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Causal Relationship Between Saffron Exports and Agricultural Gdp

Binish QadriExpert Author Binish QadriThere is a causal relationship between exports and agriculture gross domestic product (GDP) reflecting the long-run association between the two. The relationship between international trade and economic growth has always caught the attention of economists. The rise in GDP is always desired by economies (Shombe, 2005). Export-led growth has been heavily emphasized and declared important to growth and development plans and approaches in all recent empirical studies on growth and development because it augments growth and development in Total-Factor-Productivity. Furthermore, it increases FDI flows in countries, which in-turn upsurge productivity levels and cut dead weight loss in an economy.

Agriculture export drives value additions in agriculture at the country level. There is a statistically positive relationship between saffron export and value additions in agriculture (Mehdi & Reza, 2012). Different econometric models for different time series and periods like Johansen cointegration techniques, Auto Regressive Distributed Lag Model and other forecasting models allow us to use such relationships as a good tool of analysis and forecasting of the business cycle, estimating the long run relationship between economic variables. Cointegration of multiple economic series suggests that there is a long run or equilibrium relationship between two or more economic series even though each series is considered to be an integrating of the order one, I(1) process (Shin; 1991). These models allow us to estimate the long run relationship between agriculture exports and value additions in agriculture thus, boosting agriculture exports in the long run. Similarly, these econometric models allow us to estimate the long run relationship between saffron export and value additions in agriculture thereby encouraging saffron exports in the long run. It has been found that one percent change in saffron export rate leads to much more than one percent change in agricultural value added growth (Mehdi & Reza, 2012). For that reason, saffron export is considered as a significant aspect of value additions in agriculture and economic growth. Value additions in the agriculture sector is a function of the rate of absorption of the export sector. It means that if the incomes attracted from the export sector can be spent on vital and productive investments in general and agriculture in particular, it will undoubtedly generate value-added growth in the economy. Therefore, the government should promote export-led growth.
Saffron is the most important cash crop of India which is cultivated in Jammu and Kashmir. It is the important horticulture crop with greater efficiency and wide market. Jammu and Kashmir government should promote exports of horticulture crops in general and cash crops like saffron in particular because it will increase agricultural GDP to a great extent. If we won’t encourage export-led growth, we will witness declining share of agriculture export in the agricultural sector. Promoting exports through export promotion measures, we will surely enhance the economic viability as well the financial viability of the important sectors in general and agriculture sector in particular.

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