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Theoretical and Applied Economics
No. 3 / 2020 (624), Autumn

Does exchange rate has any impact on economic growth in India? An empirical analysis

Khulsum SHAIK
Dr. Abdul Haq Urdu University, India
Babu RAO G
Dr. Abdul Haq Urdu University, India

Abstract. In the present globalization economic world exchange rate plays a major role in every countries economic activity. Here, Exchange rate policy has been identified as one of the endogenous factors that can affect the economic performance of a nation. Exchange rate plays a key role in international economic transactions because no nation can remain in isolation due to varying factor endowment. Movements in the exchange rate have ripple effects on other economic growth. The study used secondary data and which was collected from the World Development Indicators data base respectively and were analysed. The study used the Ordinary Least Square (OLS) method of estimation for data covering the period from 1990 to 2017. The results from the econometric analyses show that there is a short-run relationship between exchange rate, inflation rate, interest rate and GDP. The result obtained from the unit root analysis indicates at least one time series variable property is stationary. The study concludes that in India, the factors that influence the level of growth rate are extent of Exchange rate and its variables. Based on the findings, from the Granger causality investigation procedure at 5% critical value are EXCH, INT, INF, IMP and EXP among other variables affects economic growth. The study recommends the need to be technological incline in all sectors of Indian economy, excess and over budgetary inflation and implementation should be cut to barest minimal level to avert the ideal of external borrowing which most consequently result in external debt and services. The Indian government should show to the path of redirecting its investment profile by channeling it towards capital projects of the government.

Keywords: exchange rate, Ordinary Least Square (OLS) structural adjustment programme, Granger causality test, foreign currency, economy.

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