Export of Environmental Goods: India's Potential and Constraints

The increasing awareness of climate change and its impact on overall economic growth has encouraged many countries to pursue environmental friendly production and consumption of goods and services. Based on their comparative advantages, developing countries too are emerging as exporters of environmental goods and services (EGS) along with developed countries. An important question in this context is whether these emerging EGS exporting developing economies are able to realize their export potential fully. Using data between 1996 and 2010, this paper identifies the constraints that make India, which is one of the emerging EGS exporters, not able to realize its export potential of environmental goods (EG). The empirical results show that the growth of India's exports of EG was negatively affected by its ‘behind the border' constraints, such as weak infrastructure and institutions, while the effect of ‘explicit beyond the border' constraints, such as partner-countries' tariff and exchange rate on the exports of EG was relatively small. The reduction of India's trading partners' ‘implicit beyond the border' constraints, such as weak infrastructure and institutions has made significant contribution to India's exports of EG, especially during the period 2005 – 2010.