Causal Nexus between Exports and Imports in India in the Globalized Era

The paper probes the nexus between exports and imports in India during the globalization period of 1990s and early 2000s. The test has been undertaken on the monthly data of exports and imports from 1991-92 to 2004-05. The empirical evidence is based on unit root test, cointegration test and causality test. The unit root test confirmed that both exports and imports are stationary at the first difference level. The cointegration test established that both exports and imports are cointegrated with each other, indicating the existence of a long-term relationship between the two. The Granger Causality test supported that there exists a bi-directional causality between exports and imports in India during the period under study. This paper suggests that government should go in for the `openness' policy in the interest of increasing foreign trade.