“RELATIONSHIP OF EXPORTS AND MSMES IN INDIA: AN ECONOMETRIC STUDY”

Abstract

Micro, small and medium enterprises (MSMEs) have been accepted as the engine of economic growth and for promoting equitable development. MSMEs constitute over 90% of total enterprises in most of the economies and are credited with generating the highest rates of employment growth and account for a major share of industrial production and exports. The paper highlights the role of MSME sector in India, its growth patterns and contribution in Indian economy. This study examines the relationship the MSMEs and exports in India. To gauge this, data is tested for stationarity using Augmented Dickey Fuller Test and Philip Perron and the study uses the more recent data analysis technique like Johenson’s cointegration approach, Granger causality/Block Exogeneity Wald tests to conclude the objective of the study. The data span for the study is from 1982-2010. Amongst the key results it is found: that there is a cointegration between them confirming a long term relationship .The results of a long run relationship between them is confirmed by Granger Causality and VAR Granger causality/Block Exogeneity Wald tests showing bidirectional causal relationship. Therefore this study concludes by recommending, the strategy to improve the manufacturing ability of the MSME sector is expected to improve the competitiveness of their products and enhance exports. Higher value addition, skill development and training, thrust on standardization and quality, access to affordable credit, impetus for innovation, etc. would be essential elements in this endeavour.