INDIA’S TRADE WITH ITALY: ANALYSING COINTEGRATION BETWEEN TRADE AND ECONOMIC GROWTH USING AUTOREGRESSIVE DISTRIBUTED LAG (ARDL) MODEL

India and Italy both nations have a rich culture and history. In recent years, their relationship has strengthened into a Strategic Partnership in 2023 prompting a Joint Strategic Action Plan. This new framework is the result of a commitment to deepen their bilateral relationship. It also signals a leap forward in economic, cultural and scientific diplomacy. At the heart of this relationship, economic cooperation and trade are two significant pillars that fuel this partnership drive. Looking ahead, economic pundits are optimistic of heightened trade relations, given the chemistry between Indian Prime Minister, Narendra Modi and his Italian counterpart, Giorgia Meloni. Trade between India and Italy touched an all-time high of USD 15.2 billion in 2023. While exports to Italy were USD 8.3 billion, imports from Italy clocked over USD 6.8 billion during this period. The current study uses historical data for the period 1988-2023, while applying Autoregressive Distributed Lag (ARDL) modelling to analyze the relationship between India’s trade (exports and imports) with Italy and India’s GDP.Both the short-run and long-run relationships amongst the variables have been investigated to examine their impact on each other. The study concludes that India’s GDP and India’s exports to Italy are cointegrated and have a bi-directional relationship in the short-run and long-run. Further, a bidirectional relationship exists between exports and imports albeit only in the short-run.