An assessment of India’s virtual water trade in major food products

Abstract

This paper analyzes virtual water trade flows through food products between India and its trading partners. It relies on the gravity model of trade and estimates a panel data fixed effect regression to identify drivers of virtual water trade. Our results show that India was the net exporter of virtual water in food products during 1990-2013; however later it turned out to be its net importer. Further our analysis shows distance between trading partners as the primary driver of virtual water trade. India prefers trading with its neighbours to reduce transportation costs. The availability of arable land and water used in crop production are limiting factors for production of food crops and thus act as essential factors in deciding the virtual water trade flows. These findings indicate that resource endowment factors influence bilateral virtual water trade flows.