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<p>This study provides a comprehensive econometric evaluation of the ASEAN-India Free Trade Agreement (AIFTA) on bilateral trade flows during 2011–2019. Employing difference-in differences estimation, synthetic control methods, instrumental variables, dynamic panel Generalized Method of Moments (GMM), and Poisson Pseudo-Maximum Likelihood (PPML) estimation, the study establishes robust causal identification of AIFTA’s trade effects. However, the agreement generated asymmetric effects: India’s trade deficit expanded from 4&#xa0;billion USD to 22&#xa0;billion USD as import elasticity (1.247) significantly exceeded export elasticity (0.321). Instrumental variables reveal negative selection bias, with OLS understating treatment effects by 45%. Dynamic panel results show substantial trade persistence, implying long-run effects larger than short-run estimates. India’s exports remained highly concentrated, while imports diversified significantly. Counterfactual simulations indicate symmetric liberalization could reduce India’s deficit by 36% under optimal conditions, though supply-side improvements require sustained industrial policy. Despite positive net welfare gains equivalent to 2.3% of gross domestic product (GDP), 67% accrued to ASEAN, with structural competitiveness constraints limiting India’s export performance. The findings suggest that the full potential of India-ASEAN economic integration requires going beyond tariff elimination to address deeper barriers to trade and investment, and to address structural competitiveness gaps. Policymakers should focus on reducing non-tariff barriers, enhancing logistics infrastructure, and supporting sectors with revealed comparative advantage. The persistent trade deficit indicates that tariff elimination alone is insufficient without complementary supply-side reforms and strategic trade diversification.</p>

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The ASEAN-India free trade agreement: an empirical assessment of trade effects

  • 期刊论文

  • 发表日期：

    2025年12月22日

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  • Saurav Kalita

摘要

This study provides a comprehensive econometric evaluation of the ASEAN-India Free Trade Agreement (AIFTA) on bilateral trade flows during 2011–2019. Employing difference-in differences estimation, synthetic control methods, instrumental variables, dynamic panel Generalized Method of Moments (GMM), and Poisson Pseudo-Maximum Likelihood (PPML) estimation, the study establishes robust causal identification of AIFTA’s trade effects. However, the agreement generated asymmetric effects: India’s trade deficit expanded from 4 billion USD to 22 billion USD as import elasticity (1.247) significantly exceeded export elasticity (0.321). Instrumental variables reveal negative selection bias, with OLS understating treatment effects by 45%. Dynamic panel results show substantial trade persistence, implying long-run effects larger than short-run estimates. India’s exports remained highly concentrated, while imports diversified significantly. Counterfactual simulations indicate symmetric liberalization could reduce India’s deficit by 36% under optimal conditions, though supply-side improvements require sustained industrial policy. Despite positive net welfare gains equivalent to 2.3% of gross domestic product (GDP), 67% accrued to ASEAN, with structural competitiveness constraints limiting India’s export performance. The findings suggest that the full potential of India-ASEAN economic integration requires going beyond tariff elimination to address deeper barriers to trade and investment, and to address structural competitiveness gaps. Policymakers should focus on reducing non-tariff barriers, enhancing logistics infrastructure, and supporting sectors with revealed comparative advantage. The persistent trade deficit indicates that tariff elimination alone is insufficient without complementary supply-side reforms and strategic trade diversification.