Gravity model and International Trade: Importance of Determinants of India’s Gems and Jewellery Exports (2000-01 to 2023-24)

Abstract

Foreign trade encourages growth and development by efficiently using resources of the country. As development process starts, the structure of trade undergoes a change in terms of composition and direction. The development leads to growth in production of non –traditional items and the diversification of markets from traditional to non-traditional (Ricardo,2017). The diversification of markets creates scope for manufacturers where they can sell and generate earnings for the country. The export earnings finance the essential developmental imports especially for the developing countries. Product-wise and Destination-wise exports of a country gives an idea about the structural shifts and diversification of the export destinations. The shift from traditional markets to non-traditional markets represents new opportunities for the exports of developing countries. Also, this structural shift prevents developing countries from risk and helps in increasing foreign exchange earnings. The exports of commodities by a country which other country demand it, gains stock of essential goods and benefits the former country in terms of gain in foreign reserves (Helpman, 1987).