Azmi, Shujaa Naeem; Khan, Kashi Hasan; Koch, Halil
A icle
Assessing he e ec o INSTC on India’s ade wi h Eu asia:
an applica ion o g a i y model
Cogen Economics & Finance
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Assessing he effec o INSTC on India’s ade wi h
Eu asia: an applica ion o g a i y model
Shujaa Naeem Azmi, Kashi Hasan Khan & Halil Koch
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GENERAL & APPLIED ECONOMICS | RESEARCH ARTICLE
Assessing he e ec o INSTC on India’s ade wi h Eu asia: an
applica ion o g a i y model
Shujaa Naeem Azmi
a
, Kashi Hasan Khan
b
and Halil Koch
c
a
Depa men o Economics, Ala-Too In e na ional Uni e si y, Bishkek, Ky gyzs an;
b
Silk Road Resea ch Cen e, Ala-Too
In e na ional Uni e si y, Bishkek, Ky gyzs an;
c
Depa men o Managemen , Ala-Too In e na ional Uni e si y, Bishkek,
Ky gyzs an
ABSTRACT
India’s ade wi h Eu asian coun ies has been imp o ing s eadily. India is agg essi ely
add essing i s oubles o accessibili y and connec i i y o he egion, p ima ily
h ough In e na ional No h Sou h T anspo Co ido (INSTC). The p esen s udy has
been unde aken o empi ically examine he impac o INSTC on India’s expo o i s
membe coun ies. Using g a i y model o in e na ional ade in a panel da a ame-
wo k, he indings show ha bo h dis ance and i a ade pa ne is landlocked, e ec
India’s expo nega i ely. Addi ionally, a posi i e e ec o INSTC on India’s expo was
also disco e ed, elucida ing he need o quickly emo e he bo lenecks holding back
he success o he p ojec . Knowledge ans e and in es men in in as uc u e is soli-
ci ed o acili a e he smoo h ans e o goods, which will en ail economic bene i s
o all membe s and also p o ide a coun e na a i e o China’s inc easing in luence in
he egion.
IMPACT STATEMENT
Economic co ido s a e gene ally ega ded as a ool o he acili a ion o in e na ional
ade. The e o e, an assessmen o a co ido om ade pe spec i e is essen ial o
ake co ec i e measu es, i necessa y. Ou esea ch empi ically examines he
In e na ional No h Sou h T anspo Co ido (INSTC) o examining i s e ec i es in
s imula ing expo s om India o o he membe s a es. The esul s sugges ha bo h
dis ance and a ade pa ne being landlocked ad e sely e ec s India’s expo s. The
INSTC has been help ul in b idging hese ade cos o India’s expo o he membe
s a es. This no el wo k gi es c edence o he po en ial o INSTC as a sou ce mu ual
bene i s o he membe coun ies. The esea ch assumes mo e signi icance in ligh o
he conce ns su ounding supply chain dis up ions o INSTC membe s due o Russia-
Uk aine wa .
ARTICLE HISTORY
Recei ed 26 June 2023
Re ised 6 No embe 2023
Accep ed 30 Janua y 2024
KEYWORDS
Economic co ido s; INSTC;
Eu asia; g a i y model;
India; ade
REVIEWING EDITOR
Miao Wang, Ma que e
Uni e si y, Uni ed S a es
SUBJECTS
poli ical economy;
economics; e en s
1. In oduc ion
India aspi es o become he wo ld’s hi d-la ges economy by inc easing i s cu en $3.2 illion GDP o
$5 illion in 2025. To achie e he equi ed g ow h a e o ealising he a ge , he go e nmen o India
has se he ambi ious goal o $1 illion in expo s by 2025, elying on he expo -led g ow h s a egy.
1
Howe e , i will be a challenging assignmen ; i calls o economic e o ms ha will encou age he
indus ial sec o by aiding co po a ions and assis ing SMEs (small and medium-sized companies). In ha
di ec ion, he “Make in India”p ojec is one o many p og ams ini ia ed by he go e nmen o ans o m
he coun y in o a manu ac u ing hub and assis in achie ing he expo a ge .
The success o expo p omo ion p og ammes will depend on se e al ac o s, including iden i ying
egions wi h high ade po en ial and de eloping ela ions wi h hose na ions. Undoub edly, one such
egion is Eu asia, bu di ec access p esen s a challenge. The ecen inc ease in ade lows wi h Russia
CONTACT Shujaa Naeem Azmi [email p o ec ed] Depa men o Economics, Ala-Too In e na ional Uni e si y, Bishkek,
Ky gyzs an
ß2024 The Au ho (s). Published by In o ma UK Limi ed, ading as Taylo & F ancis G oup
This is an Open Access a icle dis ibu ed unde he e ms o he C ea i e Commons A ibu ion License (h p://c ea i ecommons.o g/licenses/by/4.0/), which
pe mi s un es ic ed use, dis ibu ion, and ep oduc ion in any medium, p o ided he o iginal wo k is p ope ly ci ed. The e ms on which his a icle has been
published allow he pos ing o he Accep ed Manusc ip in a eposi o y by he au ho (s) o wi h hei consen .
COGENT ECONOMICS & FINANCE
2024, VOL. 12, NO. 1, 2313899
h ps://doi.o g/10.1080/23322039.2024.2313899
due o he con lic in Uk aine is a es amen o he egion’s po en ial o India. The e o e, o add ess he
issue o accessibili y o he egion, he Indian go e nmen is making he cons uc ion o co ido s one o
i s op o eign policy p io i ies (Tandon, 2016).
India is looking in o new possibili ies o economic collabo a ion and has been di e si ying i s ade
and in es men ela ions. Mos o India’s ade goes h ough he Suez Canal, bu ge ing o Eu asia is
expensi e and challenging (including a po en ial egion: Cen al Asia). T ade wi h Cen al Asia is also
qui e limi ed (Kuszewska and Khan, 2020). The e o e, as one o he ounding membe s, India c ea ed he
In e na ional No h Sou h T anspo Co ido (INSTC), an economic co ido , o gain access o he egion
and beyond. INSTC is a mul imodal anspo a ion co ido including land, ma ine, and ai componen s
es ima ed o be a ound 7,200 kilome es long (Khan and Koch, 2021;Khan and Omidi, 2023). Wi h he
aid o eliable in as uc u e, logis ics, and dis ibu ion ne wo ks ha connec p oduc ion hubs, u ban
clus e s, and in e na ional en y poin s, he INSTC en isions b inging he egions close and making he
ans e o goods mo e e icien .
Al hough INSTC has been ope a ional o he las wo decades, i emains o be seen whe he INSTC
has con ibu ed o enhancing India’s ade wi h he membe coun ies. The e needs o be mo e
li e a u e on he iabili y o INSTC as a ool o ade p omo ion o he Eu asian egion. The limi ed
li e a u e we came ac oss on INSTC explo es he geopoli ical angle o he p ojec (See, o ins ance,
Gogna, 2019; Ka alski, 2019; Meena, 2020; Mohapa a, 2022). The au ho s ha e ye o come ac oss any
esea ch ha empi ically s udies he impac o INSTC on India’s expo . The s udy Khan e al. (2023)
looked a India’s ade wi h Caspian na ions wi hin he amewo k o INSTC and sough o assess
his o ical ends o Indo-Caspian ade po en ial using a g a i y model; howe e , he s udy is only
ocused on Caspian na ions. In iew o he ac ha India has been expanding i s ade and in es men
links wi h he o he INSTC coun ies and is looking in o new possibili ies o economic coope a ion, he
cu en s udy aims o highligh he impo ance o comme cial in e ac ions be ween INSTC membe
coun ies. Di ec access o he Caspian egion, howe e (mos INSTC membe s), posed a ba ie o India
(Passi, 2017; Za a , 2023). As a esul , ade wi h na ions in Cen al Asia is also qui e limi ed. Mo eo e ,
he scan INSTC li e a u e is s udied om a geo-economics poin o iew. Fu he impa ial in es iga ion,
acco ding o he pape ’s au ho s, is equi ed o asce ain how INSTC a ec s India’s expo s. We, he e-
o e, in es iga e whe he India’s expo s a e hampe ed by dis ance and whe he INSTC has been e ec -
i e in b idging his gap.
We u ilised he g a i y model, one o he mos ex ensi ely used models, o assess in e na ional ade
and o es ima e he ade po en ial be ween coun ies. G a i y model has been used in ecen imes o
assess he economic signi icance o Bel and Road Ini ia i e (BRI) o China’s ade lows. In he Indian
con ex , Lohani (2020) employing g a i y model sugges s ha ha ing a common bo de and o icial lan-
guage is ad an ageous o ade and ha any inc ease in dis ance esul s in a highe ade cos ha
nega i ely a ec s expo s o goods. Addi ionally, ade ag eemen s be ween coun ies ha e a ou able
e ec on ade po en ial (Kohl, 2014).
This pape has six sec ions— he ini ial in oduc ion, which ocuses on he need and con ibu ion o
esea ch. The backg ound o INSTC is co e ed in he second pa . The G a i y model, u ilised in his
s udy o de e mine he po en ial o ade, is expanded in he hi d sec ion. Sec ion ou p o ides model
speci ica ion and sou ces o da a. The esul s o he panel eg ession a e p esen ed in sec ion i e. The
pape concludes wi h a discussion on esul s in he las sec ion.
2. Backg ound o INSTC
India, I an, and Russia oge he launched INSTC in Sep embe 2000. A menia, Aze baijan, Bela us,
Kazakhs an, Ky gyzs an, Tajikis an, Tu key, Uk aine, Oman, and Sy ia a e he o he en na ions ha ha e
since joined he INSTC. I would link he economies o Russia and Eu ope wi h hose o he Indian
Ocean and he Pe sian Gul ia I an and he Caspian Sea. INSTC p ima ily consis s o h ee ou es,
al hough sou ces in I anian media indica e ha he e may be oom o an addi ional 14 ou es connec -
ing po s in India, he Uni ed A ab Emi a es, and Russia. The INSTC will u ilise ships, ains and oad
anspo o mo e goods. Goods will a el on ships om Jawaha lal Neh u and Kandla po s in Wes e n
2 S. N. AZMI ET AL.
India o I an’s Banda Abbas ha bou , going by oad and ail no h h ough Baku (Aze baijan) o Moscow
and S . Pe e sbu g as well as pass in o Eu ope (Shephe d, 2017).
Once comple ely ope a ional, he INSTC will diminish shipping cos s and ime o me chandise om
India o Eu ope, Russia and Cen al Asia. As pe es uns comple ed in 2014, he INSTC cou se was 30
pe cen cheape and 40 pe cen sho e in e ms o ime (Pu usho haman & Unnik ishnan, 2019). The e
a e h ee p ima y ou es pa o INSTC (a) Wes e n: This co ido connec s Indian po s on he Wes e n
coas wi h I an (As a a), Aze baijan (Baku) and Russia. I uns h ough he Wes e n coas o he Caspian
Sea. (b) Cen al: I connec s India o Banda Abbas po in I an and la e passes om Nowshah ,
Ami abad and Banda -e-Anzali while unning along he Caspian Sea. I eaches As akhan po in Russia.
(c) Eas e n: The eas e n a e y connec s India and Russia h ough Cen al Asian coun ies like Kazakhs an,
Uzbekis an and Tu kmenis an ia I an.
2
In addi ion, an Indian ag eemen wi h I an in May 2016 es ab-
lished Chabaha po in I an, hus p o iding a i al po en ial condui o India’s exchange and comme ce
wi h Wes Cen al Asia (G ajewski, 2022). India has al eady commi ed o e US$2.1 billion o he p ojec ,
spending abou US$500 million on he expansion o he I anian po o Chabaha and ano he US$1.6
billion on he cons uc ion o a ailway line be ween Zahedan, Sou he n, and eas e n I an and he
Hajigak i on and s eel mining p ojec in cen al A ghanis an.
3
2.1. How has INSTC gained signi icance in ecen yea s?
Fi s , i mus be acknowledged ha due o he wa in Uk aine, Russia has eassessed i s geoeconomic
in e es s and in ensi ied i s engagemen wi h INSTC a ilia es o ensu e he quick deli e y o a ious
in as uc u e p ojec s associa ed wi h INSTC. Russia has exp essed in e es in spending millions o
dolla s on cons uc ing ailway in as uc u e in o he na ions, including China, Kazakhs an, and
Mongolia, in esponse o ecen geopoli ical de elopmen s. Moscow has chosen o und wo signi ican
INSTC- ela ed p ojec s in I an and Aze baijan. Gi en he cu en geopoli ical en i onmen , hese ini ia-
i es ma k signi ican shi s in Russia’s egional in as uc u e in es men s. The inc eased emphasis on
INSTC was made possible by he Uk aine c isis and he in ensi ica ion o Russia’s policy owa ds he Eas .
Simply pu , INSTC has bene i ed om he Uk aine si ua ion; he p ojec has gained p ominence in he
geopoli ical s a egies o he in ol ed na ions (pa icula ly Russia). I he c isis pe sis s, INSTC’s in luence
Figu e 1. T adi ional ou e (Via Suez Canal) Vs INSTC Rou e (Via Chabaha Po in I an).
Sou ce: P epa ed by au ho s.
COGENT ECONOMICS & FINANCE 3
on Russian o eign policy—speci ically on Moscow’s in e ac ions wi h na ions in Sou h and Sou heas
Asia—will g ow. As a esul , INSTC will be c ucial o Russia’s poli ical economy, and i will play a mo e
p ominen geopoli ical and geo-economic ole as a ou e ee o Wes e n in luence han e e be o e
(Huwaidin, 2022).
Second, he ecen Suez Canal blockage, which cos he global economy a he y US$9 billion, has
aised he p o ile o he In e na ional No h Sou h T anspo Co ido (INSTC) as a cheape and as e
al e na i e mul imodal ansi co ido
4
. I can answe logis ics headaches and mi iga e agains he wo s
impac s o u u e blockage scena ios (see Figu e 1). Goods om India can be anspo ed along his co -
ido wi h a ela i ely lesse cos and ime and consequen ly mo e p o i able when compa ed o he
Suez Canal ou e (Di salla , 2022).
Thi d, INSTC is a easible and mo e equi able al e na i e o China’s Bel and Road Ini ia i e (BRI). The
combined objec i es o con on ing and unde mining China’s BRI in esou ce- ich pa s o he wo ld,
such as Cen al Asia and A ica, a e pa o New Delhi’s g and geopoli ical plan.
5
I is es ima ed ha i
India and he Eu asian Economic Union sign a ee ade ag eemen (FTA) while he INSTC also becomes
ully unc ional, India’s wo-way ade wi h Eu asia could each $170 billion om he cu en igu e o
a ound $20 billion.
6
In Ap il 2023, India and Russia began nego ia ing o sign a ee ade ag eemen
be ween India and he Eu asian Economic Union. India and he Eu asian Economic Union (EAEU), which
consis s o Russia, Bela us, Kazakhs an, Ky gyzs an and A menia, a e nego ia ing a ee ade ag eemen
(FTA). I such bila e al ag eemen s come in o e ec , hey will o e a mechanism o coun e China’s plan
o building a poli ical and economic hegemony in he egion h ough BRI.
Fou h, Inc eased ade olume among membe s: To da e, he ade da a among INSTC membe s a e
a om hei ue po en ial. Only 1% o he o al expo s in he CIS egion come om India, whe eas
he o e all ade connec ions wi h India a e also isibly weak (Shepo ylo, 2009). Ene gy p oduc s and
mili a y ha dwa e hea ily domina e India’s ade wi h Russia. Gi en he size o he Indian and Russian
economies and he compa a i e ad an age, hese coun ies enjoy in a ious p oduc s, he e a e mul iple
a enues o imp o e ade ela ions (Tochko , 2018). The lack o knowledge abou Indian ma ke s among
he Russian business class and he cos o ade a e he main easons o he minimal ade in o he
i ems. The INSTC will s eng hen physical connec i i y and knowledge and in o ma ion-sha ing p ocesses
and econnec o me con en ional ma ke places ha ha e been inaccessible since he di ision. These
unde de eloped ma ke s ha e eno mous po en ial o ade and consume g ow h.
3. G a i y model
G a i y de i es i s name om New on’s law o g a i y, as i s nonlinea unc ion esembles he unc ional
o m o physics law. I has long been used o s udy bila e al ade pa e ns, analyse ade ba ie s and
iden i y ade ac o s in empi ical economics. Tinbe gen (1962) was he i s o ansla e he in ui i e
explana ion o bila e al ade lows in o applied in e na ional ade li e a u e. His indings laid he
ounda ions o he mode n-day g a i y model, which heo ises ha ade be ween na ions is di ec ly
p opo ional o he size o hei economies and in e sely p opo ional o he cos o ading. In o he
wo ds, g a i y pos ula es ha la ge coun ies a e expec ed o ade mo e, bu coun ies ha a e mo e
emo ed om each o he a e expec ed o ade less, p obably because o highe ade cos s. Since hen,
he model has been used in ade li e a u e ex ensi ely.
Al hough he model was ini ially based on an in ui i e idea, la e schola s ha e explo ed he heo e -
ical basis o employing he g a i y model in ade li e a u e (See, o ins ance, Ande son, 1979;
Ande son & Van Wincoop, 2003). Add essing he challenges o heo e ical unde pinnings o g a i y
model, ecen wo ks p o ide a mo e comp ehensi e a ionale o i s usage (See o ins ance, Feens a,
2015). I has been con inuously imp o ed o e he yea s and expanded o s udying eme ging issues in
in e na ional ade (See o ins ance (Be gs and, 1989; Dea do , 1998; Feens a e al., 2001; E ene e
al., 2002).
The e iciency and e ec i eness o g a i y model is bes highligh ed by Beck (2020), who compa ed
di e en de e minan s o ade o EU coun ies and s a es ha ‘g a i y model akes lead in explaining
ade lows’. Due he e ec i eness o g a i y model in ade s udies, we ha e seen a conside able
inc ease in he applica ion o g a i y model o gauge di e en aspec s o in e na ional ade. Fo
4 S. N. AZMI ET AL.
ins ance, i has been used o s udy ade pa e ns o coun ies. Hassan Khaya (2019) and Lypko (2022)
examined he ade pa e n o GCC coun ies wi h de eloped na ions and cen al and eas e n Eu ope,
espec i ely. Kabi and Salim (2016) used g a i y model o s udy he e ec s o in ellec ual p ope y
igh s (IPR) on china’s elec ical and elec onic expo s. Simila ly, Na hoo e al. (2021) demons a e a posi-
i e e ec o aid o ade on bo h ex ensi e and in ensi e ma gins o ade o coun ies in Sub
Saha an A ica.
Ano he p ominen a ea o applica ion o he g a i y model has been o es ima e he ade po en ial
o coun ies. Fo example, Ba a (2006), using c oss-sec ional da a om India, analysed ade pa e ns
wi h he wo ld and o ecas ed he u u e ade po en ial o India. Simila ly, Sohn (2005) employed a
g a i y amewo k o examine ac o s a ec ing he bila e al ade lows o Sou h Ko ea and opined ha
Japan and China need o ade wi h Sou h Ko ea o hei ull po en ial. Mo e ecen ly, he g a i y model
has been adop ed o s udying he e ec s o ee ade ag eemen s and economic co ido s. Fo
example, Jagdambe and Kannan (2020) ha e s udied he e ec s o ASEAN- India ee ade ag eemen s
on ag icul u al ade and sugges he need o libe alise ag icul u al ade in ee ade ag eemen s.
Simila ly, Huang e al. (2020) o ecas he ade po en ial o China wi h he i e cen al Asian coun ies,
highligh ing he e iciency o he Bel and Road Ini ia i e (BRI). Jing e al. (2020) also used he g a i y
model o o ecas China’s enewable ene gy ade po en ial wi h BRI coun ies. Al hough, he e is ex en-
si e li e a u e employing g a i y model, Kabi e al. (2017) a e conduc ing a ho ough su ey o exis ing
s udies, sugges a close examina ion o he dis ance ac o o de e mining ade lows in he p esence
o unila e al and mul ila e al a angemen s be ween he coun ies. The p esen wo k will add o he
s and o li e a u e ha has a emp ed o add ess conce ns o Kabi e al. (2017).
4. Model speci ica ion
As men ioned in he p eceding sec ion, he g a i y model was p esen ed as an in ui i e explana ion o
ade lows. In i s mos basic o m, i can be w i en as:
Xij ¼_
aiþ
_
b1GDPiþ
_
b2GDPjþ
_
b3TCij þ_
li(1)
Whe e Xij depic s expo s om coun y i o coun y j, GDPiand GDPjis g oss domes ic p oduc o o ig-
ina ing and des ina ion coun ies, TCij cap u es he ade cos be ween wo coun ies, usually p oxied by
he geog aphical dis ance be ween he capi al ci ies and _
li is a andom e o e m. The _
ai e m is he
model in e cep , and he b e ms a e coe icien s, measu ing he e ec s o explana o y a iables.
Following mac o-economic li e a u e, we make he loga i hmic ans o ma ion o he undamen al
equa ion and eplace ade cos wi h dis ance. The modi ied equa ion can be w i en as:
lnXij ¼_
aiþ
_
b1lnGDPi þ
_
b2lnGDPj þ
_
b3lnDisij þ_
li (2)
Whe e ln ep esen s he loga i hmic applica ion o he a iables unde conside a ion, Xij deno es
he expo o India o INSTC a ilia es in pe iod ,GDPi and GDPj is GDP o India and INSTC coun ies,
espec i ely, a ime , and Disij is he geog aphical dis ance in kilome es be ween om India’s capi al
ci y o espec i e ade pa ne unde conside a ion.
As India’s expo is also a ec ed by o he ac o s, we conduc ed a su ey o iden i y elemen s o
India’s ade and e alua ed i s ele ance o he p esen s udy. Apa om GDP and dis ance, o he a ia-
bles, such as common bo de s and language, can be used in he s anda d g a i y model (F ankel e al.,
1997). Common language and bo de a e employed in g a i y models wi h an unde s anding ha i alle-
ia es ade cos s be ween na ions. Howe e , i does no add alue o he model o ou pu poses as
India does no sha e a common bo de and language wi h any o he INSTC a ilia es. Addi ionally, com-
mon eligious cul u e has been sugges ed o in luence coun ies’ ade pa e ns, whe e some eligious
cul u es a e mo e conduci e o ade and o he s no (Guo, 2007; Lewe & Van den Be g, 2007). Despi e
he ele ance o eligious cul u e o de e mining ade lows, we do no use i because o he absence
o common eligion be ween he coun ies unde conside a ion.
Mo eo e , WTO membe ship and a coun y being landlocked ha e also been a gued o imp o e he
p edic i e capabili y o g a i y models (Jing e al., 2020). We inco po a e bo h a iables in ou model o
ca ying ou he s udy. The Popula ion o ade pa ne s has also been conside ed in ex ended g a i y
COGENT ECONOMICS & FINANCE 5
models o accoun o he expo ing coun y’s supply and consump ion capaci y and impo ing na ions’
consump ion capaci y (Jagdambe & Kannan, 2020). We es o he ele ance o Popula ion in ou es ima-
ion o he g a i y equa ion. Las ly, we inco po a e INSTC in ou s udy o iden i y i s cumula i e e ec s
on India’s expo o INSTC membe s. The augmen ed g a i y model in i s linea o m is p esen ed as:
lnXij ¼_
aiþ
_
b1lnGDPi þ
_
b2lnGDPj þ
_
b3WTOij þ
_
b4Landlockedjþ
_
b5lnPopi þ
_
b6lnPopj þ
_
b7lnDisij
þ
_
b8INSTCij þ_
li (3)
Whe e WTOij is a dummy a iable aking a alue o 1 i bo h India and he co esponding INSTC
membe a e WTO membe s in a pe iod and 0 o he wise. Landlockedjis a dummy a iable ha akes 1
i a coun y is landlocked and 0 o he wise. Popi and Popj a e he Popula ions o India and o he INSTC
membe s, espec i ely, o di e en yea s. INSTCij is a dummy a iable conside ed 1 i bo h India and he
pa ne coun y a e membe s o INSTC in a gi en yea and 0 o he wise. I he esul s o he p esen
s udy concu wi h he exis ing li e a u e,
_
b1,
_
b2,
_
b3,
_
b6, and
_
b8a e expec ed o ha e posi i e signs and
_
b4and
_
b7a e expec ed o be nega i e, whe eas
_
b5can ha e a posi i e as well as nega i e sign.
Recen ly, using he OLS echnique o es ima ing g a i y models has been c i icised because o he
p oblem o ze o ade lows, as he assump ion o Xij >0 is iola ed in mos cases. Howe e , ou da a-
se does no iola e he posi i e ade low assump ion and, he e o e, can be es ima ed using OLS.
Fu he mo e, because o he p esence o ime-in a ian a iables like dis ance and landlocked in he
model, we can only es ima e he ime- ixed e ec . Howe e , o ex end obus ness o ou o e all analysis,
we es ima e a ixed e ec model, whe e he ime in a ian a iables would be d opped due o collinea -
i y. We also es ima e he andom e ec s model and hen compa e he esul s om he es ima ed model
unde di e en assump ions using he walds es o linea es ic ions and he B eusch and Pagan Tes .
The esul s om he walds es and B eusch and Pagan es help us iden i y he co ec model speci ica-
ion o ou da a. Las ly, in o de o compa e ou esul s om andom and ixed e ec es ima ions, we
pe o m Hausman es , which has he null hypo hesis o andom e ec s being a p e e ed model.
4.1. Da a sou ce and cha ac e is ics
In o de o ca y ou he analysis, we use he ex ended g a i y model in equa ion (3). We use a panel
da ase o India’s expo o INSTC membe s om 2000 o 2019. The s udy pe iod is chosen o emembe
he yea in which he INSTC p ojec s a ed ma e ialising and he isible s uc u al b eak in he expo
igu es pos he global lockdown in 2020 due o he Co id19 ou b eak. The coun y dimension o he
panel da ase consis s o 14 INSTC a ilia es and 1 INSTC obse e . The lis o coun ies associa ed wi h
INSTC is p esen ed in Appendix 1. The sou ce o he dependen a iable, along wi h 8 explana o y a ia-
bles, is gi en below.
The dependen a iable Xij (India’s expo o INSTC membe s) is ex ac ed om ade map and wo ld
bank da abase. Among he independen a iables, he GDP and Popula ion o coun ies ha e been
de i ed om he wo ld bank da abase o wo ld de elopmen indica o s. The s a us o WTO membe ship
has been assessed om he o icial websi e o WTO. The da a on he physical dis ance be ween India
and o he coun ies and INSTC landlocked coun ies ha e o igina ed om he USITC (US In e na ional
T ade Commission) da abase. INSTC membe ship in o ma ion has been collec ed om he o icial web-
si e i s o icial websi e. All a iables ha e con e ed in o loga i hmic alues o easy in e p e a ion o
esul s wi h he excep ion o dummy a iables. Reg ession coe icien s o logged a iables can be in e -
p e ed as elas ici y (Azmi & Akh a , 2022). We use he s a a15 so wa e package o pe o m ou quan i a-
i e analysis based on he ecommenda ions o Azmi e al. (2023).
5. Resul s
We ha e es ima ed he g a i y model wi h OLS and GLS. OLS es ima ion has been used o es ima e
POLS and ime e ec and ixed e ec s models, whe eas GLS has been employed o es ima ing he an-
dom e ec model. Addi ionally, we ha e es ima ed pa ame e s employing Poisson pseudo-maximum
likelihood (PPML) model o supplemen ou esul s wi h a sensi i i y analysis, which in ou case means
6 S. N. AZMI ET AL.
o examine whe he esul s a e sensi i e o changes in he es ima ion echnique. The esul s o he panel
eg ession analysis a e p esen ed in Table 1. A he onse , we compu ed desc ip i e s a is ics o all a ia-
bles employed in he s udy o ge a sense o he da a. The desc ip i e s a is ics epo ed in Appendix 2
a e in line wi h ou expec a ions and do no aise any cause o conce n. Be o e p oceeding o u he
analysis, we ha e es ed c oss sec ional independence assump ion using Pesa an (2021)’s CD es . The
null hypo hesis o he Pesa an’s CD es is ha he c oss-sec ional uni s a e independen . F om he
esul s in Table 2, he CD es does no ejec he null hypo hesis o c oss-sec ional independence.
The e o e, c oss-sec ional dependence is no a p oblem in he p esen con ex . We can p oceed u he .
Table 1 e eals ha all he models show he GDP o epo ing and impo ing coun ies o ha e a
signi ican ly posi i e e ec on expo s, excep POLS es ima es ha ound he GDP o India o be insig-
ni ican . Al hough all i e models epo he same le el o signi icance o GDP, he e a e di e ences in
he magni ude o hei e ec s. Wi h o he hings emaining he same wi h an inc ease in ei he he GDP
o India o he impo ing coun ies, he expo s om India o INSTC a ilia es will inc ease. We also ound
India’s Popula ion o be insigni ican o he ixed e ec models and signi ican in he o he h ee mod-
els. Howe e , he Popula ion o pa ne coun ies was epo ed o be signi ican only in he POLS.
Dis ance has he expec ed nega i e sign and is highly signi ican unde he ime- ixed e ec , andom
e ec s and PPML models. Howe e , we obse ed ha dis ance is insigni ican when conside ing he
POLS model. Las ly, he eg ession analysis sugges s he landlocked and WTO membe ship s a us a i-
able is signi ican a 1% o mos models. The missing alues in ixed e ec s models could no be es i-
ma ed due o collinea i y.
The log-linea eg ession indings can be in e p e ed as elas ici ies. He e, we emphasise ha he coe -
icien es ima es o he a iables a e almos simila when es ima ed wi h di e en me hods. Hence, we
will discuss he coe icien es ima es o only one es ima o . Fo ins ance, using andom e ec es ima es,
a 1% inc ease in India’s GDP will esul in a 0.449% inc ease in India’s expo o INSTC membe s. Since
he landlocked WTO and INSTC we e dummy a iables, i should be in e p e ed by aking i s exponen ial
and hen deduc ing one om i (F ankel e al., 1997). Fo ins ance, he coe icien o he landlocked a i-
able is -0.438, which indica es ha India expo s 35% less [ exp (-0.438) –1g100] o a landlocked
coun y ela i e o o he coun ies. Simila ly, he WTO membe ship coe icien can be in e p e ed as
India expo ed 40 pe cen mo e [ exp (-0.342) –1g100] o a coun y when bo h coun ies a e WTO
membe s o a gi en yea . Las ly, INSTC coe icien s sugges a 27 pe cen inc ease [ exp (-0.243) –1g
Table 2. Diagnos ic es s.
Tes s S a is ics p- alue
Pesa an’s es o c oss sec ional independence 12.297 0.148
Modi ied Wald es o g oup wise he e oskedas ici y 1.125 0.326
Woold idge es o au oco ela ion 0.593 0.867
Table 1. G a i y model es ima ions.
Va iable POLS Fixed E ec s (Time) Random E ec s Fixed E ec s PPML
Cons an −4.544−3.935−1.91 −5.557 0.789
lnGDPi 0.857 0.619 0.449 .929 0.435
lnGDPj 0.455 0.737 0.744 0.421 0.783
WTOij 0.067 0.341 0.342 .045 0.392
Landlockedj−0.682 −0.442 −0.438 –−0.481
lnPopi 0.319 0.278 0.179 −1.138 0.168
lnPopj 0.0100.168 0.098 0.235 0.159
lnDisij −0.857 −1.202 −1.210 –−1.567
INSTCij 0.454 0.512 0.243 0.346 0.402
p>chi 2 0.00 0.00 0.00 0.00 0.00
R- sq 0.745 0.785 0.845 0.694 0.921
Walds Tes (p- ale) 0.06
B eusch and Pagan LM Tes 930.71
Hausman RE/FE
Chi Squa e S a is ics: 5
P-Value: 0.54
Sou ce: Au ho ’s calcula ions.
Signi ican a 1% le el, Signi ican a 5% le el, Signi ican a 10% le el.
COGENT ECONOMICS & FINANCE 7
