Margin: The Journal of Applied Economic Research

The literature on export-led growth in India is voluminous but inconclusive. This study re-examines the export–output relationship over the 1960–2009 period, and finds strong evidence of export-led growth for India. While there is no long-run cointegration relationship between India’s exports and output, tests of causality and impulse responses show a significant positive impact of export growth on output growth in the short run. Autoregressive models of India’s output growth also reveal the significant role of export growth over the same period. This result remains robust regardless of testing exports with different measures of output. The short-run impact of export on output, however, becomes insignificant in all types of estimation once the sample is reduced to the pre-liberalisation era from 1960 to 1991. Hence, liberalisation appears to have significantly contributed to export-led growth in India. We work with quarterly data as well over the liberalisation regime from 1996Q2 to 2010Q4 and find consistent results on export-led growth for India. Thus, export-led growth appears to be a liberalisation phenomenon for India. These findings have implications for other developing economies that aspire to grow fast but confront dilemmas with trade liberalisation policy.

JEL Classification: F41, F43, C32, O53

This article considers two aspects in the Reserve Bank of India’s (RBI) first set of reports on financial stability. First, the reports fear sudden and large flows of foreign capital, and rightly so. However, the focus of policy makers has been on foreign exchange reserves and on capital controls to some extent. This article explores the use of an additional instrument—the international credit line. Second, this article reconsiders the reasons for the correlation between stock prices and capital flows. There is some misunderstanding in the interpretation of the evidence. Finally, it is suggested that the government should gradually move in the direction of ‘prescription financial products’ to contain excessive volatility in financial markets.

JEL Classification: F33, F41 and G01

The study applied recent advances in propensity score matching methods to assess the impact of microfinance on household income and savings. Results suggest that overall programme participants’ benefit incidence is indeed pro-poor. With respect to both household per capita income and savings, programme participation definitely has a positive impact for all low-income households. Consequently, this article’s findings have several important policy implications. The large positive impact of participating in microfinance programmes on household income and savings suggest that microfinance programmes may improve household status in terms of wealth. The regressive effect on household per capita income suggests that poorer households do not feel as much the effects of the intervention compared to richer households. The policy implication of this regressive effect might be that for the poorest programme participants, the availability of programme loans and savings schemes may be not sufficient to become highly productive in income-generating activities. The finding of participation in microfinance programmes not being highly effective in terms of savings for richer households highlights the importance of a robust and accurate targeting mechanism for the microfinance programme in Sri Lanka. Against the backdrop of these findings, policy planners and microfinance practitioners could re-examine the targeting approach of microfinance in Sri Lanka. Finally, the principal message that emerges from the study is: there are quantitatively non-negligible, average gains from microfinance on household savings and income, especially for the poor.

JEL Classification: O16, C14, C21, G21

This study examines the determinants of firms’ liquidation and acquisition in the Indian electronics industry during the period 1990–2006. It is argued that liquidation and acquisition are alternative modes of exit. Therefore, these modes of exit might have different determinants. To explore this possibility, a multinomial logistic (MNL) regression model is estimated using cross-sectional data of 540 firms. We find that the effects of age, size, leverage, innovative competence and profitability are significant for the likelihood of liquidation. In contrast, the effect of profitability was found insignificant for the likelihood of acquisition. Moreover, the effects of size and leverage are dissimilar across the exit modes, that is, large firms are more likely to be liquidated but less likely to be acquired, and high leverage firms are more likely to be liquidated but less likely to be acquired. The findings of this study show that the determinants of liquidation and acquisition modes of exit are different in the Indian electronics industry.

JEL Classification: C25, G33, G34, L63