Export Potential of Environmental Goods in India: A Gravity Model Analysis

The paper of this estimates the export potential of environmental goods in India using the gravity model analysis. This model has been estimated using the ordinary least square (OLS) technique with a panel data for 58 sample countries from the period between 1991 and 2011. Dependent variable in the estimation was export of environmental goods from India. The gravity equation fits well with the data and delivers precise and plausible income and distance elasticities, which estimates for other geographical, historical and cultural characteristics. In effect, the results show that India¡¦s export volume is determined by the economic size (GDP) of the importing country. India¡¦s bilateral trade is also positively and significantly influenced by the common colonizer and membership in bilateral trade agreements. The estimation of this gravity model also shows that the potential for expansion of export is highest with Japan and China. It also indicates that India can potentially attain ten times or more the level of an actual export with countries like Netherlands and Pakistan