An Econometric Study of Indian Export and Import of Black Gold (oil)

The paper tries to analyse the export and import of black gold (oil) with respect to the Indian scenario. The study extensively tries to capture the trends over the last four decades. Existing stuff primarily focuses on real GDP, exports, imports and share of exports. Unlike the existing papers this study has made an attempt to pin down the issue of export and import of oil, petroleum and the related products. In such a backdrop we have considered three variables - export of oil, import of oil, and GDP at constant prices for the Indian case. It has been found that all three time series data are integrated of order one. In what follows the cointegration analysis was done to show that the bivariate relation between exports and imports of oil is negative. So taking their first difference, an appropriate VAR specification was proposed. However, the bivariate cointegration results were positive for import of oil and GDP and so were the trivariate results for the three variables. This result interestingly corroborates Milton Friedman's theory of permanent income hypothesis. This allowed us to set up the vector error correction (VEC) model. The Granger causality tests were also carried out as a natural procedure. In the end, the paper also points to some policy implications.