Impact of India’s FTAs and FTA Partners on India’s Trade: A Gravity Model Approach

This paper explores the impact of Free Trade Agreements (FTAs) on India’s trade flows, focusing on exports and imports through a gravity model. FTAs are formal agreements establishing trade obligations between nations. As of September 2024, the World Trade Organization (WTO) recognized 373 FTAs in force globally. Advancements in transportation and digital technologies have spurred FTA growth, lowering trade barriers and expanding markets. The ASEAN-India Free Trade Agreement (AIFTA) increased bilateral trade to US$110.4 billion in 2021-22, benefiting Indian exporters with preferential tariff access, enhanced export potential, and reduced trade deficits. However, AIFTA’s impact has been uneven, with gains limited to specific sectors. The study also examines India’s bilateral FTAs and SAFTA (South Asian FTA) between 2014 and 2024, finding SAFTA to be ineffective in boosting trade. Using OLS and fixed-effects models, the paper highlights GDP and geographic distance as key trade determinants and underscores the need for strategically designed FTAs.