India in the Global and Regional Trade: Determinants of Aggregate and Bilateral Trade Flows and Firms Decision to Export

This paper contributes to two strands of literature on empirical models of trade flows and trade policy. The first and the older strand is that of gravity models of bilateral trade flows going back to Hans Linneman (1966) and Tinbergen (1962) and its recent applications, particularly by Adams et al (2003) and De Rosa (2007) in analyzing the impact of Preferential Trade Agreements (PTAs). Our focus is on applying the gravity model to analyze India’s trade flows (exports and imports) with its trading partners around the world and to examine the impact of various PTAs in which India or its trading partner or both are members. Clearly this is of interest, since, from 1991 India is aggressively negotiating and concluding PTAs of which South Asian preferential trade (and later free trade) agreement is the most prominent. We find that India is not well served by its pursuit of PTAs and should instead push for multilateral trade liberalisation by contributing to conclusion of the Doha round of negotiations with an
agreement beneficial to all WTO members.