Analysis of india’s trade patterns and trade possibilities with the european union

Trade has played a crucial role in the emergence of developing econo-mies. The global emergence of India is also linked to its role in global trade. In this context, the European Union and India initiated talks for a free trade agreement known as the Bilateral Trade and Investment Agreement (BTIA). However, this agreement has failed to materialise due to various challenges and disputes. Against this backdrop, the present study attempts to trace the existing pattern of trade relations between India and the EU and provide a preliminary analysis of the nature of trade in this proposed region. A modified gravity equation and indicators of regional trade interdependence have been estimat-ed. The results indicate that trade within this region is in line with cer-tain predictions of the gravity model. Additionally, it also indicates that such an agreement has little potential for expanding trade and might even result in ‘unnatural trade’. Thus, it provides evidence for the argu-ment that India can benefit from developing ties with similar emerging economies in the Asia-Pacific neighbourhood.