Estimating the Effects of some

Uncommon Free Trade

Agreements on India’s Exports,
Imports and Trade Volume
Suadat Hussain Wani

Key Points

Introduction

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Literature Review and Background

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Methodology

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 𝐿𝑛𝑇𝑣𝑖𝑡 = 𝛽1 𝐿𝑛𝐸𝑥𝑃𝑜𝑠𝑡𝑖𝑡 + 𝛽2 𝐿𝑛𝐼𝑚𝑝𝑃𝑜𝑠𝑡𝑖𝑡 + 𝛽3 𝐿𝑛𝐸𝑥𝑝𝑃𝑟𝑒𝑖𝑡 +
𝛽4 𝐿𝑛𝐼𝑚𝑝𝑃𝑟𝑒𝑖𝑡 + 𝜀𝑖𝑡 (

𝑇𝑣𝑖𝑡 𝐸𝑥𝑃𝑜𝑠𝑡𝑖𝑡 𝐸𝑥𝑝𝑃𝑟𝑒𝑖𝑡 𝐼𝑚𝑝𝑃𝑜𝑠𝑡𝑖𝑡 𝑎𝑛𝑑 𝐼𝑚𝑝𝑃𝑟𝑒𝑖𝑡

𝜀𝑖𝑡

𝛽10+ ∑ 𝛽1𝑖 𝑦𝑡−1 +∈1𝑡 𝑖𝑓 𝑦𝑡−1 > 𝜕

𝑖=1
𝑇𝑣𝑖𝑡 = 𝑃

𝛽20+ ∑ 𝛽2𝑖 𝑦𝑡−1 +∈2𝑡 𝑖𝑓 𝑦𝑡−2 ≤ 𝜕

( 𝑖=1 )
(2)

𝑇𝑣𝑖𝑡
∂

𝑝
𝑇𝑣𝑖𝑡 = 𝐼+ 𝑅 −
𝑡 (𝛽10 + Σ𝑖=1 𝛽1𝑖 𝑦𝑡−1 ) + 𝐼𝑡 (𝛽10 + Σ𝑖=1 𝛽2𝑖 𝑦𝑡−1 ) + 𝜀𝑡 (3)

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 𝐼𝑡+ = (10 𝑖𝑓 𝑦𝑡−1 >𝜕
𝑖𝑓 𝑦 ≤𝜕
)
𝑡−2

𝐼𝑡− = (1 − 𝐼𝑡+ )

𝑦𝑡−1 > 𝜕
𝑦𝑡 𝛽10 + 𝛽11 𝑦𝑡−1 … … … … . . 𝛽1𝑅 𝑦𝑡−𝑅 + 𝜀𝑡 (4)
𝑦𝑡−1 < 𝜕
𝑦𝑡 𝛽20 + 𝛽21 𝑦𝑡−1 … … … … . . 𝛽2𝑝 𝑦𝑡−𝑅 + 𝜀𝑡 (5)

Empirical Results

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 Table 1: India’s trade with Japan pre–post FTA with Japan

Variable Coefficient Std. error t-statistic Prob.

LNEXPRE 0.454864 0.007982 56.98411 0.0000
LNEXPOST 0.327577 0.018795 17.42883 0.0000
LNIMPRE 0.555180 0.006621 83.84824 0.0000
LNIMPOST 0.673939 0.017556 38.38755 0.0000
C 0.621805 0.028877 21.53308 0.0000
Autocorrelation 0.5617
Heteroscedasticity 0.1822

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 Figure 1: Trade volume between India and Japan, 1970–2018 (US$ million)

20,000

16,000

12,000

8,000

4,000

0
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Total Trade
Exp to Japan
Imp from Japan

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 Table 2: India–Sri Lanka trade relations

Variable Coefficient Std. error t-statistic Prob.

LNEXPRE 0.881342 0.006031 146.1411 0.0000
LNEXPOST 0.861269 0.005497 156.6667 0.0000
LNIMPRE 0.100259 0.008592 11.66901 0.0000
LNIMPOST 0.134051 0.004532 29.5809 0.0000
C 0.438481 0.019715 22.24115 0.0000
Autocorrelation 0.4496
Heteroscedasticity 0.5448

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 Figure 2: Trade volume between India and Sri Lanka, 1970–2018 (US$ million)

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

total trade
Exp to Sri Lanka
imp from Sri Lanka

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 Table 3: India–Nepal trade relations

Variable Coefficient Std. error t-statistic Prob.

LNEXPRE 0.549703 0.011099 49.52552 0.0000
LNEXPOST 0.876797 0.012174 72.02241 0.0000
LNIMPRE 0.483714 0.019121 25.29776 0.0000
LNIMPOST 0.097429 0.018051 5.397482 0.0000
C 0.546987 0.067986 8.045616 0.0000
Autocorrelation 0.8719
Heteroscedasticity 0.2754

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 Figure 3: Trade volume between India and Nepal, 1970–2018 (US$ million)

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Total Trade
Exp to Nepal
Imp from Nepal

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 Table 4: India–ASEAN trade relations

Variable Coefficient Std. error t-statistic Prob.

LNEXPRE 0.436467 0.005304 82.29731 0.0000
LNEXPOST 0.426461 0.005754 74.1169 0.0000
LNIMPRE 0.562538 0.005299 106.1574 0.0000
LNIMPOST 0.572414 0.005597 102.2652 0.0000
C 0.695769 0.007976 87.23161 0.0000
Autocorrelation 0.3607
Heteroscedasticity 0.4090

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 Figure 4: Trade volume between India and ASEAN, 1970–2018 (US$ million)

100,000

80,000

60,000

40,000

20,000

0
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Total Trade
Imp from ASEAN
Exp to ASEAN

Conclusion

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 ➢

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