Impact of Regional Trade Agreements on India’s Agricultural Exports

The rapid increase in the bilateral and regional trade agreements (RTAs) depicts a worldwide urge to liberalise and attain a more competitive platform for trade. Moreover, RTAs being negotiated are increasing the spectrum of product and service coverage. Elaborate RTAs include provisions relating to, inter alia, investment, labour, agriculture, and environment. This paper empirically examines the impact of two RTAs (SAFTA and APTA) on India’s agricultural exports. The study uses panel data for the period 2001 to 2013 and gravity framework to capture India’s agricultural exports with 16 Asian economies. Along with the traditional variables of gravity (economic size and distance), we also include exporter-importer labour participation ratio, taste differential, and trade openness of importing countries in our model specification. The impact of RTAs is captured with two dummy variables, one for SAFTA membership and the other for APTA membership. Our results indicate that India’s agricultural exports are positively affected by export-importer labour participation ratio, economic size, trade openness (of importer economy) and presence of RTAs. Though the impact of both SAFTA and APTA membership are found to be positive, the results for APTA are found to be significant for Indian agricultural exports.

Keywords

Regional Trade Agreements, Agricultural exports, APTA, SAFTA, Fixed effects model, Hausman Taylor estimation

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