Impact of Cultural Determinants on Bilateral Trade of India

Culture was defined by Hofstede as “the collective programming of the mind”, which distinguishes people from one another and that can affect various social, economic and political transactions. They play a very significant role in affecting global trade transactions, especially for a country like India with such strong and deeply rooted cultural values. This paper has analyzed the role of cultural factors in determining India’s bilateral trade with 76 trading partner countries for the year 2018. ‘Cultural distance’ and ‘colonial links’ have been used as cultural determinants, where ‘cultural distance’ is measured using the six dimensions of culture given by Hofstede. An extended gravity model of trade has been used to test their impact on India’s exports, imports and total trade. Our analysis revealed a positive impact of ‘colonial links’ and a negative though insignificant effect of ‘cultural distance’ on India’s trade variables.