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India s Export Potential to the Gulf Cooperation Council: A Gravity Model Exploration


  • Samir Ranjan Pradhan


: 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.

Suggested Citation

  • Samir Ranjan Pradhan, 2009. "India s Export Potential to the Gulf Cooperation Council: A Gravity Model Exploration," The IUP Journal of Applied Economics, IUP Publications, vol. 0(3-4), pages 48-71, May-July.
  • Handle: RePEc:icf:icfjae:v:08:y:2009:i:3-4:p:48-71

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    References listed on IDEAS

    1. Carmen M. Reinhart, 1995. "Devaluation, Relative Prices, and International Trade: Evidence from Developing Countries," IMF Staff Papers, Palgrave Macmillan, vol. 42(2), pages 290-312, June.
    2. B. Bhaskara Rao & Rup Singh, 2007. "Estimating export equations," Applied Economics Letters, Taylor & Francis Journals, vol. 14(11), pages 799-802.
    3. Rose, Andrew K., 1991. "The role of exchange rates in a popular model of international trade : Does the 'Marshall-Lerner' condition hold?," Journal of International Economics, Elsevier, vol. 30(3-4), pages 301-316, May.
    4. Narayan, Paresh Kumar & Narayan, Seema, 2005. "Estimating income and price elasticities of imports for Fiji in a cointegration framework," Economic Modelling, Elsevier, vol. 22(3), pages 423-438, May.
    5. Rose, Andrew K., 1990. "Exchange rates and the trade balance : Some evidence from developing countries," Economics Letters, Elsevier, vol. 34(3), pages 271-275, November.
    6. Ostry, Jonathan D. & Rose, Andrew K., 1992. "An empirical evaluation of the macroeconomic effects of tarrifs," Journal of International Money and Finance, Elsevier, vol. 11(1), pages 63-79, February.
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    Cited by:

    1. Tahiri, Noor Rahman, 2017. "Afghanistan and China Trade Relationship," MPRA Paper 82098, University Library of Munich, Germany, revised 15 Sep 2017.

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