Trade Integration of India with South and Central Asia: Evidence from Gravity Model

Abstract

The present study investigates exports of India with selected South and Central Asian countries and their top trade partners. The panel data from 1996–2020 is used and PPML estimation technique which takes care of heterogeneity, zero trade and endogeneity is applied. In addition to basic variables, institutional setup in selected countries is included in the model to get better results. To check robustness of results, in addition to PPML, Heckman selection model is also estimated. The findings indicate that institutions play an important role in export promotion of India to these countries. Among various institutional factors, effectiveness of government in different aspects has considerable influence on exports from the country. The study concludes that institutional quality needs to be improved to enhance trade cooperation of India with these countries.

Keywords

• international trade
• gravity model
• institutional factors
• regional trade agreement
• panel data