Explicating India's outward trade mode using augmented gravity approach

Omdeep Gupta, Krishna Chandra Balodi and Mohd Afaq Khan

International Journal of Business and Emerging Markets, 2025, vol. 17, issue 1, 49-70

Abstract: International trade irrespective of its mode - exports and foreign direct investment (FDI) is a key enabler of national economic growth. Amongst the various theoretical explanations of international trade, gravity theory is one the most widely applied. According to gravity theory, modes of international trade, viz., exports and FDI are shown to be associated with GDP, comparable sizes of GDP, relatively similar factor endowments and are negatively affected by transportation cost. India has recently risen to the fifth position among the largest economies reflecting India's influence in shaping the future of international trade. The researchers have asked for more empirical research in the Indian context. This paper adds to existing studies on outward trade mode in four ways: firstly, it employs an augmented gravity model; secondly, it uses the most recent data; thirdly, it examines both external trade modes-exports and FDI; and fourthly, the dataset includes panel data for all 154 trading economies of the world that India has trade relations with. Results gives an in-depth analysis of gravity factors associated with Indian outwards trade and compares between the Indian's trade modes.

Keywords: India; outward FDI; exports; emerging economies; EE; augmented gravity model; panel data. (search for similar items in EconPapers)
Date: 2025
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