ANNOUNCEMENTS
Intra-Industry Trade fits well with the new trade theories of monopolistic competition, product differentiation and scale economies rather than the traditional trade theories of comparative advantage and factor endowment differences. The new trade theories assume that trade takes place between similar countries, which are identical in their factor endowments and income levels. The model of monopolistic competition shows that trade will occur between similar countries and within similar industries because there is a potential for gains from such a trade. With limited studies conducted for developing nations, especially in the context of India, the major objective of the present study is to analyze the structure of trade and nature of product differentiation for India’s processed agri-food products. Further, the aim of this study is to analyze the determinants of total and vertical intra-industry trade between India and EU member countries. The measures of Grubel Lioyd index, Horizontal IIT and Vertical IIT indicate the pattern of trade, while the panel regression indicate that the determinants for the two types of trade are different from one another. Our preliminary analysis showed that India exhibited inter-industry trade with EU member countries chosen for the purpose of study, with high level of vertical intra-industry trade. The regression results indicate that the results for both total and vertical IIT are in line with the theoretical expectations. The differences in demand and factor endowments were negative and significant for the total IIT model while the same was positive and significant for the vertical IIT model.
