Sectoral Level Analysis of India’s Bilateral Trade over 2001-2015

The paper explores the sectoral level analysis of India’s IIT with rest of world (ROW), to try to identify the key determinants of IIT in the selected sectors for the Indian economy in the 21st century. It also examines the patterns and determinants of India’s intra-industry trade (IIT) in 7 major sectors during 2001-2015 in a panel data framework. The empirical results indicate that Vertical Intra-Industry Trade (VIIT) significantly explains India’s IIT pattern in Base Metals, Chemical, Machinery & Electrical Equipment, Textiles & Garments and Iron & Steel sectors. The analysis further shows that VIIT-type trade pattern is observed with lower income group countries whereas HIIT-type trade emerged with higher income group countries in case of Leather & Footwear and Vehicles and Transport Equipment sectors. The results also concludes that trade facilitation may significantly enhance IIT level with respect to India’s high income partners among all the sectors except Textiles & Garments and Iron & Steel segment; while it may also enhance IIT level with respect of lower income partners in Vehicles and Transport Equipment segment. Interestingly, the preferential trade dummy is found to be significant in limited sectors, implying less influence of the RTA partnerships on trade balance