Assessment of Possible Economic Alignment Between G20 Nations with Special Focus on India, G7 and G12: A General Equilibrium Analysis

Abstract

The article analyses the ex-ante effects of India’s possible alignment with G20 countries. The study considers G7, G12 and G20 countries as separate blocks. The study analyses India’s bilateral tariff and non-tariff liberalisation, free flow of factors of production, Global Value Chain (GVC) participation, output-oriented technological progress in manufacturing, transport and communication and the introduction of shipping technology in India. The study considers liberalisation in G7 standalone, G12 standalone, G20 standalone and also G20 comprehensive liberalisation. The study also considers India’s bilateral standalone liberalisation with G7, G12 and G20 countries separately using computable general equilibrium (CGE) analysis with the help of the Global Trade Analysis Project (GTAP) 10 database. The overall results indicate that strengthening of GVC standalone in the G20 region may bring maximum welfare to the region. Further, the sectors which may gain the most seem to be grain crops, meat and meat products, textiles and apparel, etc., and in terms of factors of production, all other factors of production would gain but land and natural resources seem to lose in terms of real returns to factor of production. Addressing issues related to factor movements and policies strengthening GVCs can bring about relatively higher growth and welfare, respectively, in the G20 nations as compared to other trade and industrial policies.