Final Report Assessing Export Opportunities for Canada in India

The renewed signs of interest in trade talks suggests that India may again be looking to two-way trade as an engine of growth, especially given the renewed dynamism that it is showing in terms of establishment of fast-growing firms, most of which are in the future-oriented digital economy domains of e-commerce, edtech, fintech and logistics (India accounted for 48 of the 943 unicorns in a recent s. [...] The increase in total trade with the world is about half of the increase in bilateral trade in each case, meaning that roughly half of the increase in bilateral trade represents trade diversion. [...] Annex 1: The Gravity Model of Trade As the name suggests, the gravity model of trade is based on an analogy to the concept of gravity in physics, relating bilateral trade between two countries to the size of trading partners and the distance between them, as well as to trade frictions (which stand in for the physical concept of a gravitational constant). [...] Gravity models are a workhorse tool for the analysis of international trade patterns and the impacts of many types of trade policies (e.g., the level of diplomatic representation, the presence of an FTA, etc.). [...] We estimate the model sequentially, adding variables to identify the final form in which any modification of the variables leads to only minor changes in the results, suggesting a high level of robustness and validity of the suggested model.