The Impacts of India’s Export to African Blocs: Panel Data Analysis
Journal of Quantitative Finance and Economics , 2019, 1(1), 1-23, PDF Full-text
Recived:05/01/2019, Revised: 05/01/2019, Accepted : 10/04/2019, Publication: 05/05/2019
Recived:05/01/2019, Revised: 05/01/2019, Accepted : 10/04/2019, Publication: 05/05/2019
Abstract:
The paper studied the impacts of India’s export to the seven African trading blocs during 19952016 especially on GDP growth rate, FDI inflows, inflation rate, Real Effective Exchange Rate, import concentration index and openness of the blocs which directly or indirectly help to speed up the process of trade and financial integration of the African blocs taking data from UNCTAD through BaiPerron model(2003), Fixed effect panel regression model ,the Hausman test (1978, Fisher(1932)Johansen(1991) , Kao(1999) and Pedroni(1999) cointegration models. Vector Error Correction and Wald test(1943)were applied to test causality. The empirical results showed that the growth rate of India’s export to seven African blocs namely, CEMAC, COMESA ,EAC,ECCAS,SACU, SADC and WAEMU have been increasing at the rate of 0.130.19 per cent per annum during 19952017 which have significant upward structural breaks . The fixed effect panel regression assured that one per cent increase in GDP growth rate,FDI inflows, inflation rate, of African blocs led to 0.101 per cent , 0.1185 per cent , 0.1839 increase in India’s export to African bloc blocs but one per cent increase in openness ,REERand import concentration index in African blocs led to 3.586 per cent decrease , 1.15% decrease , 1.388 per cent decrease in Indian export to African blocs during 19952017. Panel cointegration showed that there are at least five cointegrating vectors among them. There are insignificant long run causalities from import concentration index and openness index of 7 African blocs to GDP growth rate and REER .There is short term causality from REER of the African blocs to Indian export to their blocs. And there are short term causalities [i] from import concentration of African blocs to GDP growth rate of African blocs,[ii] from openness of African blocs to inflation rate of African blocs, and [iii] from FDI inflows of African blocs to REER of African blocs respectively. This research may find out to formulate policies on macro variables how to accelerate trade and financial integration of African blocs with India.
Key words: African blocs, India’s exports, panel cointegration, panel vector error correction, short run causality, long run causality,
JEL classification codes: C33, F14, F15, F40, P33
Introduction
There are almost 14 regional economic communities in Africa in which full economic union was satisfied in UMA, CEMAC, ECCAS, EAC, ECOWAS, CEPGAL, SADC and UEMOA, customs union was satisfied in COMESA,SACU and UEMOA and free trade area was established in SADC and COMESA. The blocs are trying to hike their intra trade shares and macro convergence. Even they have been following Abuja Treaty of 1991 to form African Economic Community through six phases of targets in which 202328 is the sixth phase where complete political, economic and monetary union with a single currency and a pan African Parliament would be achieved.
Economic Commission of Africa sets various targets in every field to realize the Obuja Treaty.The success stories of African blocs outweighed the failures during last two decades which were examined empirically by Bhowmik (2014) lucidly. The African Free Trade Zone (AFTZ), also known as the African Free Trade Area, was announced at the EACSADCCOMESA Summit in October 2008. In May 2012, the agreement was extended to include ECOWAS, ECCAS and AMU to operationalise an African Free Trade Zone by 2018. A breakthrough in Africa’s journey towards regional and continental integration was achieved when the Heads of State and Government of COMESA EAC SADC met on 10 June 2015 in Sharm El Sheikh, Egypt, to launch the Tripartite Free Trade Area (TFTA). Even, the AfCFTA provides an important opportunity for the African countries in an increasingly globalised world. The elimination of tariffs in goods and services will help in boosting economic growth of the African countries, transform their economies and achieve sustainable development goals (SDGs).The integration agenda of SADC has also been strengthened through the Regional Indicative Strategic Development Plan which is a comprehensive 15 year strategic roadmap. This plan not only boosts regional economic integration but also leads to the addressing of the socioeconomic issues in this region. Indian Technical and Economic Cooperation, Team 9,and Pan Africa enetwork aimed at building institutional and human capacity as well as enabling skills and knowledge transfer in the IndoAfrican ties.Indian businesses are active across geographic spaces and sectors in Africa.They are deeply engaged in agribusiness, engineering,construction,film distribution, cement,plastics and ceramics manufacturing, advertising, marketing,pharmaceuticals and telecommunications respectively. The presence of India Inc. in the continent can be loosely divided into three categories ,namely,business set up by members of the diaspora,large state owned for private MNCs and New SMEs set up investors in search of business opportunities.
IndoAfrican Framework for Strategic Cooperation identified significant areas of cooperation, such as,agriculture, infrastructure, health, blue economy and renewable energy. CII stressed the needs for Business to Government dialogue both in India and Africa which can fulfill threefold
