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This is a Quantitative Study study.

October 9, 2025

Revolutionising Indian Agriculture Exports: Unpacking the Transformative Impact of South Asian Free Trade Agreement

Key Points

SAFTA's impact on agricultural exports from India shows a negative and significant coefficient, indicating ineffectiveness.
Trade creation under SAFTA is ineffective, yet external trade activities with non-member countries have increased significantly.
Using a gravity model with Poisson estimation and Heckman selection method, the study reveals trade deflection trends.
Structural flaws and design limitations of SAFTA suggest urgent policy interventions are needed for enhancing regional trade.

Abstract

This article empirically examines the impact of South Asian Free Trade Agreement (SAFTA) on agricultural exports of India vis-à-vis SAARC and the rest of the world from 2000 to 2022 using the Poisson pseudo maximum likelihood estimator and Heckman selection method. Estimating a fully saturated gravity model, the findings of the preferred model reveal that SAFTA fails to boost intra-regional agriculture trade among the examined countries. The coefficient of the trade creation variable SAFTA ij is negative and statistically significant, reflecting the ineffectiveness of SAFTA in boosting the intra-regional agriculture trade among the partner countries. Conversely, the estimated coefficients of the other two regional trade dummies, SAFTA i and SAFTA j , are positive and statistically significant, indicating that trade activities (exports and imports) with non-members increased, implying the trade deflection and prioritisation of external markets. The ineffective outcome of SAFTA due to its design, structural flaws and external constraints warrants immediate policy attention to bolster the regional trade. JEL Codes : F1, Q1, Q17

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