Impact of Globalisation on India’s exports with special reference to Regional Trade Agreements

Abstract

Coinciding with the era of globalisation, there has been a rise in the number and depth of Regional Trade Agreements (RTAs) in the Asian region. As India has also been a part of this growing trend, this paper attempt to identify the determinants of India’s exports with special focus on the role of globalisation and RTAs of India. We employ panel data regression on an augmented gravity model to examine the effects of these variables. To capture the globalisation effect, we have included trade openness of the host country. For RTAs, we have taken two variables; one which indicates the presence or absence of an RTA in a given year; and second is the number of RTAs between India and its partner country. Using data for nine countries which are India’s trading partners over the period 1991-2012, we find that GDP and GDP per capita of the host country are significant determinants of India’s exports. Trade openness which is an indicator of globalisation is positive and highly significant indicating that trade openness of the partner country has resulted in increased Indian exports to that country. Of the two variables capturing the impact of RTAs, the variable defining the number of RTAs negotiated with trading partners is positive and significant. The results show that while presence of an RTA may have a positive impact on Indian exports, they are still not a prime consideration. At the same time, the width of integration is having a significant positive impact on India’s export.