Causality between international trade and gross domestic product: the case of the Indian agricultural and manufacturing sectors

Singh, J.P. and Konya, L. (2006) 'Cointegration and causality between Indian export, import, and GDP', Asia Pacific Journal of Economics and Business, Vol. 10, pp.20-35; studied the relationship between the Indian gross domestic product (GDP), exports and imports from 1950/1951 to 2003/2004. A further logical step is to investigate the same issue for two major sectors of the Indian economy: agriculture and manufacturing. In both of these sectors there is Granger causality between GDP and total exports, imports. In particular, agricultural GDP causes imports, exports cause agricultural GDP, and any two variables jointly cause the third one. There is also some evidence for the agricultural GDP causing exports and imports causing agricultural GDP, though these results are sensitive to model specification. As regards manufacturing, there is a two-way causality between manufacturing GDP and exports, imports cause manufacturing GDP, manufacturing GDP and imports jointly cause exports, and exports and imports jointly cause manufacturing GDP, but manufacturing GDP and exports do not seem to cause imports. Finally, there is also some evidence for manufacturing GDP causing imports, but this result is also sensitive to model specification.