Causal Relationship Between Saffron Exports and Agricultural GDP : There is a causal relationship between exports and agricultural gross domestic product (GDP) which reflects the long-term relationship between the two. The relationship between international trade and economic growth has always attracted the attention of economists. An increase in GDP is always desired by the economy (Shombe, 2005).
Export-driven growth has been highly emphasized and stated to be important to growth and development plans and approaches in all recent empirical studies on growth and development as it promotes growth and development in Total Factor Productivity. Moreover, it increases FDI flows in countries, which in turn increases productivity levels and reduces deadweight losses in an economy.
Agricultural exports drive agricultural value added at the country level. There is a statistically positive relationship between saffron exports and added value in agriculture (Mehdi & Reza, 2012).
Different econometric models for different time series and periods such as Johansen cointegration technique, Automatically Regressive Distributed Lag Model and other forecasting models allow us to use relationships as a good business cycle analysis and forecasting tool, estimating long term relationships between economic variables.
Cointegration of several economic series shows the existence of a long-run or equilibrium relationship between two or more economic series even though each series is considered an integration of a first-order process, I(1) (Shin; 1991).
These models allow us to estimate the long-term relationship between agricultural exports and value added in agriculture, thereby increasing agricultural exports in the long run. Similarly, this econometric model allows us to estimate the long-term relationship between saffron exports and value added in agriculture thereby driving saffron exports in the long run.
It has been found that a one percent change in the rate of saffron exports causes more than a one percent change in agricultural value-added growth (Mehdi & Reza, 2012). Therefore, the export of saffron is considered a significant value-added aspect in agriculture and economic growth.
Value added in the agricultural sector is a function of the rate of absorption of the export sector. That is, if the income derived from the export sector can be spent on vital and productive investments in general and agriculture in particular, it will undoubtedly result in value added growth in the economy. Therefore, the government should encourage export-driven growth.
Saffron is India’s most important commercial crop cultivated in Jammu and Kashmir. It is an important horticultural crop with greater efficiency and wide market. The government of Jammu and Kashmir should promote the export of horticultural crops in general and commercial crops such as turmeric in particular as it will increase agricultural GDP significantly.
If we don’t encourage export-driven growth, we will see a decline in the share of agricultural exports in the agricultural sector. Promoting exports through export promotion measures, of course we will increase the economic viability and financial viability of important sectors in general and the agricultural sector in particular.