-led Growth in India

What is it about?

This article studies the import-led growth proposition in addition to the export-led growth proposition hold in India for the post-reform period. Accordingly, the short-run and the long-run impacts of exports, imports, exchange rate and trade openness on income are assessed. Besides, the possibility of reverse causality from income growth to export and that from income growth to import proposition have also been studied by estimating export-demand function and import-demand function for this period.

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Why is it important?

We have noticed some critical issues, which to the best of knowledge, have not addressed in these studies. First, the impact of imports in the long-run and short-run economic growth in India for the post-linearization regime is quite reasonable and vital. Importantly, such an issue is scantly researched. So, a comprehensive study assessing the extent of imports and exports on growth in India may be more insightful. Second, since the early 1990s, the Indian economy gradually becomes more open. Openness affects macroeconomic policy and economic growth from several dimensions. It is, therefore, pertinent to include openness in the study of ILG or ELG in India. Third, the exchange rate is an essential intermediate variable impacting trade–growth dynamics. Most of the earlier studies, however, have not considered the role of the exchange rate. Fourth, there is a dearth of studies that emphasized the post-reform period. So, a complete empirical analysis for the post-reform period of the Indian economy may reflect a more prominent picture.

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