TRADE LIBERALIZATION AND ECONOMIC GROWTH PROCESS IN INDIA: AN EMPIRICAL ANALYSIS

Abstract

Abstract:- This paper studies the relationship between the trade liberalization and economic growth process in India. The Augmented Dickey Fuller test (ADF) and Phillips-Perron (PP) tests are used to check the order of integration of the variables and at this level all the variables were non-stationary, which means that null hypothesis cannot be rejected. However, the stationarity found at their first difference of the series is significant. We apply Johansen co-integration method found 1 cointerating vector, that there exists a long run relationship between international trade openness and growth. Our Granger causality results show that causality follows from GDP to Trade Openness and support trade-led hypothesis. Results also support the idea that country may experience faster per-capita growth with a growing degree of international trade through gains in country productivity associated with availability of finance in the market. Finally, the direction of the causality results followed trade led growth. Keywords: Trade liberalization, economic growth, co-integration, India. JEL Classification: G21, E44, O16.