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Agricultural Trade and its Linkages to Macroeconomic Variables in the Indian Economy

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  • Deepika M G

Abstract

This paper articulates that India has very little share in the world trade of agricultural commodities. This paper states that the importance of external trade lies with the linkage it has with the other sectors of the economy like the terms of trade, level of prices, trade balance, etc., which act as a mechanism to enhance growth in the economy. Further, this study examines the relationship between exports and growth in GDP in agriculture and finds that there is a two-way causation between the two, seen through the trends in simple growth rates and also through the results of the Granger Causality Test. An increase in export growth is preceded by a favorable growth in GDP in agriculture. But establishing the causality from exports to growth seems to be difficult, since the variables affecting the growth in agriculture are many. According to this study, the period of early 1990s and mid 1990s was favorable for all, as against the late 1990s, which showed a declining growth in prices, capital formation, exports and the GDP. This study also points out that the terms of trade has shifted in favor of agriculture in the 1990s, which seems to play a greater role in inducing the growth in the agriculture sector as well as in the economy.

Suggested Citation

  • Deepika M G, 2006. "Agricultural Trade and its Linkages to Macroeconomic Variables in the Indian Economy," The IUP Journal of Agricultural Economics, IUP Publications, vol. 0(1), pages 7-21, January.
    • Handle: RePEc:icf:icfjag:v:03:y:2006:i:1:p:7-21
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