Economic and institutional determinants of India–Africa merchandise trade

Purpose This study examines the primary drivers of India’s merchandise trade with 48 African countries from 2000 to 2023. It examines how economic size, governance effectiveness, regulatory quality and corruption shape bilateral trade flows within a rapidly evolving South–South economic partnership. By analysing both formal and informal institutional factors, this paper aims to clarify their relative influence on trade and provide evidence-based insights for policies that can strengthen and sustain India–Africa economic cooperation. Design/methodology/approach Structural gravity model estimated using Poisson pseudo-maximum likelihood, enabling robust treatment of heteroskedasticity and zero-trade observations. Findings Gross domestic product (GDP) of India and its African partners is the strongest predictor of bilateral trade. Governance effectiveness and regulatory quality have significant positive effects, underscoring the importance of institutional capacity. The analysis also identifies a short-term “greasing the wheels” effect of corruption, where higher corruption levels accompany increased trade, revealing a more complex institutional landscape than conventional views suggest. Model-based projections indicate continued growth in India–Africa trade. Originality/value This paper presents one of the few systematic assessments of India–Africa trade, using a modern structural gravity framework that incorporates institutional quality. By identifying a nuanced corruption effect alongside positive governance impacts, it challenges standard assumptions and highlights the interaction of formal and informal institutions in South–South trade. The results offer clear policy guidance for enhancing governance and regulatory environments to deepen India–Africa economic engagement.