Is There a J-Curve for India? Local Projections of the Trade Balance on Real Rupee Depreciations, 1974-2025, and a Comparison with Twelve Peers

The J-curve hypothesis says that a real depreciation worsens the trade balance in the short run and improves it later as quantities adjust. Using India's external balance on goods and services from WDI and a real exchange rate built from the INR/USD rate (FRED EXINUS) and US and Indian CPI, I estimate local projections of the trade-balance change on the log real-exchange-rate change for horizons 0 to 5 years. For India, 1974-2025 (52 annual observations), the impact coefficient is +4.37 points of GDP per unit log real depreciation (Newey-West standard error 1.59), the cumulative response peaks near +5.34 at horizon 2, and it fades toward zero by horizons 4-5. There is no initial deterioration: the Indian impulse response rises through horizon 2 and then fades toward zero, rather than tracing a J. Across twelve peers the median impact coefficient is +5.18 and the median one-year cumulative coefficient is +3.89. An exact identity confirms that the WDI external balance equals exports minus imports as shares of GDP to machine precision.