Assessing the Impact of Tariff Reductions under the ASEAN-India Free Trade Agreement on India’s Black Pepper Imports from Vietnam (2010–2023)

Abstract

This study examines the impact of tariff reductions from the ASEAN-India Free Trade Agreement (AIFTA) on India's imports of black pepper obtained from Vietnam from 2010 to 2023. AIFTA aimed to enhance regional trade and economic integration, yet growing dependence on low-cost Vietnamese pepper has raised concerns regarding India’s domestic competitiveness. This study employs time-series econometric techniques, such as Augmented Dickey–Fuller tests, Vector Autoregression (VAR), and Vector Error Correction Model (VECM), to assess the extent to which tariff liberalization has impacted trade patterns. The findings suggest that factors in the Indian pepper market show notable short-term interactions affected by production shocks, price fluctuations, and changes in exports, whereas tariff rates exert little influence in the short run. However, the VECM indicates a significant long-term equilibrium relationship influenced by variations in domestic consumption. Forecasts indicate continuous variations in India's pepper prices and consumption, with a short-term rise expected until 2030 before entering a stabilization period. The results show that tariff reductions from AIFTA improved Vietnam's competitiveness in the Indian market, boosting India's dependence on imports but offering limited long-term benefits to domestic producers. These results highlight the need for specific policy actions to protect India’s pepper sector while maintaining the advantages of local trade liberalization.