Agricultural Trade Structure and Linkages in SAARC: An Empirical Investigation

Abstract

Since regional associations and free trade are perceived to be welfare-enhancing, this paper has examined the structure and flow of trade among SAARC economies. The study has revealed that India alone accounts for 74 per cent of the agricultural exports from the region and 55 per cent of the agricultural imports of the region. Cotton, cereals, fish & crustaceans, and tea & beverages have emerged as the most exported commodities accounting for more than 50 per cent share of exports from SAARC countries to the world. Animal or vegetable fat, cotton and rubber are the most imported commodities by SAARC. India enjoys comparative advantage in exports of cotton, cereals, fish and tea, while Pakistan has a greater comparative advantage in export of cotton and cereals. A unidirectional causality has been observed between gross domestic product (GDP) and agricultural exports, where agricultural exports Granger cause GDP and not vice versa. A one-way causal relationship has also been observed between agricultural GDP and agricultural exports. This indicates that growth in agricultural exports has contributed to the overall and agricultural growth in India. The study has suggested that Indian trade policy environment needs to be made more favourable for attracting foreign buyers and making Indian exports competitive globally.