India in SAFTA: Is It Welfare-generating? An Ex-post Analysis

This study evaluates the welfare effects of India’s participation in the South Asian Free Trade Area (SAFTA), focusing on the impact of sensitive lists on trade flows and welfare from 2011 to 2019. Using an ex-post Kemp–Wan model and partial least squares regression, we find that India’s sensitive lists have negatively affected imports, leading to a net welfare loss of $263 million. The study further explores a hypothetical scenario in which all sensitive lists are eliminated, projecting significant welfare gains for India through increased trade and consumer surplus. These findings highlight the restrictive nature of sensitive lists and the potential benefits of deeper tariff liberalisation. The results suggest that pruning sensitive lists should be a priority in future SAFTA negotiations to maximise welfare gains and promote stronger regional integration in South Asia. JEL Classification: F13, F14, F15, F17