Enhancing India's Export Growth to GCC: A PPML Approach to Gravity Model Optimization

Abstract

Introduction: This paper explores the dynamics of India's exports to the Gulf Cooperation Council (GCC) countries over the period 1996 to 2023. It addresses the economic, geographical, and historical factors influencing trade between India and the GCC region.

Objectives: The primary objectives are to identify the key determinants affecting India's exports to GCC countries using an augmented gravity model with remoteness indexes, and to analyze export patterns across the GCC countries and India.

Methods: An augmented gravity model incorporating remoteness indexes was employed to assess bilateral trade flows. Variables such as GDP, distance, shared colonial history, and language ethnicity were analyzed.

Results: Findings indicate that GDP significantly promotes exports, while distance acts as a major deterrent. The common colony variable shows a positive effect, whereas shared language ethnicity has a surprising negative impact. The remoteness indexes for both importers and exporters negatively affect trade, highlighting the importance of multilateral resistance.

Conclusions: The study provides a nuanced understanding of the trade dynamics between India and GCC countries. It emphasizes the importance of geographical and historical linkages, and the need for policy strategies that promote sectoral diversification and deeper economic engagement between the regions.