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An Empirical Analysis of Sectoral Export Demand Elasticities and Trade Policies: The Case of India

Author

Listed:
  • Albert Wijeweera
  • Dimitrios Reppas

Abstract

This article contributes to the existing literature on India’s exports by estimating price and income elasticities for different export categories. The objective is to identify potential policy implications associated with sectoral export elasticities. The analysis focuses on five categories of exports: (a) goods and services exports, (b) goods exports, (c) services exports, (d) food exports and (e) merchandise exports. Annual data spanning the period 1994–2021 is used for the analysis, and the bound testing cointegration approach based on the Auto-Regressive Distributed Lag (ARDL) method is employed to estimate export elasticities for each category. The study finds that sectoral price elasticities of exports are inelastic and small in magnitude, suggesting that although a currency depreciation would lead to an increase in demand for its exports, it is not expected to have a positive impact on the aggregate export earnings of India. Income elasticities, however, are positive and large in magnitude, implying that India’s export performance is significantly responsive to changes in global income levels. Hence, an understanding of income export elasticity in different sectors provides valuable insights for policymakers to tailor strategies in an evolving global economic landscape. JEL Codes: C22, F13, F32, F43

Suggested Citation

  • Albert Wijeweera & Dimitrios Reppas, 2025. "An Empirical Analysis of Sectoral Export Demand Elasticities and Trade Policies: The Case of India," Foreign Trade Review, , vol. 60(3), pages 347-361, August.
    • Handle: RePEc:sae:fortra:v:60:y:2025:i:3:p:347-361
    DOI: 10.1177/00157325241266030
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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