International Journal of Business and Management Invention (IJBMI) ISSN (Online): 2319 – 8028, ISSN (Print): 2319 – 801X www.ijbmi.org || Volume 7 Issue 12 Ver. 1 ||December 2018 || PP—15-22 www.ijbmi.org 15 | Page The Empirical Linkage Between Remittances And Economic Growthan ARDL Co-Integration Approach For India Suman Bindu, P.Sridharan Research ScholarDepartment of International Business,Pondicherry University ProfessorDepartment of International Business,Pondicherry University Corresponding Author; Suman Bindu ABSTRACT:The purpose of this paper is to investigate the empirical relationship between remittances and economic growth by highlighting short run and long-run dynamics forIndian economy.The paper uses secondary time series data over the period 1977-2016.AugmentedDickey-Fullerand Phillips Perron unit root tests are applied to figure out the order of integration. The study employed Autoregressive Distributive Lag (ARDL) approach generally known as Bound testing technique.ARDL technique is more efficient for small and finite sample studies. Error Correction Model (ECM) has also been utilized to provide us information about the impact of a causal factor on the variable under study. Further, in order to check the model stability, CUSUM and CUSUMQ tests are also used. Sensitivity analysis is conducted to check the robustness of the results.Theresearch paper establishes an empirical relationship between remittances and economic growth for the Indian economy. The findings reveal the existence of a significant positive relationship between economic growth and remittances in the long run while the results are insignificant in case of a short run. However, the model is found to be stable.The paper proves empirically the linkage between remittances and economic growth in the long run by bridging the gap between theory and practice. Indian policymakers can consider the model to formulate pertinent policies by transforming the potential of these efficient financial resources into real economic growth. KEYWORDS:India, Remittance,Economic growth,ARDL approach --------------------------------------------------------------------------------------------------------------------------------------- Date of Submission:20-11-2018 Date of acceptance: 06-12-2018 --------------------------------------------------------------------------------------------------------------------------------------- I. INTRODUCTION Economic globalization in the nineties led to the increase in economic activities with the greater international demand for manpower. This has opened up opportunities for skilled and unskilled labor in a labor surplus economy like India. That showed the way for many people to migrate to an international destination (Castles and Davidson, 2000) that can fetch them better livelihoodabroad. Migration adds to inclusive and sustainable economic growth and development in both home and host countries. India is the second highly populated country with a total migrant stock of 16.4 million which constitute the largest diaspora in the worldwith 1.36% of India‟stotal population (Migration and Development Brief Report 2018, World Bank).Indian migrants mainly residein, Saudi Arabia, UAE,andthe UK. Migration can be seen as the blend of benefits and costs for the individual and economy at large. The cost comprises of reduction in labor in which considerable amount of human capital has been employed, distortion of age structure and the depopulation of rural areas. The advantages include the reduction of social tensions such as unemployment, acquisition of skills in foreign countries by the returning migrants to their host countries and money transfers from migrants to the families back home which constitutes remittances. Remittance inflows in India have become larger with the increasing demand for its labor resources. However, India is the highest recipient of remittances with its diaspora remitting about US$ 69billion back home in 2017 exceeding remittances of US$62.7billion in 2016 US$ 9.3millionin 1977.Remittancesconstitute a major source of household income that benefits the livelihood of families and society at large through investment in education, health, infrastructure, housing,and sanitation. Remittance inflows illustrate solution for the inadequate foreign exchange reserves required for the payment of import bills in a labor remitting economy like India. India as the sixth largest economy in the world with the Gross domestic product (GDP) of US$2.6 trillion in 2017with a growth rate of 6.6%, US$ 2.26 trillion in 2016 with a growth rate of 7.1%, remittances forms 2.8% of GDP. Worldwide, remittances have reached US$613 billion in 2017 from US$ 537 billion in 2016 which grew up to 7 %.Further, it is expected to rise 4.6% which accounts forthe US $ 642billion in 2018.However, remittances are relatively steady as compared to cyclical private debt and equity flows.Remittances are more than the three times the size of official development assistance and significantly larger than foreign direct investment, portfolio investment and grant in aid. The two major factors responsible for the rapid increase in