Index Of Trade Openness and Intensity: A Study of India-Afghanistan Relations

Abstract

The trade relationship between India and Afghanistan is as old as their cultural and political relations, dating back to ancient times. The trade between the two nations has been consistent over the years. India's trade relations with Afghanistan have improved significantly after signing various trade agreements like the Preferential Trade Agreement (PTA) in March 2003. The study aims to measure the index of openness of India and Afghanistan with the world of economy and evaluate the degree of trade intensity of both nations to each other using the trade-to-GDP ratios and K. Kojima's (1964) trade intensity index over the period 2014 - 2023. The findings of trade openness show that Afghanistan has a higher trade openness than India, showing its higher dependency on and openness to global trade. However, the analysis of trade intensity highlights that the bilateral trade between India and Afghanistan has not strengthened and remained below its potential. The study suggests that Afghanistan diversify its exports and boost domestic production to reduce import dependency. It also highlights the need for stronger trade cooperation and policies aimed at enhancing bilateral trade and strengthening global economic integration.