Export Growth of Textiles and Economic Development in Pakistan and India-A Comparative Study

This paper investigates the difference between export of textile of Pakistan and India. Export growth is a source of economic development, especially for third world countries. Data of export of textile of India and Pakistan is taken, (from FY2001 to FY2007). Paired t-test is applied to check the significant difference between exports of two countries. Result shows that export of India is greater than Pakistan which leads to increase in its economic development.

Textile sector plays an important role in both Pakistan and India, as it is a source of increase in economic development with the increase in export. The main objective of this study is to know about the difference between contribution of textile export in economic development of Pakistan and India. As Pakistan and India both are labor intensive countries, increase in textile production can lead to increase in employment and GDP of the country. Textile products are one of the basic necessities; its production on large scale can be a blessing for the economy of developing country.
KEYWORDS: export growth, economic development LITERATURE REVIEW: Roll and Tallbott (2001) found that "Once a developing country government establishes the rules to affair game and ensures their enforcement, it would be well advised to stand back and enjoy the self generating growth". During the last 15 years it has become very important to govern strongly and bring innovations in every country. Michaely (1977), Balassa (1978) and Tyler (1981) among others, uses cross-section data of different countries for finding the relationship between export growth and economic development. Michaely (1977) uses the spearman's rank correlation to detect the relationship between export growth and economic development based on a cross -section data of 41 less developed countries. According to this study, there is a positive relationship between export growth and economic development only when country is achieving some minimum level of economic development. Balassa (1978) argues that, in an inter-country context, the correlation between export growth and economic growth may also effects on increase in export with the changes in income and cost. The study develops several measures of exports and income to explore the relationship between export expansion and econo mic development in a sample of 11 developing countries having a substantial industrial base. The result shows positive relationship between export growth and economic growth. Nandi (1991) applies the Granger Causality Tests to examine the export -led growth hypothesis for India for the period 1960-1985, and finds evidence of unidirectional causality from export growth to economic growth. Based on a longer data set , Bhat (1995) re-examines the export economic growth nexus for India by utilizing the error-correction modeling approach, and finds evidence of bi-directional causality between export growth and economic growth. Using the same methodology, Ghatak and Price (1997) conclude that export growth is Granger-caused by output growth in India. It is noteworthy that these results are in sharp contrast to Xu (1996), who obtains rejection of the export-led growth hypothesis for India for the period 1960-1990. Khan, (1995 have found strong evidence of bi-directional causality between export growth and economic growth for Pakistan. Anwar and Sampath (2000) examine the export led growth hypothesis for 97 countries (including India, Pakistan and Sri Lanka) for the period 1960-1992 using co integration and Granger causality tests. They have found the evidence of unidirectional causality in the case of Pakistan and Sri Lanka, and no causality in the case of India. This is in contrast to Kemal,(2002), who has found a positive association between exports and economic growth for India as well as for other economies of South Asia. Evenson (1995) and Westphal (1981) examined that economic development depends upon innovations, successful adoption of foreign technology. Since technologies promote new ways of raw material control, introduce new production methods, which bring new changes in the production process, production scheduling, repairing and maintenance, and quality control.

METHODOLOGY AND DATA:
The present study was conducted to know the difference between export of textile of Pakistan and India and. The data is collected from reserve bank of India and fiber2fashion.com. Paired t-test (assuming equal variance) is conducted to find out the difference between export of Pakistan and India.

EXPORT GROWTH OF TEXTILES AND ECONOMIC DEVELOPMENT IN PAKIST AN AND INDIA;
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Hypothesis:
H 0: There is no significant difference between export of Pakistan and India.

Result:
By conducting paired t-test on excel it is clear that export of India is greater than Pakistan, because mean of textile export of India is 12700 and of Pakistan is 7016.67. T-critical= 2.23 and t stat = 3.71, which is greater than tcritical, conclude that we reject H 0 .

Reasons:
There are lots of reasons which results in declining export of Pakistan. Some are as follow:  Pakistan has low quality of cotton because it is lack of R&D programs.  Due to increase in inflation, interest rate and depreciation of Pakistani rupee the cost of production is increasing.  Global recession is also a major reason.  Electricity and gas crisis also increasing the cost of production.  Tariff on electricity and removal subsidy causing major loss.  As Pakistan has low quality machinery, there is a need of new investment to increase the production and export.  Internal conditions of Pakistan are getting worse day by day due to which FDI is decreasing that affects a lot to textile sector.
All these reasons are decreasing the export of textile as well as employment level of Pakistan.

RECOMMENDATIONS:
There are some suggestions to bring improvement in textile sector of Pakistan.  Need to introduce R&D programs.  There should be awareness about new technologies.