India–European Union Trade Integration: An Analysis of Current and Future Trajectories

Swetha Loganathan, Joshy Joseph Karakunnel and Vijay Victor
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Swetha Loganathan: Swetha Loganathan (corresponding author) is with the Department of Economics, Christ University, India.
Joshy Joseph Karakunnel: Joshy Joseph Karakunnel is with the Department of Economics, Christ University, India. E-mail: joshy.kj@christuniversity.in
Vijay Victor: Vijay Victor is with the Department of Economics, Christ University, India; College of Business and Economics, University of Johannesburg, Auckland Park, South Africa. E-mail: vijayvictor@christuniversity.in

Margin: The Journal of Applied Economic Research, 2021, vol. 15, issue 4, 484-504

Abstract: In a dynamic global environment of increased economic interdependence, nations are more than ever seeking to remove barriers to trade, despite growing trends of protectionism. In this context, India and the EU-27 have initiated talks for the establishment of a Bilateral Trade and Investment Agreement (BTIA) in an attempt to bring their economies together. However, after 16 rounds of negotiations, the failure to conclude this agreement has raised questions regarding the benefits of the agreement to India. This study attempts to examine the current trade scenario and the effects of the proposed regional trade agreement by estimating a structural gravity model. This study employs the Poisson Pseudo Maximum Likelihood (PPML) estimator for analysing the trade-creation and trade-diversion effects of the BTIA to overcome the shortcomings of ordinary least square (OLS) estimators. For the empirical analysis, the merchandise export data from the Gravity database has been taken for a period of 19 years from 2001 to 2019. The results indicate that the BTIA could lead to trade creation and trade diversion, highlighting the need for a re-evaluation of India’s trade policy. JEL Classification: F10, F13, F14, F15, O24

Keywords: India–EU trade; Bilateral Trade and Investment Agreement; Structural gravity model; Regional trade agreements; Poisson Pseudo Maximum Likelihood estimators (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:sae:mareco:v:15:y:2021:i:4:p:484-504

DOI: 10.1177/09738010211040064

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