Investigating the long-term dynamics of basmati rice and agricultural exports in India: A var approach

Abstract

Basmati rice holds significant importance in India's agricultural exports due to its high demand and premium pricing in international markets. This study investigates the relationship between basmati rice exports and agricultural exports in India to test the export-led growth (ELG) hypothesis, which posits that exports drive economic growth. Utilizing the Johansen cointegration method and a Vector Autoregressive (VAR) model, the analysis confirms a stable long-run relationship between the value of basmati rice exports and total agricultural exports. Variance decomposition reveals that while initial forecast errors in each variable are primarily due to their own variations, over time, agricultural exports significantly influence basmati rice exports, accounting for up to 76 percent of the forecast error. This interdependence suggests that policies aimed at stabilizing and promoting agricultural exports can substantially enhance basmati rice export performance, thereby supporting broader economic development.