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

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. Due to rapid industrialization and the government's efforts to supplement domestic production and maintain a minimum level of buffer stock by regularly importing food grains from 1958-59 to 1972-73 under the PL 480 scheme, the value of India's imports rose above the value of its exports since 1951. Increasing imports and supplies of price-sensitive commodities like cement, edible oils, etc., had helped keep inflation in India under control. In the name of boosting exports, imports have been liberalized, allowing entry of both necessary and luxury items. Since 1973, when OPEC was formed, oil prices have been ramped up regularly. India's import costs have increased because of this. The new FTP (2009-14) includes several provisions designed to promote steady growth in international trade and reverse a last ten-month decline in exports. The measures include both financial and procedural leniencies. For 2010–11, exports were projected to reach $200 billion, representing a 15 percent increase for the forecast period. The FTP also plans for an annual growth rate of 25% in the medium term. Therefore, it was anticipated that improvements to export-related infrastructure, a decrease in transaction costs, and the provision of full refunds of all indirect taxes and levies would all contribute to meeting the targets. In the past, the Foreign Trade Policy 2009-14 included five separate schemes for incentivizing merchandise exports with duty scrips of varying types and conditions (sector-specific or actual user only) such as the Focus Product Scheme, the Market Linked Focus Product Scheme, the Focus Market Scheme, the Agricultural Infrastructure Incentive Scrip, and the VKGUY (Vishesh Krishi and Gram Udyog Yojana). The Foreign Trade Policy 2015-2020 (FTP 2015-20) has consolidated all of these programs into a single program called the Merchandise Export from India Scheme (MEIS), and the scrips issued under the program will no longer be subject to any conditions. The critical components of MEIS include information on the various product groups supported by MEIS. Under the Foreign Trade Policy 2015-2020, the MEIS plan applies to the following nation clusters: Category A: Traditional Markets (30) - European Union (28), USA, and Canada. The 139 nations in Category B, Emerging & Focus Markets, including those in Africa (55), Latin America and Mexico (45), the Commonwealth of Independent States (12), Turkey and West Asian countries (13), the Association of Southeast Asian Nations (10), Japan, South Korea, China, and Taiwan. Category C: All Other Markets (70). The following section of literature review followed by estimation of gravity model for EXIM policy 2010-15 and 2015-20.

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