Do Tax Treaties Matter? Empirical Evidence on India’s Bilateral Trade from an Augmented Gravity Model

This study investigates the impact of Double Taxation Treaties (DTTs) on India’s bilateral trade using a panel dataset of 22 major investing countries over the period 1990 to 2022. Grounded in the augmented gravity model of trade, the paper incorporates key economic and institutional variables such as GDP, distance, common language, historical ties, and the presence of tax treaties. To ensure robust and reliable estimates, the analysis employs both Ordinary Least Squares (OLS) and Poisson Pseudo Maximum Likelihood (PPML) methods, with the latter addressing issues like heteroscedasticity and zero trade flows. Across all model specifications, the results consistently show that DTTs have a significant positive effect on India’s trade flows, confirming their role in reducing tax-related trade barriers and enhancing economic cooperation. These findings underline the importance of maintaining and updating India's tax treaty network as a strategic tool for global trade integration. The study provides meaningful insights for policymakers aiming to strengthen India's trade framework through effective international tax policy. JEL Classification: F14, F15, F53, H87, C33