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Transportation Cost and Trade Competitiveness : Empirical Evidence from India

Author

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  • Prabir De

    (RIS)

  • Bhisma Rout

Abstract

India 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.

Suggested Citation

  • Prabir De & Bhisma Rout, 2008. "Transportation Cost and Trade Competitiveness : Empirical Evidence from India," Trade Working Papers 22099, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:tradew:22099
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    File URL: http://www.eaber.org/node/22099
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    References listed on IDEAS

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    1. Hummels, David, 1999. "Toward a Geography of Trade Costs," GTAP Working Papers 1162, Center for Global Trade Analysis, Department of Agricultural Economics, Purdue University.
    2. Douglas H. Brooks & Jayant Menon (ed.), 2008. "Infrastructure and Trade in Asia," Books, Edward Elgar Publishing, number 13171.
    3. Prabir De, 2006. "Trade, Infrastructure and Transaction Costs: The Imperatives for Asian Economic Cooperation," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 21, pages 708-735.
    4. Prabir De, 2007. "Impact of Trade Costs on Trade: Empirical Evidence from Asian Countries," Working Papers 2707, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..
    5. David L. Hummels & Georg Schaur, 2013. "Time as a Trade Barrier," American Economic Review, American Economic Association, vol. 103(7), pages 2935-2959, December.
    6. Hummels, David, 1999. "Toward a Geography of Trade Costs," Working papers 283448, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    7. David Hummels & Alexandre Skiba, 2004. "Shipping the Good Apples Out? An Empirical Confirmation of the Alchian-Allen Conjecture," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1384-1402, December.
    8. Limao, Nuno & Venables, Anthony J., 1999. "Infrastructure, geographical disadvantage, and transport costs," Policy Research Working Paper Series 2257, The World Bank.
    9. Hummels, David, 2001. "Time As A Trade Barrier," Working papers 28701, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
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    Cited by:

    1. Hossain, Sharif M., 2009. "South Asian Free Trade Area: Implications for Bangladesh," MPRA Paper 18517, University Library of Munich, Germany.

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    Keywords

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    JEL classification:

    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General

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