Small Scale Industries and Economic Growth: Empirical Evidence from India during Post Economic Reforms Era

Abstract

The present study empirically investigates the causality between Growth and Exports (EXP) by small scale industries in India over the period 1991-2014, the post economic reforms era. In the present study Gross Output (GO) is used as proxy of Economic Growth. The study takes into consideration the recent advances in econometric techniques. The study shows the high degree of correlation between GO and EXP. The variables are tested for stationarity applying Augmented Dickey-Fuller (ADF) test. To determine the cause and effect relationship between GO and EXP, Granger Causality test and Vector autoregression (VAR) model have been used. Granger Causality results suggest that there is unidirectional causality between GO and EXP. The Vector auto regression (VAR) model has explained that there is a strong cause and effect relationship between the variables in the present study.