Assessing agricultural trade efficiency and untapped export potential: evidence from India and G20 economies

The imperative objective of developing countries is rapid economic growth, and exports are considered an engine of that growth. Developing countries generally have an agriculture-based economy, and agro-exports play an important role not only in economic growth but also in improving socioeconomic status. This study aims to estimate the efficiency and determinants of agricultural trade between India and G20 nations, employing the Stochastic Frontier Gravity Model (SFGM) on a panel data set covering the period 2005–2024. The results of the study show a significant inefficiency in agricultural exports. The conventional gravity variables’ coefficients show that bilateral trade is positively and significantly impacted by both India’s gross domestic product (GDP) and the GDP of the destination nations. This implies that rising trade flows are a result of both the exporting and importing countries’ markets and higher economic output. On the other hand, bilateral trade is negatively impacted by the distance between the capital cities, which is a proxy for trade costs. The other trade cost variable, the weighted average tariff, has a negative but insignificant impact. Furthermore, the free trade agreement (FTA)/regional trade agreement (RTA) variables are found to be insignificant, and the exchange rate has a positive and significant effect on agricultural trade. Policymakers should focus on reducing non-tariff barriers, strengthening the global competitiveness of agricultural products, and improving trade logistics.