An Analysis of Determinants of India's Import: Panel Regression Approach

Abstract

After the crisis in 1991, the Indian government introduced some changes in its policies on trade, foreign Investment, Tariffs and Taxes under the aegis of “New Economic Reforms ”. The main focus of export-import policy has shifted from “import-substitution ”to “export-promotion”. The paper is focused on the impact of development variables on India's import. Developmental variables include infrastructure, human resource, openness, resource, production and market. Each development variable consists of a set of related variables. This paper has used Principal Component Analysis (PCA), Composite Index and Panel Regression Model. These help to know impact of individual developmental variable on India's import. The period of study is 1990–2013. The value of KMO is over 0.6 indicating the samples are adequate and the value of Bartlett's test is less than 0.05 ensure suitability of PCA. The overall growth rate of Indian import is 3.6 percent during more than last two decades. Resource is most important development variable. The elasticity of resource is almost equal to one and statistically significant. Main determinants of Indian import are resource and openness. The government should incorporate these developmental variables while making Indian import policy under the umbrella of WTO.