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Impact of Trade Liberalization on Indian Agriculture: A Gravity Model Approach

Shilpa K. Ramannagol, B. H. Nagoor
DOI: http://dx.doi.org/10.21013/jmss.v21.n3.p2
Abstract
The study examines the effects of trade liberalization, with a particular focus on the India-ASEAN Free Trade Area (AIFTA) agreement, on India’s agricultural sector. Trade liberalization has been a key catalyst for economic transformation, and agreements like AIFTA are essential in reducing trade barriers and fostering integration into global markets. This study used the gravity model to examine the impact of Free Trade Agreements (FTAs) between India and ASEAN countries on agricultural trade. The advanced panel model, widely used in international trade analysis, suggests that trade flows between two nations are directly proportional to their economic size (GDP), inversely proportional to the distance between them, and influenced by factors such as shared history and trade agreements. Focusing on agricultural trade, the model integrates a dummy variable representing the India-ASEAN FTA to evaluate its specific impact. The analysis incorporates results from various advanced econometrics techniques, including Pooled Ordinary Least Squares (POLS), Fixed Effects, and Random Effects models, to evaluate the determinants of India’s agricultural trade with ASEAN nations. The findings suggest that trade liberalization measures, such as tariff reductions and the implementation of free trade agreements, have substantially enhanced agricultural export performance between India and ASEAN countries.
Keywords
Trade, liberalization, AIFTA, agriculture and gravity model
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