Transportation Cost and Trade Competitiveness : Empirical Evidence from India
AbstractIndia has been witnessing a sharp rise in merchandise trade and showing greater trade interdependence on a large variety of goods, particularly in intermediate and capital goods. However, higher transportation costs continue to impede Indias trade. Costlier transportation prohibits trade in India and taxes the trade in the way tariff does. This paper provides sufficient evidence to ascertain that variations in ad-valorem transportation costs strongly influence trade flows in India. Another conclusion of this paper is that transportation cost is relatively more important than tariff in enhancing Indias merchandise trade. Reduction in transportation costs should therefore get utmost priority while formulating policy for Indias infrastructure development and trade facilitation since the fall in transportation costs, as an outcome of improved infrastructure, will stimulate trade. The challenge for India is thus to identify improvements in trade facilitation, logistics services and related infrastructure that can be achieved in the short-to-medium term and that would have a significant impact on trade competitiveness of India.
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Bibliographic InfoPaper provided by East Asian Bureau of Economic Research in its series Trade Working Papers with number 22099.
Date of creation: Jan 2008
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trade; competitiveness; transportation costs;
Find related papers by JEL classification:
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- O24 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
- O50 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - General
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