India s Export Potential to the Gulf Cooperation Council: A Gravity Model Exploration
: This paper explores India s export potential to the six-member countries of Gulf Cooperation Council (GCC) with which a Free Trade Agreement (FTA) is currently under negotiation. Augmented gravity model is used to analyze India s export flows, and the coefficients thus obtained are incorporated to predict India s export potential to the GCC. The model is estimated using the Ordinary Least Square (OLS) technique with panel data. The workhorse gravity model shows that the magnitude of India s export potential is highest with Oman (3.7 times), followed by Qatar (2.7 times), Bahrain (1.5 times), and Kuwait (1.2 times). Moreover, when the RTA (Regional Trading Arrangements) dummy takes the value of one, the results show sharp increase in the magnitude of export potential. However, all the model specifications, consistently show no export potential with United Arab Emirates (UAE), and Saudi Arabia. This implies that currently India is overtrading with UAE and Saudi Arabia, as they are the two largest trading partners of India in the GCC and India s export basket to these two countries is not diversified and is confined to limited number of items. In addition, the models using time-specific fixed effects also exhibit favorable trends of India s export potential to the GCC.
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Volume (Year): VIII (2009)
Issue (Month): 3-4 (May-July)
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