India-Us Trade and Investment: Have They Been Up To Potential?

Prachi Mishra and Devesh Roy
Additional contact information
Prachi Mishra: Reserve Bank of India, Shahid Bhagat Singh Marg, Mumbai, India–400020

Global Economy Journal (GEJ), 2016, vol. 16, issue 3, 539-567

Abstract: This paper documents stylized facts about the evolution of trade and foreign direct investment (FDI) between India and the United States over the last four decades. We ask the question: does India-US trade and FDI deviate from its potential i. e. the level that would have been predicted by standard determinants? Using an augmented gravity model and a large sample of countries over 1970–2009, we find that while India’s exports to the US are 34 % higher than predicted, US exports to India are in line with its potential. Notably, we find strong reversals in the nature of these trading relationships over time. India loses its over-trading status while US turns out to be under-exporting to India in the period after 1990. We also find significant variation in trade performance across product categories. For primary and intermediate goods during post-1990, US exports to India turn significantly below normal. Conducting similar analysis for bilateral FDI flows for the period 1985–2009, we show that while US direct investments in India are in line with predictions based on fundamentals, India has actually been an under-investor in the US market.

Keywords: trade; FDI; gravity model (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.worldscientific.com/doi/abs/10.1515/GEJ-2015-0018
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:gejxxx:v:16:y:2016:i:03:n:gej-2015-0018

Ordering information: This journal article can be ordered from

DOI: 10.1515/GEJ-2015-0018

Access Statistics for this article

Global Economy Journal (GEJ) is currently edited by Joseph Pelzman

More articles in Global Economy Journal (GEJ) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().