VALIDATION OF INTERNATIONAL TRADE DRIVEN GROWTH BY ESTIMATING MARSHALL-LERNER CONDITION BETWEEN INDIA AND SAARC (1997-2015) : AN EMPIRICAL STUDY.

This paper aims at scrutinizing and providing a validation of the bilateral trade of India with other SAARC countries. India enjoys a dominant share of 70% area and population among the SAARC countries thus paving way to a great intensity of trade between India and SAARC. Further acceleration to this trade is provided by the 1991 reforms of India, the two trade agreement of SAARC namely SAPTA and SAFTA. Hence, this paper attempts to understand the trade growth pattern of India with respect to its bilateral trade with SAARC by estimating the Marshall-Lerner Condition and the J-curve. For the clear understanding of the effect of SAPTA and SAFTA, the total trade pattern is estimated for 2 times periods 1997-2005 and 2006 -2015. In order to analyze the above said, the annual data of five variables namely total exports, total imports; exchange rate, domestic income of India and other SAARC (in totality) are taken from the World Bank. The analysis is done using the modern econometric techniques of Stationarity and Cointergation and OLS method to determine the elasticity using SAS. This study concludes that Marshall-Lerner Condition is satisfied in the case of bilateral trade between India and SAARC. Also, the J-curve pattern is observed. Therefore, this paper serves as a trademark improvement in the field of economics and trade and provides impetus towards future research on which the policies can be adopted in India and this will be helpful for the international trade driven growth and development.