AUGMENTED GRAVITY MODEL: AN EMPIRICAL INVESTIGATION INTO INDIA’S TRADE FLOWS DURING TWO EXIM POLICY PERIODS

Abstract

Indian exports slowed for a long time because the country relied heavily on agricultural products like tea, jute, and cotton. The inelastic demand for these products cannot be overstated, and India's exportable goods were not competitively priced. Following the devaluation of the rupee in 1966, the government entered into several treaties with socialist countries and began offering fiscal and monetary incentives to their citizens. In addition, several councils and agencies were established to boost exports. In the 1970s, exports proliferated for all these reasons. However, because most exportable commodities were primary goods, our import bill has always been greater than the export value. Due to rising domestic consumption, India exported only a small percentage of its surplus. It was concluded that tax incentives and similar programs to encourage exports were insufficient. Developed nations, such as the United States, raised tariff barriers to combat imports from less developed nations. It is worth noting that the unit value of exportable goods increased by a much larger margin than the quantum index of exports when most developed countries were experiencing economic recession.