Exploring Factors Shaping India's Trade Patterns: Evidence from Major Trading Partners

Abstract

The study investigates the determinants of India's trade flows with a focus on major trading partners using a gravity model for the period 1998-2019. The selected partners include China PRP, United Arab Emirates, United States, Saudi Arabia, Switzerland, Singapore, Germany, Hong Kong, Indonesia, Iraq, Japan, Belgium, Kuwait, Korea RP, Nigeria, Australia, United Kingdom, Iran, South Africa, and Qatar. By employing panel data analysis, the research assesses various factors influencing bilateral trade. The findings reveal several significant determinants of India's trade patterns. Political globalization and cultural proximity are identified as factors positively impacting bilateral trade, indicating that closer political ties and cultural similarities foster stronger trade relationships between India and its partner countries. Additionally, economic size and the presence of a common border are found to have a positive influence on bilateral trade, underscoring the importance of market size and geographical proximity in facilitating trade flows. The results suggest that the gravity model effectively captures the dynamics of trade relationships, providing insights into the drivers of trade patterns among the selected bloc of countries. By incorporating a range of variables representing economic, political, and geographical factors, the model offers a comprehensive framework for understanding the determinants of bilateral trade. The study contributes to the literature on international trade by shedding light on the factors influencing India's trade flows with its major partners. The findings offer valuable insights for policymakers and stakeholders seeking to enhance bilateral trade relations and promote economic cooperation between India and its trading partners in the global arena.