India’s Trade Potential and Free Trade Agreements: A Stochastic Frontier Gravity Approach

Surender Kumar and Prerna Prabhakar
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Prerna Prabhakar: National Council of Applied Economic Research, New Delhi 11002, India

Global Economy Journal (GEJ), 2017, vol. 17, issue 1, 1-19

Abstract: This paper analyses the role of Free Trade Agreements in determining export and import efficiency levels in India using stochastic frontier version of gravity model. We estimate the impact of selected FTAs of India (its bilateral FTAs, FTA with ASEAN and South Asian FTA) and regulatory quality on the efficiency of exports and imports over the period of 2000–2014. The results indicate that India’s bilateral FTAs and its FTA with the ASEAN group help in improving the export and import efficiency respectively. However, the South Asian Free Trade Agreement is statistically insignificant for India’s export and import efficiency. The results also highlight importance of trading partners’ regulatory quality for enhancing the India’s trade efficiency and note that the impacts of regulatory quality are non-monotonic.

Keywords: export and import potential; gravity equation; stochastic frontier; RTA; regulatory quality (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1515/GEJ-2016-0074

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