The role of foreign trade on economic growth and development in Indian and Iranian economies

Abstract

This study entitled “the role of foreign trade on economic growth and development in Indian and Iranian economies.” Basic data for India were collected from Economic Surveys, Government of India and computed. Basic data for Iran were collected from central bank of Iran, (www.cbi.ir) and computed. Data were collected for the period 1970-2004. Basic economic variables that were considered in this study are Exports, Imports, Trade Deficits, and Current Account deficits, Foreign Exchange Reserves, External Debt and GNP. We have computed ten different ratios. They are (1) Export to Import [X/M] (2) Export to GNP [X/GNP] (3) import to GNP [M/GNP](4) external Debt to GNP [ED/GNP] (5) external Debt to Export [ED/X] (6) Foreign Exchange reserves to GNP [FER/GNP] (7) trade Deficits to Exports [TD/X] (8) trade deficits to Imports [TD/M] (9) Trade deficits to Foreign Exchange Reserves [TD/FER](10) Current Account Deficit to GNP [CAD/GNP]. In order to make analysis of ratios and external variables regarding foreign trade we have used two stages. First stage: I. trend equations have been fitted to estimate foreign sector ratios (H1: β<1) II. We have also used means – test between ratios of external section (H1: μ1>μ2). As Iran was at war “between” 1980 to 1987 we have also used Dummy variable in models for Iranian Economy. Our analyzing in this stage based on two periods (pre-liberalization and post-liberalization). Second stage: I. is there a long-run equilibrium relationship between GNP, Exports and Imports? II. Is there a long-run equilibrium relationship between Exports and Imports? After post-liberalization according to findings India have created better condition, and Iran have not create better condition, but after war with five-year development plans especially in third five-year development plan have created better condition for economic growth . Iranian export has a better condition in relation to Indian export in economic growth.