Do terms of trade affect economic growth? Robust evidence from India

This study extends the previous empirics and conducts a comprehensive analysis of effects terms trade (TOT) on economic growth in large emerging market economy, India, which experienced tremendous transformation from persistently low-growth economy 1950s–1970s to moderate-growth 1980s then high-growth following onset inclusive reforms beginning 1990s. The TOT remained unfavourable during 1950s, witnessed boom mid-1960s mid-1970s, showed sharp downturn mid-1970s mid-1980s, displayed deteriorations again late 1990s 2017–2018. model estimated one-regime setting with no structural break sample-split multiple breaks—over both “long” “short” time periods—supports presence cointegration among variables suggests positive significant long-run growth. diversification trade, continual improvements quality export products, development high value-added industries are essentially crucial induce long-term TOT. need be accompanied by financial sector, expansion external acceleration domestic investment.