An Analysis On The Proportional Relationship Between Trade Openness And Economic Growth In India

Sneha Susan Thomas, Presidency University

ABSTRACT

Examining the causal link between Trade Openness, Financial Development, and Economic Growth in India over the post-liberalization period of post 1991 is the aim of this article. Growth is also thought to have a big influence on private credit, which is thought to lead to trade openness. Trade openness is causally impacted by financial development (private credit and money supply), which allocates resources efficiently to support both technical advancement and productivity growth. Therefore, the results lend credence to the growth-led trade theory. The neoclassical growth model links technical advancement to growth, which is made feasible by well-considered economic policies like foreign direct investment (FDI) in a number of national industries. India appears to be leading the way in this regard. This study looks at the impact that foreign direct investment (FDI) plays in the economic process in developing nations with varying trade policy regimes, using a novel paradigm from growth theory. The positive impact of foreign direct investment (FDI) on enhanced economic growth is stronger in countries that pursue an outwardly oriented trade policy than it is in those that adopt an inwardly oriented policy, is tested in this paper using cross-section data pertaining to a sample of 46 developing countries.

Keywords: Open economy, Foreign trade policy, Growth of economy.