Abstract

Trade in textiles and clothing plays a pivotal role in the SAARC regional trade and is a major source of foreign exchange and promoting the growth of industrial sector in the SAARC member nations. The textile and clothing sector features among the top revenue generating sector in the South Asian countries and represents a large proportion of the overall output of the member countries. Textile and clothing sector in SAARC is one of the largest contributing sectors of their exports, employment, industrial production and GDP growth but still contributing lowest in the intraregional trade. Thus, it becomes important to examine the performance of textile and clothing sector in SAARC region. For this we have studied determinants of India’s exports and imports in textile and clothing with SAARC members, with the help of Gravity Model. Factors like distance between the capital of two countries, size of the two economies, per capita incomes and whether or not they share a border have been included as independent variables to see their impact on trade of India with neighboring countries. Model shows that Indo-Pakistan trade has huge potential due to the capitals of two countries being closest in SAARC region. Study also concludes that SAARC countries need to improve the quality of their textile and clothing product.