International Journal of Foreign Trade and International Business
2020, Vol. 2, Issue 1, Part A
An econometric analysis of India’s bilateral trade with South Asian countries: A gravity model approach
Dr. Hemlata Manglani
South Asian Association for Regional Cooperation (SAARC) was established in 1985. One of the major objectives of SAARC was to improve economic growth and development in South Asian countries. This study aims to examine the bilateral trade flows between India and selected SAARC nations for the period of 1996-2018. Gravity model of trade is used to determine the trade flow. The findings of this study have shown that the trade flow depends positively on GDP of host nation and partner nation. This study makes use of panel data analysis for double log function of Gravity model for trade between India and selected SAARC nations. Study used annual data of SAARC countries except Afghanistan due to unavailability of Data. Study analyzed data for India’s bilateral trade from 1996 t0 2018 for 6 countries and tested three econometric models to assess the impact of income of both nations, per capita, inflation, and trade openness on bilateral trade between India and SAARC. Study is intended to know the existence of H-O model or Linder model in the trade between India and SAARC. Study found that SAARC countries highly open in bilateral trade with India. Countries income is also increasing in bilateral trade with India. The income differential of SAARC countries indicates that there is the presence of Linder model of International trade. Study used Panel data analysis and FEM model to assess the effects of bilateral trade between India and SAARC countries.