Unlocking Trade Potential: A Stochastic Frontier Gravity Model Analysis of India-Africa Information and Communication Technology (ICT) Goods Trade

Abstract

This study examines the relatively unexplored domain of Information and Communication Technology (ICT) trade between India and the African Union (AU), applying the Stochastic Frontier Gravity Model (SFGM) to measure the untapped potential and discern factors that impede trade. It points out India’s burgeoning role in global ICT trade, with the AU being an increasingly valuable market due to its digital growth and young population. The research identifies India’s significant comparative advantage in exporting telecommunication equipment, with a Revealed Comparative Advantage of 3.54, strategically enhancing its position in the global marketplace. The research notes the high trade complementarity index of 0.984 in 2021, indicating a strong synergy between India’s export capabilities and the AU’s demand, suggesting a beneficial trade relationship. It acknowledges the shift in Africa’s ICT import partners, highlighting China’s rising influence and the need for India to solidify its market share in Africa strategically. The SFGM’s application to evaluate trade efficiency, considering factors such as GDP, exchange rate, distance, tariff rate, and language, provides insightful conclusions. Positive impacts of GDP, exchange rate, and shared language on bilateral ICT trade are found to be significant. The findings emphasise the importance of strengthening trade ties for economic development and digital transformation in Africa.