Impact of Trade on Economic Growth in India: An Empirical Analysis

Abstract

Aims: The study aims to empirically analyse the impact of trade on economic growth in India during the period 1997–2025. Specifically, the study aims to (i) examine the trend and growth pattern of India’s trade and GDP, and (ii) assess the statistical relationship between trade and economic growth. Study Design: Quantitative analysis Methodology: The study relies on annual time-series data sourced from secondary databases such as the World Bank and the Ministry of Commerce and Industry of India. Descriptive statistical techniques are employed to analyse trends and growth rates of GDP and trade. Pearson correlation analysis is used to examine the strength of the association between trade and economic growth. To empirically estimate the impact of trade on growth, a log-linear regression model is applied, with real GDP as the dependent variable and total trade (exports plus imports) as the key explanatory variable. Results: The empirical findings reveal a strong and positive relationship between trade and economic growth in India. Total trade significantly enhances GDP, with a trade elasticity of 0.667. Exports are found to have a significant positive impact on growth, while imports do not exhibit a statistically significant effect. The extended model confirms the robustness of trade’s contribution even after controlling for gross capital formation. Overall, the results strongly support the trade-led growth hypothesis in the Indian context. Conclusion: Overall, the results suggest that policies aimed at strengthening export capacity, improving trade infrastructure, and enhancing global competitiveness can further stimulate economic growth in India. Future research may explore sector-specific trade effects and long-run cointegration dynamics to deepen understanding of the trade–growth nexus.