Published Online:July 2025
Product Name:The IUP Journal of Applied Economics
Product Type:Article
Product Code:IJAE020725
DOI:10.71329/IUPJAE/2025.24.3.24-40
Author Name:Annu Kumari and Vijita Singh Aggarwal
Availability:YES
Subject/Domain:Economics
Download Format:PDF
Pages:24-40
The skyrocketing food prices have compelled emerging economies like India to resort to restrictive trade practices, affecting the country’s food exports and tarnishing its image as an exporter. This study examines the effect of trade openness on food inflation in India and whether it aligns with the Romer hypothesis. To fulfill the objectives of this study, annual time series data is collected and compiled for the study period 1985 to 2022. The computational methodology applied in this study comprises descriptive analysis, stationarity check, NARDL bound cointegration technique, and diagnostic tests. This study supports Romer’s hypothesis that inflation falls with trade openness in the long run. The results document the presence of an asymmetrical long-run association between exchange rate, trade openness, urbanization, and food inflation.
Rising food prices generally force emerging economies like India to resort to restrictive trade practices, affecting the country’s food exports and tarnishing its relations with the international market. Therefore, this study seeks to resolve the dilemma of a developing country: whether increased trade openness should be adopted to reduce food inflation in the Indian context. Since the economic reforms in the 1990s, India has been trying to leverage its economic growth by increasing international trade, so quota and tariff reductions (with WTO, UNCTAD, and GATT) have been adopted. However, at the same time, it has also placed several trade restrictions in place to protect its domestic sectors.