ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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India s Balance of Payments and Exchange Rate Behaviour since 1971-A New Approach

A study of India's external accounts over the period 1971-91 shows that India's export earnings, private foreign remittances, import costs, etc, items of balance Of trade and payments are stochastic processes with no tendency to return to any deterministic trend There is no fundamental force inherent in the system that creates the problem of balance of trade and payments deficit. Furthermore, these series do not have any meaningful relationship with India's nominal and real exchange rate behaviour WITH the development of unit root' econometrics, there is some debate whether macroeconomic series have deterministic trends or whether these are non-stationary stochastic processes with no tendency to return to a trend line. In the light of this literature, the present study seeks to reexamine India

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