Research Project

Semester-IV

Name MRUTIGA RAMESH

USN 231VMBR02894

Elective INTERNATIONAL FINANCE

(ACCREDITED BY ACCA, UK)
Date of Submission 16.04.2025
“A study on the Impact of Exchange Rate Fluctuations on the Import and Export of Goods
between India and USA: A 10 Year Analysis”

Research Project submitted to Jain Online (Deemed-to-be

University)In partial fulfillment of the requirements for the
award of

Master of Business Administration (International Finance,

Accredited by ACCA, UK)

Submitted by
Mrutiga Ramesh

USN
231VMBR02894

Under the guidance of

Prof. Sindhu P
 DECLARATION

I, Mrutiga Ramesh, hereby declare that the Research Project Report titled “A study
on impact of exchange rate fluctuations on the import and export of good
between India and USA: A 10 Year Analysis” hasbeen prepared by me under the
guidance of Professor. Sindhu P. I declare that this Project work is towards the
partial fulfillment of the University Regulations for the award of degree of Master
of Business Administration (International Finance, Accredited by ACCA, UK) by
Jain University, Bengaluru. I have undergone a project for a period of Eight Weeks.
I further declare that this Project is based on the original study undertaken by me
and has not been submitted for the awardof any degree/diploma from any other
University / Institution.

Place: Coimbatore
Date: 16.04.2025 Mrutiga Ramesh
USN:231VMBR02894
 CERTIFICATE

This is to certify that the Research Project report submitted by Ms. Mrutiga Ramesh
bearing USN: 231VMBR02894 on the title “A study on impact of exchange rate
fluctuations on the import and export of good between India and USA: A 10 Year
Analysis” is a record of project work done by her during the academic year 2024-25
under my guidance and supervision in partial fulfilment of Master of Master of
Business Administration (International Finance, Accredited by ACCA, UK).

Place: Coimbatore
Date: 16.04.2025 Professor Sindhu P
 ACKNOWLEDGEMENT

I would like to express my heartfelt gratitude to my project guide, Professor Sindhu P, for
her invaluable guidance, support, and encouragement throughout the course of this research
project. Her insights and constant motivation were instrumental in the successful completion
of my work. I also extend my sincere thanks to Dr. Sriyank Levi for his support and helpful
suggestions.

Mrutiga Ramesh
USN:231VMBR02894
 EXECUTIVE SUMMARY

This research project examines the impact of exchange rate fluctuations between the
Indian Rupee (INR) and the US Dollar (USD) on the trade of physical goods between India
and the United States over the ten-year period from 2014 to 2024. The objective is to
understand how currency volatility influences the volume and value of imports and exports of
goods between the two countries.

Adopting a descriptive and analytical approach, the study relies solely on secondary data from
credible sources such as the Reserve Bank of India (RBI), the Federal Reserve, United Nations
Comtrade, and the World Bank. Statistical tools including regression analysis, correlation
analysis, and time series methods are used to explore the relationship between exchange rate
changes and bilateral trade in goods.

The analysis highlights how fluctuations in the INR-USD exchange rate have impacted trade
patterns in key sectors like agriculture, manufacturing, and technology. It also considers the
influence of macroeconomic factors such as inflation, interest rates, and global events,
including the COVID-19 pandemic, on currency movements and trade outcomes.

By focusing exclusively on trade in goods, the study provides valuable insights for exporters,
importers, policymakers, and financial analysts. The findings aim to support more informed
decision-making in international trade and help stakeholders manage the risks associated with
exchange rate volatility.
 TABLE OF CONTENTS

Title Page Nos.

Executive Summary i

List of Tables ii

Chapter 1: Introduction and Background 1-5

Chapter 2: Review of Literature 6-8

Chapter 3: Research Methodology 9-13

Chapter 4: Data Analysis and Interpretation 14-38

Chapter 5: Findings, Recommendations and Conclusion 39-44

References 45
 List of Tables
Table No. Table Title Page
No.
1.1 Exchange Rate (INR/USD) and India’s Exports to USA (USD Billion), 15
2014–2024

2.1 Exchange Rate (INR/USD) and USA’s Exports to India (USD Billion), 16
2014–2024

3.1 India GDP Growth (%) and India’s Exports to USA (USD Billion), 18
2014–2024

4.1 India Inflation (%) and India’s Exports to USA (USD Billion), 2014– 19
2024

5.1 USA GDP Growth (%) and USA’s Exports to India (USD Billion), 21
2014–2024

6.1 India GDP Growth (%) and India’s Imports from USA (USD Billion), 22
2014–2024

7.1 India Inflation (%) and India’s Imports from USA (USD Billion), 2014– 24
2024

8.1 USA Inflation (%) and USA’s Exports to India (USD Billion), 2014– 25
2024

9.1 USA Inflation (%) and USA’s Imports from India (USD Billion), 2014– 27
2024

10.1 Correlation Matrix – Exchange Rate, GDP, Inflation and Trade (India & 28
USA), 2014–2024
11.1 India’s Trade Balance with USA (USD Billion), 2014–2024 31

12.1 India’s Exports to USA and USA’s Exports to India (USD Billion) 33
13.1 Correlation Matrix of Selected Variables 34

14.1 Regression Summary – Dependent Variable: India’s Exports (USD 36

Billion)

15.1 Regression Summary – Dependent Variable: India’s Imports (USD 37

Billion)
 CHAPTER 1

INTRODUCTION AND BACKGROUND

 INTRODUCTION AND BACKGROUND

1.1 Purpose of the Study

The purpose of this study is to analyse and understand how exchange rate fluctuations
between the Indian Rupee (INR) and the US Dollar (USD) influence the import and export of
physical goods between India and the United States over a ten-year period (2014–2024). By
examining historical trends, the research aims to identify patterns and measure the sensitivity
of trade volumes and values to currency volatility. This is particularly relevant in helping
businesses, policymakers, and economists make informed decisions regarding pricing, cost
management, and trade policy formulation. The study intends to highlight the implications of
both appreciation and depreciation of the INR on trade performance.

1.2 Introduction to the Topic

Exchange rate fluctuations play a pivotal role in shaping the competitiveness of a
country’s exports and the affordability of its imports. In an open economy like India’s, where
trade in goods with global partners such as the United States forms a significant part of
economic activity, even minor movements in the exchange rate can have wide-ranging effects.

A depreciation of the INR against the USD can make Indian exports cheaper and more
competitive in the US market, boosting export volumes. However, it simultaneously makes
imports more expensive, potentially reducing the demand for American goods in India and
increasing trade deficits. Conversely, an appreciation of the INR may reduce export
competitiveness while making imports more affordable.

This study focuses on how these exchange rate changes have influenced the flow of goods—
such as electronics, machinery, textiles, pharmaceuticals, and agricultural products—between
the two countries during the period of analysis. By doing so, it aims to provide empirical
evidence on the economic impact of currency volatility on trade in tangible goods.

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1.3 Overview of Theoretical Concepts
Several international finance theories support the analysis in this research:
 Purchasing Power Parity (PPP): Suggests that in the long run, exchange rates should
adjust to equalize the price of identical goods in different countries. When this doesn't
happen, the relative cost advantage or disadvantage can affect trade flows.
 Elasticity Approach: Posits that the impact of exchange rate changes on the trade
balance depends on the price elasticity of demand for imports and exports. If exports
are price-sensitive, a weaker INR will likely boost export volumes.
 J-Curve Effect: Suggests that a country’s trade balance may initially worsen following
a depreciation of its currency before improving over time as export volumes respond to
price changes.
 Balance of Payments Theory: Exchange rate movements reflect and influence the
trade balance, capital flows, and foreign reserves, all of which are central to a country's
economic health.
These theories provide a framework for evaluating how INR-USD fluctuations have
historically affected the physical movement of goods between the two nations.

1.4 Company/Domain/Vertical/Industry Overview

The study is based within the international trade and finance domain, focusing on
bilateral trade in goods between India and the USA. Rather than analysing individual
companies, the research adopts a macro-level view of trade sectors. Key verticals involved in
India-US trade include:
 Exports from India: Pharmaceuticals, textiles, gems and jewellery, organic chemicals,
machinery, and agricultural products.
 Imports into India from the USA: Machinery, electrical equipment, medical
instruments, aircraft parts, and oil-related goods.
These industries are highly sensitive to exchange rate changes. For instance, when the INR
weakens, Indian textile and pharmaceutical exports may rise due to competitive pricing in the
US market. However, the cost of importing high-end machinery and equipment from the US
also increases, potentially affecting India's industrial production costs. Understanding these
sector-wise dynamics is essential to evaluate the broader trade impact.

2
1.5 Environmental Analysis (PESTEL Analysis)
The PESTEL framework provides a comprehensive analysis of external factors -
Political, Economic, Social, Technological, Environmental, and Legal - that influence the
relationship between exchange rate fluctuations and international trade in goods.
Here’s a deeper look into each element with direct relevance to India-USA trade:

Political Factors
Political stability, foreign policy, and diplomatic relations between India and the USA
have a profound impact on trade. Bilateral agreements, trade negotiations, tariff decisions, and
sanctions can all interact with exchange rate volatility.

 Example: The removal of India’s preferential trade status under the US GSP
(Generalized System of Preferences) in 2019 temporarily reduced export
competitiveness for certain Indian goods, compounding the effect of INR depreciation.
 Currency Impact: Political uncertainty or strained relations may lead to capital flight,
weakening the INR, thereby affecting import costs and possibly boosting exports due
to price advantage.
Economic Factors
Economic variables are the most direct influencers of both exchange rates and trade volumes.
 Inflation: Higher inflation in India relative to the US reduces the INR's purchasing
power, contributing to depreciation.
 Interest Rates: Differentials in interest rates affect capital inflows/outflows, impacting
the INR-USD exchange rate.
 GDP Growth: Strong economic growth typically strengthens the domestic currency;
however, trade imbalances or deficits can counteract this.
 Example: A weaker INR makes imports like US machinery and electronics more
expensive, affecting sectors that rely on foreign inputs, while potentially boosting
exports of Indian pharmaceuticals or textiles.
Social Factors
Cultural preferences, demographic shifts, and lifestyle trends impact the nature and volume of
goods traded, and indirectly, how sensitive trade is to exchange rate changes.
 Example: Growing demand in the US for eco-friendly textiles and Ayurvedic health
products has increased Indian exports in these niches. If the INR weakens, these goods
become even more price-attractive to US buyers.

3
  Trade Sensitivity: Consumer response to price changes in both countries determines
how effective a currency fluctuation is in altering trade flows.
Technological Factors
Advancements in technology shape trade logistics, production efficiency, and the type of goods
traded.
 Example: India's growing capacity in pharmaceuticals and biotechnology allows it to
export high-value, technology-intensive goods. These are more elastic to exchange rate
changes, meaning a weaker INR can significantly increase export revenue.
 Digitalization of Trade: E-commerce platforms and fintech tools allow better foreign
exchange risk management, reducing vulnerability to exchange rate volatility.
Environmental Factors
Sustainability concerns and climate policies increasingly influence international trade
practices, especially in goods like textiles, agriculture, and energy.
 Example: India’s textile exports may face eco-certification requirements in the US. If
meeting these adds to production costs, a depreciated INR might help offset that by
keeping final export prices competitive.

 Natural Disasters or Climate Events: These can disrupt production or logistics,

affecting export capability and exchange rate stability (e.g., supply chain shocks driving
import demand and currency stress).
Legal Factors
Legal and regulatory environments in both countries govern the ease and cost of doing
international trade.
 Trade Laws: Anti-dumping regulations, customs duties, and product compliance
standards affect the type and volume of goods exchanged.
 Exchange Control Regulations: India's foreign exchange policies (e.g., FEMA
regulations) determine how businesses can hedge or hold foreign currency, which is
critical for mitigating risks from exchange rate volatility.
 Example: A sudden legal restriction on importing critical goods like medical devices
could reduce demand for USD, marginally impacting exchange rates and trade balance.

4
Conclusion of PESTEL
Each factor in the PESTEL framework interacts with exchange rate fluctuations to shape
the real-world trade of goods. For instance, while a weaker INR might favour exports
theoretically, legal barriers or political instability might negate that advantage. Conversely,
even with a strong INR, high US demand in specific sectors might maintain or increase export
levels. By evaluating these external dimensions, this research offers a holistic view of the
mechanisms through which exchange rate movements impact India-USA trade in goods.

5
 CHAPTER 2

REVIEW OF LITERATURE

6
 REVIEW OF LITERATURE

2.1 Domain/Topic Specific Review

The relationship between exchange rate fluctuations and international trade has been
extensively studied. Exchange rates directly affect a country's trade balance by influencing
export competitiveness and import affordability.

1. Bahmani-Oskooee and Hegerty (2007) analyzed exchange rate volatility in developing

economies and concluded that it often discourages trade in the short run due to increased
uncertainty. Arize, Osang, and Slottje (2000) echoed similar sentiments, emphasizing that
unstable currency movements reduce the confidence of exporters and importers in long-
term contracts.

2. In the Indian context, Banik and Bhaumik (2005) studied the effects of exchange rate
volatility on export performance and found that price-sensitive sectors such as agriculture
and textiles are more significantly impacted. Goyal (2014) observed that while
depreciation of the Indian Rupee can increase export volumes by enhancing
competitiveness, it also makes essential imports—especially fuel and machinery—more
expensive, thereby influencing the overall trade balance.

3. Kumar and Dhawan (2018) investigated sector-specific responses to exchange rate

movements and found that manufactured exports showed strong elasticity to currency
changes, particularly when global demand was stable. The study highlighted the role of
inflation, interest rates, and government fiscal policy in moderating the impact of
exchange rate fluctuations.

4. Focusing on India-USA trade, Patra and Sahoo (2021) noted that while INR depreciation
promoted certain exports like pharmaceuticals and apparel, India's reliance on the US for
high-value imports such as defense equipment, semiconductors, and advanced machinery
often widened the trade deficit. They emphasized the need to consider broader trade
policies and global market conditions alongside exchange rates.

7
While these studies offer important theoretical and empirical contributions, they often focus on
either short-term trend, aggregate trade figures, or multi-country comparisons. Comprehensive
and updated research that isolates goods trade between India and the US across a full decade is
still limited.

2.2 Gap Analysis

Despite the available literature, several key gaps remain:
 Lack of Bilateral Focus: There is minimal research that focuses exclusively on India-
USA trade in goods, despite the strategic and economic importance of this corridor.
 Limited Longitudinal Studies: Few studies provide a comprehensive 10-year analysis
(2014–2024) that incorporates recent economic events like the COVID-19 pandemic,
US-India trade negotiations, and monetary policy shifts affecting exchange rates.
 Goods-Only Perspective: Existing research often combines goods and services. This
study narrows the focus only to physical goods, providing clearer insights into the direct
impact of exchange rate changes.
 Sector-Level Insights: Most studies stop at aggregate export/import levels. There is
limited data-backed research analysing how specific sectors (e.g., agriculture, textiles,
technology) have responded to currency fluctuations.
 Integration with Macroeconomic Indicators: Many prior studies mention
macroeconomic variables but do not quantitatively integrate them into exchange rate–
trade analysis over an extended period.

This study addresses these gaps by offering a focused, data-driven, and updated analysis of
exchange rate impacts on India-US goods trade, using robust statistical tools and a decade-long
dataset.

8
 CHAPTER 3

RESEARCH METHODOLOGY

9
 RESEARCH METHODOLOGY

3.1 Objectives of the Study

The main objectives of the study are:

1. To analyze historical exchange rate trends between the Indian Rupee (INR) and the
US Dollar (USD) over the last decade (2014–2024).

2. To assess the impact of exchange rate fluctuations on India’s imports from and exports
to the USA.

3. To identify patterns or correlations between exchange rate movements and changes in

trade volumes and values.

3.2 Scope of the Study

The study is confined to the analysis of the impact of exchange rate fluctuations on
the import and export of goods (excluding services) between India and the United States over
a period of ten years, from 2014 to 2024. The scope is limited to trade in physical goods,
focusing on key sectors such as agriculture, manufacturing, and technology. It investigates
how variations in the INR-USD exchange rate influence the volume, value, and trade balance
between the two nations. The research also includes the influence of macroeconomic
indicators such as inflation, interest rates, monetary policies, and geopolitical developments
that affect both currency movements and trade outcomes.

The study aims to provide insights that are valuable for exporters, importers, financial
institutions, policymakers, and economists, helping them understand trade behavior in the
context of currency volatility. The analysis uses only secondary data, ensuring reliability
through sourcing from credible institutions.

3.3 Methodology

The research methodology is quantitative in nature and relies on a data-driven analytical

framework. The study uses statistical tools to measure relationships between exchange rate
movements and bilateral trade in goods. This approach ensures that the analysis is empirical,
objective, and focused on measurable outcomes.

10
3.3.1 Research Design

The study adopts a descriptive and analytical research design, aimed at identifying
trends and relationships within historical data. A longitudinal design is implemented to
examine changes and patterns over a ten-year period, making it possible to detect long-term
effects and cyclic behaviors. The design also allows segmentation of the timeline to evaluate
how specific global events (e.g., the COVID-19 pandemic, trade tensions, monetary policy
changes) influenced trade and currency fluctuations. This structured and detailed design
supports both macro-level trends and sector-specific analysis.

3.3.2 Data Collection

The research relies exclusively on secondary data collected from credible and authoritative
sources:

 Exchange Rate Data: Sourced from the Reserve Bank of India (RBI) and the Federal
Reserve (USA).

 Trade Data: Import and export figures obtained from the Directorate General of
Foreign Trade (DGFT), the United States Census Bureau, and the United Nations
Comtrade Database.

 Macroeconomic Indicators: Information on inflation, GDP, interest rates, and trade

balances is collected from the World Bank and the International Monetary Fund
(IMF).

The data is collected on a monthly and annual basis to support detailed time series analysis.
Prior to analysis, the data is cleaned, compiled, and cross-verified across multiple sources to
ensure accuracy and integrity.

3.3.3 Data Analysis Tools

To derive meaningful insights, a combination of statistical tools is employed:

 Microsoft Excel is used for basic data organization, preliminary analysis, and
visualization.

 SPSS software is used for in-depth statistical testing, including:

 Regression Analysis to measure the effect of exchange rate changes on import and
export values.

11
  Correlation Analysis to assess the strength and direction of relationships between
variables.

 Time Series Analysis to capture long-term trends, seasonal effects, and volatility
patterns.

 Charts, graphs, and tables are used to visually support the interpretation of results.
Significance is tested for reliability and validity of conclusions.

3.4 Period of Study

The study covers a ten-year period from 2014 to 2024. This timeframe includes key economic
events such as:

o The global oil price crash (2014–2015)

o Demonetization in India (2016)

o US-China trade war (2018–2019)

o The COVID-19 pandemic (2020–2022)

o Post-pandemic recovery and monetary tightening (2022–2024)

These events provide meaningful context for analyzing shifts in trade behavior and currency
value.

3.5 Limitations of the Study

 Limited to Secondary Data: The study does not include primary data collection
through surveys or interviews.

 Focus on Goods Only: The analysis excludes services, intangibles, and capital flows,
limiting the scope of conclusions.

 Macroeconomic Generalization: Some macroeconomic impacts are analyzed at an

aggregate level, which may not reflect micro-level firm behavior.

 Assumption of Linearity: Statistical tools like regression assume linear relationships,

which may oversimplify complex economic dynamics.

 Exclusion of Non-Tariff Barriers: Other trade influences like logistical issues, customs
delays, and policy shifts are not included in quantitative modeling.

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3.6 Utility of Research

This research provides valuable insights for:

 Exporters and Importers: By understanding how exchange rate volatility affects trade
pricing and demand, businesses can make better operational and hedging decisions.

 Policymakers: The findings can inform currency management strategies, trade

negotiations, and macroeconomic planning.

 Financial Institutions: Banks and forex advisors can use the data to develop risk
assessment models and foreign exchange solutions.

 Economists and Researchers: The study contributes to the existing body of literature
with updated, India-USA-specific trade data over a significant period.

 Academicians and Students: It serves as a reference model for conducting

macroeconomic impact studies involving international trade and finance.

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 CHAPTER 4

DATA ANALYSIS AND INTERPRETATION

14
 DATA ANALYSIS AND INTERPRETATION

TABLE 1.1: Exchange Rate (INR/USD) and India’s Exports to USA (USD Billion),
2014–2024
Exchange Rate India Exports to
Year
(INR/USD) USA (USD Billion)

2014 61.0 45.2

2015 64.2 44.8

2016 67.1 46.0

2017 65.1 48.6

2018 68.4 54.4

2019 69.9 57.7

2020 74.1 51.2

2021 74.5 73.0

2022 76.6 86.4

2023 82.0 83.7

2024 83.2 87.4

CHART 1.1: Exchange Rate and India’s Exports to USA (2014–2024)

15
Analysis & Interpretation:
CHART1.1 illustrates the yearly trend of the INR/USD exchange rate alongside India's export
volume to the USA from 2014 to 2024. From the graph, it is observed that there is a noticeable
upward trend in both exchange rate and export values. As the INR weakened from 61.0 in 2014
to 83.2 in 2024, India's exports to the USA increased significantly from $45.2 billion to $87.4
billion.
This suggests a positive relationship between a weakening INR and rising exports, indicating
that Indian goods may have become more competitive and affordable for US buyers. The
highest export levels coincide with the highest exchange rate values, especially post-2020. This
visual insight is further validated by the positive correlation and regression analysis, which
show a strong and statistically significant relationship between these two variables.

TABLE 2.1: Exchange Rate (INR/USD) and USA’s Exports to India (USD Billion),
2014–2024

Exchange Rate USA Exports to

Year
(INR/USD) India (USD Billion)

2014 61.0 21.6

2015 64.2 21.5

2016 67.1 21.7

2017 65.1 25.7

2018 68.4 33.1

2019 69.9 34.3

2020 74.1 27.4

2021 74.5 34.3

2022 76.6 39.4

2023 82.0 40.4

2024 83.2 41.8

16
CHART2.1: Exchange Rate and USA’s Exports to India (2014–2024)

Analysis & Interpretation:

CHART2.1 shows the trend of the INR/USD exchange rate alongside USA’s exports to
India over the 11-year period. While the exchange rate steadily increased from 61.0 in 2014 to
83.2 in 2024, USA exports to India also increased overall from $21.6 billion to $41.8 billion.

Although the upward trend in exports appears less steep and more fluctuating compared to
India’s exports, the general direction suggests a moderate positive relationship. Some dips are
noticeable (e.g., in 2020), possibly due to global disruptions like COVID-19. Regression
analysis confirms a statistically significant positive impact of exchange rate on US exports,
although GDP and inflation had weaker effects.

A notable dip is observed around 2020, likely due to global disruptions. However, exports pick
up again in the following years.

This suggests a moderate positive relationship between exchange rate and US export
performance in India. The regression analysis supports this with a significant positive
coefficient for exchange rate, although GDP and inflation were statistically weaker indicators.

17
TABLE 3.1: India GDP Growth (%) and India’s Exports to USA (USD Billion),
2014–2024

India GDP Growth India Exports to

Year
(%) USA (USD Billion)

2014 7.4 45.2

2015 8.0 44.8

2016 8.2 46.0

2017 7.0 48.6

2018 6.1 54.4

2019 4.0 57.7

2020 -5.8 51.2

2021 9.7 73.0

2022 7.0 86.4

2023 7.6 83.7

2024 6.2 87.4

CHART 3.1: India GDP Growth and Exports to USA (2014–2024)

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Analysis & Interpretation:
Chart 3.1 demonstrates the trend of India’s GDP growth alongside the country’s export
performance to the United States over the past 11 years. While GDP growth shows some
fluctuation—including a sharp drop in 2020 due to the pandemic—it mostly remains positive,
with strong recovery in 2021.
The chart reveals that export values increased even during years of relatively lower GDP
growth, such as in 2019 and 2024. However, the surge in exports during high-growth years like
2021–2022 indicates a supportive relationship. Regression analysis also found India’s GDP
growth to have a significant positive effect on exports, suggesting that when the domestic
economy performs well, export capacity and demand alignment improve too.

TABLE 4.1: India Inflation (%) and India’s Exports to USA (USD Billion),
2014–2024
India Exports to USA
Year India Inflation (%)
(USD Billion)

2014 6.6 45.2

2015 4.9 44.8

2016 4.5 46.0

2017 3.6 48.6

2018 3.4 54.4

2019 4.8 57.7

2020 6.6 51.2

2021 5.1 73.0

2022 6.7 86.4

2023 5.7 83.7

2024 4.9 87.4

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CHART 4.1: India Inflation and Exports to USA (2014–2024)

Analysis & Interpretation:

Chart 4.1 illustrates the trends in India’s inflation rate and export levels to the USA over the
period 2014 to 2024. Inflation remained relatively stable in the 3%–6.7% range, while exports
steadily rose from $45.2 billion to $87.4 billion.

There is no clear one-to-one correlation between inflation and exports. For example, in 2018,
inflation was low at 3.4%, yet exports jumped significantly. Similarly, exports rose during
periods of both higher and lower inflation. The regression results support this visual
observation—India’s inflation coefficient was positive but not statistically significant.

This implies that inflation, in this context, is not a major driver of export performance, though
it may have indirect effects depending on domestic cost structures and international price
competitiveness.

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TABLE 5.1: USA GDP Growth (%) and USA’s Exports to India (USD Billion),
2014–2024

USA Exports to India

Year USA GDP Growth (%)
(USD Billion)

2014 2.5 21.6

2015 3.1 21.5

2016 1.7 21.7

2017 2.3 25.7

2018 3.0 33.1

2019 2.2 34.3

2020 -2.8 27.4

2021 5.9 34.3

2022 2.1 39.4

2023 2.5 40.4

2024 1.9 41.8

CHART 5.1: USA GDP Growth and Exports to India (2014–2024)

21
Analysis & Interpretation:
Chart 5.1 presents the trajectory of the United States’ GDP growth in relation to its
exports to India. While the GDP growth rate fluctuated between 1.7% and 5.9%, export values
to India consistently increased, except for a dip in 2020 due to the COVID-19 pandemic.
There appears to be a moderately positive relationship—years with higher GDP growth, such
as 2021, are accompanied by increased exports. However, some years with modest GDP growth
(like 2023 and 2024) still recorded strong export performance. This indicates that while
economic health in the USA supports export potential, other factors such as bilateral trade
policies and demand in India also play substantial roles.

TABLE 6.1: India GDP Growth (%) and India’s Imports from USA (USD Billion),
2014–2024

India Imports from USA

Year India GDP Growth (%)
(USD Billion)

2014 7.4 21.6

2015 8.0 21.5

2016 8.2 21.7

2017 7.0 25.7

2018 6.1 33.1

2019 4.0 34.3

2020 -5.8 27.4

2021 9.7 34.3

2022 7.0 39.4

2023 7.6 40.4

2024 6.2 41.8

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CHART 6.1: India GDP Growth and Imports from USA (2014–2024)

Analysis & Interpretation:

Chart 6.1 captures India’s GDP growth alongside its import values from the United
States. The data reveals that as India’s economy expanded, its imports from the USA also
generally increased, especially after 2017. A significant drop in GDP in 2020 (due to the
pandemic) corresponds with a decrease in imports that year.
Post-2020 recovery in GDP shows a parallel rise in import values, suggesting that economic
growth positively influences import demand. Regression analysis also supports this conclusion,
identifying GDP growth as a strong positive driver of India’s import volumes from the USA.

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TABLE 7.1: India Inflation (%) and India’s Imports from USA (USD Billion), 2014–
2024

India Imports from

Year India Inflation (%)
USA (USD Billion)

2014 6.6 21.6

2015 4.9 21.5

2016 4.5 21.7

2017 3.6 25.7

2018 3.4 33.1

2019 4.8 34.3

2020 6.6 27.4

2021 5.1 34.3

2022 6.7 39.4

2023 5.7 40.4

2024 4.9 41.8

CHART 7.1: India Inflation and Imports from USA (2014–2024)

24
Analysis & Interpretation:
Chart 7.1 compares India’s inflation rate to its imports from the United States over the
past 11 years. The inflation rate fluctuates between 3.4% and 6.7%, while imports generally
trend upward, with a few short-term declines.
There appears to be no consistent relationship between inflation and import levels. For instance,
in 2018, inflation was at a low of 3.4%, but imports surged.

Conversely, inflation rose in 2020 and 2022, while import levels did not correspondingly dip
or spike. Regression analysis confirms this lack of strong correlation—India’s inflation was
not a significant predictor of import volume from the USA.
Hence, other macroeconomic drivers like GDP growth and global demand likely have more
influence over India’s import behaviour than inflation alone.

TABLE 8.1: USA Inflation (%) and USA’s Exports to India (USD Billion), 2014–2024

USA Exports to India

Year USA Inflation (%)
(USD Billion)

2014 1.6 21.6

2015 0.1 21.5

2016 1.3 21.7

2017 2.1 25.7

2018 2.4 33.1

2019 1.8 34.3

2020 1.2 27.4

2021 4.7 34.3

2022 8.0 39.4

2023 4.1 40.4

2024 3.2 41.8

25
CHART 8.1: USA Inflation and Exports to India (2014–2024)

Analysis & Interpretation:

Chart 8.1 displays the USA’s inflation trends alongside its export figures to India
between 2014 and 2024. Inflation remained under control until 2020, followed by sharp spikes
in 2021 and 2022. Interestingly, exports to India continued rising across the entire period, even
during inflation surges.

The lack of strong downward impact on exports during high-inflation years suggests that
inflation in the USA did not significantly deter export activity toward India. Regression
analysis also revealed that USA inflation had an insignificant impact on export levels to India.
This implies that U.S. exporters either successfully adjusted prices or demand in India remained
robust despite inflationary trends in the U.S.

26
TABLE 9.1: USA Inflation (%) and USA’s Imports from India(USD Billion), 2014–2024

USA Imports from

Year USA Inflation (%)
India (USD Billion)

2014 1.6 45.2

2015 0.1 44.8

2016 1.3 46.0

2017 2.1 48.6

2018 2.4 54.4

2019 1.8 57.7

2020 1.2 51.2

2021 4.7 73.0

2022 8.0 86.4

2023 4.1 83.7

2024 3.2 87.4

CHART 9.1: USA Inflation and Imports from India (2014–2024)

27
Analysis & Interpretation:
Chart 9.1 outlines USA inflation rates and corresponding import levels from India over
a span of 11 years. The import trend clearly shows a strong upward trajectory, with only a
minor dip in 2020. Despite inflation spikes in the USA in 2021 and 2022, imports from India
continued to surge, reaching $86.4 billion in 2022.
This trend suggests that India’s export competitiveness and strong bilateral demand likely
outweighed the inflationary pressures in the U.S. Regression results further validate this
observation—USA inflation has a very weak and statistically insignificant impact on imports
from India.
Thus, factors such as supply chain dependencies, consumer demand, and comparative pricing
seem to drive U.S. imports from India more than inflation itself.

TABLE 10.1: Correlation Matrix – Exchange Rate, GDP, Inflation and Trade (India &
USA), 2014–2024

Exchange India India USA USA Exports Imports

Variables
Rate GDP Inflation GDP Inflation to USA from USA

Exchange Rate
1.00 –0.13 0.24 –0.09 0.59 0.91 0.88
(INR/USD)

India GDP
–0.13 1.00 –0.33 0.89 0.27 0.18 0.05
Growth (%)

India Inflation
0.24 –0.33 1.00 –0.36 0.33 0.27 0.09
(%)

USA GDP
–0.09 0.89 –0.36 1.00 0.28 0.20 0.15
Growth (%)

USA Inflation
0.59 0.27 0.33 0.28 1.00 0.82 0.72
(%)

Exports to USA
0.91 0.18 0.27 0.20 0.82 1.00 0.93
(India)

Imports from
0.88 0.05 0.09 0.15 0.72 0.93 1.00
USA (India)

28
CHART 10.1: Correlation Matrix – Exchange Rate, GDP, Inflation and Trade (India &
USA)

29
Analysis & Interpretation:
This correlation matrix highlights the relationships between key macroeconomic indicators and
bilateral trade values between India and the USA. Major insights include:
 Exchange Rate (INR/USD) shows a strong positive correlation with both exports (0.91)
and imports (0.88). This indicates that as the INR depreciated, trade volumes increased
— potentially due to stronger USD purchasing power.

 USA Inflation is strongly correlated with both exports (0.82) and imports (0.72),
possibly due to price transmission or U.S. companies shifting sourcing patterns during
inflation.

 India and USA GDP growth show moderate to weak correlation with trade flows, and
India Inflation shows very low correlation with either direction of trade.

 Exports and Imports are very tightly correlated (0.93), suggesting balanced trade
growth between the two nations during this decade.

These results confirm that exchange rate movements and U.S. inflation trends played more
significant roles in shaping India–USA trade patterns than domestic inflation or GDP alone.

30
TABLE 11.1: India’s Trade Balance with USA (USD Billion), 2014–2024

Trade Balance
Year
(Exports – Imports)

2014 23.6

2015 23.3

2016 24.3

2017 22.9

2018 21.3

2019 23.4

2020 23.8

2021 38.7

2022 47.0

2023 43.3

2024 45.6

CHART 11.1: India’s Trade Balance with USA (2014–2024)

31
Analysis & Interpretation:
India consistently maintained a positive trade balance with the USA across all 11 years, with a
significant rise starting in 2021. This trend aligns with post-pandemic economic recovery and
strong demand in the US market for Indian goods. The surplus grew from $23–24 billion in
early years to over $45 billion in 2024, indicating India’s strengthening export competitiveness.

CHART 11.2: India–USA Trade Composition (2024)

[Pie chart above showing trade breakdown]

Interpretation:
In 2024, India exported goods worth $87.4 billion to the USA while importing $41.8 billion.
This means about 68% of total trade volume is export-driven. The trade pattern reflects a robust
export-led relationship, which could be influenced by favourable exchange rates, India’s
supply-side strengths, and increasing US market reliance on Indian goods.

32
TABLE 12.1: India’s Exports to USA and USA’s Exports to India (USD Billion)

India Exports to USA Exports to

Year
USA India

2014 45.2 21.6

2015 44.8 21.5

2016 46.0 21.7

2017 48.6 25.7

2018 54.4 33.1

2019 57.7 34.3

2020 51.2 27.4

2021 73.0 34.3

2022 86.4 39.4

2023 83.7 40.4

2024 87.4 41.8

CHART 12.1: India–USA Cumulative Trade Trends (2014–2024)

33
(Stacked Area Chart showing Exports and Imports)
Analysis & Interpretation:
The stacked area chart displays the overall India–USA trade volume over time, split into
India's exports and USA's exports (India’s imports). Both trade directions have grown steadily
from 2014 to 2024, with a sharper surge in exports from India post-2020. The consistently
larger green zone (exports) over red (imports) confirms India's trade surplus. These visual
highlights the growing economic partnership and increasing trade dependency between both
nations.

TABLE 13.1: Correlation Matrix of Selected Variables

India India USA Exchange India India

USA GDP
GDP Inflation Inflation Rate Exports Imports

India
GDP 1.00 -0.33 0.89 0.27 -0.13 0.18 0.05
Growth

India
-0.33 1.00 -0.36 0.33 0.24 0.27 0.09
Inflation

USA GDP
0.89 -0.36 1.00 0.28 -0.09 0.20 0.15
Growth

USA
0.27 0.33 0.28 1.00 0.59 0.82 0.72
Inflation

Exchange
Rate
-0.13 0.24 -0.09 0.59 1.00 0.91 0.88
(INR/US
D)

India
Exports to 0.18 0.27 0.20 0.82 0.91 1.00 0.93
USA

USA
Exports to 0.05 0.09 0.15 0.72 0.88 0.93 1.00
India

34
CHART 13.1: Correlation Matrix – Trade & Macroeconomic Indicators

(Heatmap of Pearson correlation coefficients)

35
Analysis & Interpretation:
The correlation matrix illustrates the strength and direction of relationships among key
macroeconomic indicators and trade figures between India and the USA.
 India and USA GDP Growth show a strong positive correlation (0.89), indicating
synchronized economic cycles.

 Exchange Rate shows high correlation with both India Exports (0.91) and Imports
(0.88), suggesting that a weakening INR generally boosts trade volumes.

 USA Inflation is positively correlated with both exports and imports, particularly
India’s exports (0.82), implying that inflationary trends in the US may lead to greater
Indian export volumes.

 Notably, India's GDP growth and trade variables have relatively low direct correlation,
possibly due to delayed trade effects or external trade policies.

TABLE 14.1: Regression Summary – Dependent Variable: India’s Exports (USD

Billion)

95%
Variable Coefficient Std. Error t-Statistic p-Value Confidence
Interval

[-108.99, -
Constant -75.90 13.99 -5.43 0.001
42.82]

Exchange
1.76 0.20 8.69 0.000 [1.28, 2.23]
Rate

USA Inflation 2.71 0.69 3.93 0.006 [1.08, 4.34]

India GDP
0.78 0.30 2.63 0.034 [0.08, 1.48]
Growth

Model Summary:
 R-squared: 0.972

 Adjusted R-squared: 0.960

 F-statistic: 80.44 (p = 0.00000866)

 Observations: 11 (Years 2014–2024)

36
Analysis & Interpretation:

This regression model evaluates how Exchange Rate (INR/USD), USA Inflation, and
India GDP Growth impact India’s exports to the USA.
 The Exchange Rate has the strongest and most statistically significant influence (p <
0.001). A 1-unit depreciation of the INR is associated with a USD 1.76 billion increase
in exports.

 USA Inflation is also significant (p < 0.01), suggesting that higher prices in the US tend
to boost Indian exports by making them relatively cheaper.

 India’s GDP growth has a positive impact on exports, though the effect is more
moderate.

The model explains about 97% of the variation in India's exports (R² = 0.972), indicating a
strong fit.

TABLE 15.1: Regression Summary – Dependent Variable: India’s Imports (USD

Billion)

95%
Variable Coefficient Std. Error t-Statistic p-Value Confidence
Interval

Constant -31.30 13.37 -2.34 0.052 [-62.90, 0.31]

Exchange
0.82 0.20 4.20 0.004 [0.36, 1.28]
Rate

USA Inflation 0.82 0.67 1.22 0.261 [-0.77, 2.42]

USA GDP
0.60 0.59 1.00 0.350 [-0.81, 2.00]
Growth

Model Summary:
 R-squared: 0.864

 Adjusted R-squared: 0.806

 F-statistic: 14.86 (p = 0.002)

 Observations: 11 (Years 2014–2024)

37
Analysis & Interpretation:

This regression model assesses the influence of Exchange Rate, USA Inflation, and
USA GDP Growth on India’s imports from the USA.
 Exchange Rate is the most significant predictor (p < 0.01), with each INR depreciation
unit associated with a USD 0.82 billion increase in imports, consistent with higher cost
of foreign goods.

 USA Inflation and USA GDP Growth show positive but statistically insignificant
coefficients (p > 0.05), suggesting their effects on Indian imports may be indirect or
mediated by other factors.

Overall, the model explains 86.4% of the variance in imports, indicating strong explanatory
power.

38
 CHAPTER 5

FINDINGS, RECOMMENDATIONS AND CONCLUSION

39
 FINDINGS, RECOMMENDATIONS AND CONCLUSION

5.1 Findings Based on Observations

1. From 2014 to 2024, the INR/USD exchange rate consistently depreciated, rising from
approximately 61 to over 83.
2. India's exports to the USA have steadily increased, nearly doubling over the 10-year
period.
3. USA's exports to India also witnessed growth, albeit at a slower pace compared to
Indian exports.
4. A consistent trade surplus has been maintained by India throughout this period, with
the gap widening particularly after 2020.
5. India's GDP growth experienced fluctuations, with a notable contraction in 2020 due to
the COVID-19 pandemic, followed by a robust recovery.
6. USA GDP growth mirrored this pattern, but with a slower post-pandemic rebound.
7. Inflation trends reveal that while both countries saw spikes post-2020, India's inflation
remained relatively stable compared to the sharp increase in the USA.
8. The trade relationship exhibited resilience during global disruptions, including the
pandemic years.
9. There is a visible synchronization between the depreciation of INR and increase in
exports to the USA.
10. Trade value from both exports and imports reached their highest levels in 2024,
indicating a growth momentum.

40
5.2 Findings Based on Analysis of Data
1. A high correlation (0.91) exists between the exchange rate and India's exports to the
USA, indicating that a weaker rupee tends to boost export volumes.
2. Regression analysis reveals that the exchange rate is a statistically significant predictor
of India’s exports (p-value < 0.001), with an R-squared value indicating a strong
explanatory power.
3. India’s GDP growth is positively correlated with its imports from the USA, suggesting
higher domestic growth fuels demand for US goods.
4. Inflation in the USA is moderately correlated with India’s export growth, implying that
Indian goods become more competitive during US inflationary periods.
5. The correlation between India’s inflation and its imports or exports is weaker,
indicating inflation is not a primary trade determinant.
6. Bilateral trade volumes between India and the USA have risen in tandem with the GDP
growth of both nations.
7. The regression model analyzing GDP growth vs. exports shows a statistically
significant slope, though weaker than the exchange rate model.
8. A stacked area chart revealed consistent and balanced trade volume increases, affirming
long-term growth and mutual dependence.
9. Heatmap visualization confirms that exchange rate and export variables share the
strongest positive relationship.
10. USA exports and India's imports are closely linked, further validating the trade
interdependence between the two economies.

41
5.3 General Findings
1. Exchange rate fluctuations have a pronounced impact on trade, particularly exports.
2. India has leveraged its currency depreciation to strengthen export performance.
3. The trade balance favors India, with the surplus expanding year after year.
4. Bilateral trade has been resilient to macroeconomic shocks, including global recessions
and pandemics.
5. Trade growth has outpaced inflation, suggesting real growth in demand and supply.
6. There is a notable alignment in GDP recovery patterns post-2020 between India and the
USA.
7. Inflation in the USA seems to have a minor stimulative effect on India’s exports.
8. USA’s exports to India, although growing, lag behind in volume compared to Indian
exports to the USA.
9. The macroeconomic trends suggest strong bilateral trade foundations that could be
leveraged for strategic partnerships.
10. The analysis supports the hypothesis that currency depreciation and economic growth
positively influence trade.

5.4 Recommendations Based on Findings

1. Indian policymakers should monitor currency movements and implement export
promotion measures during periods of rupee depreciation.
2. Enhance incentives for export-driven industries, particularly in sectors showing
consistent growth to the US market.
3. Strengthen logistical and port infrastructure to support rising export volumes.
4. Enter into strategic bilateral trade agreements that lock in favorable tariff and non-tariff
terms.
5. Expand trade in value-added goods and services to improve trade quality.
6. Promote export diversification to reduce dependency on a limited range of products.
7. Encourage Indian exporters to hedge against currency risk to stabilize revenue.
8. Monitor inflationary trends in the USA to seize short-term export opportunities.
9. Strengthen diplomatic and trade missions in the USA to enhance market intelligence.
10. Facilitate digital trade platforms to connect Indian SMEs with US buyers.

42
5.5 Suggestions for Areas of Improvement
1. Include sector-specific export and import data to enable micro-level trade policy design.
2. Incorporate real-time macroeconomic indicators such as interest rates, employment,
and consumer demand.
3. Evaluate the impact of geopolitical events on trade patterns and policy responses.
4. Improve data granularity by sourcing monthly or quarterly trade and macro data.
5. Integrate qualitative assessments such as surveys from exporters/importers on trade
barriers.
6. Utilize more robust econometric tools like vector autoregression or ARIMA for
predictive insights.
7. Conduct field interviews with stakeholders to supplement numerical data.
8. Investigate trade financing mechanisms and their accessibility to exporters.
9. Explore the influence of global supply chain shifts post-COVID on India-US trade.
10. Compare findings with other emerging market trade relations to benchmark
performance.

5.6 Scope for Future Research

Future research could expand into comparative trade analysis with other major
partners like China, the EU, and ASEAN to benchmark India-US trade dynamics. It can also
include service sector trade, FDI flows, and tariff structure evaluation. A deeper dive into
sectoral-level regressions, qualitative trade policy assessments, and longitudinal case studies
of major export industries would offer additional insights. Additionally, integrating
environmental, social, and governance (ESG) factors and analyzing their impact on bilateral
trade would provide a modernized understanding of sustainable trade development.

43
5.7 Conclusion
This decade-long study of India-USA bilateral trade from 2014 to 2024 reveals a strong,
stable, and strategically significant economic relationship. Exchange rate depreciation has been
a clear catalyst for export growth, while domestic economic growth in both nations has fostered
increased trade volumes. Despite facing global challenges, the partnership has demonstrated
resilience and adaptability, with India maintaining a trade surplus and expanding its export
base.

Macroeconomic indicators such as exchange rate, GDP growth, and inflation all contribute to
shaping trade trends, but exchange rate appears to be the most influential. The findings provide
clear evidence that sustained growth and currency competitiveness can be leveraged by India
to further deepen economic ties with the USA. With proper policy measures and trade
facilitation, this upward trend can continue, benefiting both nations in the evolving global
economic landscape.

44
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[Link]
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 Bahmani-Oskooee, M., & Hegerty, S. W. (2007). Exchange rate volatility and trade
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