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The Global Institute Russia-India-China (RIC) Conference

The Global Institute Russia-India-China (RIC) Conference Export Diversification in India and China : A Comparative Analysis* By Rajesh Chadha Geethanjali Nataraj Anjali Tandon *Work in progress. India-China : A Brief Comparison. Per Capita Incomes (PPP): India $2600, China $5340

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The Global Institute Russia-India-China (RIC) Conference

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  1. The Global Institute Russia-India-China (RIC) Conference Export Diversification in India and China : A Comparative Analysis*By Rajesh ChadhaGeethanjali Nataraj Anjali Tandon *Work in progress

  2. India-China : A Brief Comparison • Per Capita Incomes (PPP): India $2600, China $5340 • Economic Reforms: India (1991), China (1978) • Reform thrust: India (started off with import substitution strategy and gradually opened up its export sector), China (Export led growth strategy)

  3. China’s Export Story • Attracted global attention • Mainly due to the comparative advantage of due to labour surplus • Recent literature/studies have highlighted the increasing technology content of Chinese exports:Xu (2006), Rumbagh (2004)

  4. Objectives • Direction of Trade • Composition of Trade • Diversification of Trade

  5. Segregation of Chinese and Indian Exports • ETA (Empirical Trade Analysis) • UNCTAD • NCAER • Scheme of segregation based on five factors: • Skill • Scale • Resource endowment factors • Technology content • Stage of the final product

  6. NCAER Classification* derived from ETA and UNCTAD • Product group A: Primary products (91) • Product group B: Natural-resource intensive products (21) • Product group C: Unskilled-labour intensive products (27) • Product group D1: Low and medium technology intensive products (35) • Product group D2: High technology intensive products (40) • Product group E1: Low and medium human-capital intensive products (33) • Product group E2: High human-capital intensive products (10) • Sectors not classified according to intensity F: (2) • SITC Revision 3, 3 digit ( 259 products)

  7. ETA NCAER UNCTAD A: Primary A: Primary (91) A: Primary B: Natural resource intensive B: Natural resource intensive (21) B: Labour intensive & resource based C: Unskilled labour intensive C: Unskilled labour intensive (27) D1: Low & medium technology intensive (35) C: Low skill & technology D: Technology intensive D2: High technology intensive (40) D: Medium skill & technology E1: Low & medium human capital intensive (33) E: Human capital intensive E: High skill & technology E2: High human capital intensive (10) F: Unclassified (2) F: Unclassified Not classified

  8. Trade Balance Region wise, TE 2006 TE: Triennium Ending

  9. Trade Balance GroupWise, TE 2006 TE: Triennium Ending

  10. Export Composition Regionwise, TE 2006 TE: Triennium Ending

  11. Import Composition Regionwise, TE 2006 TE: Triennium Ending

  12. Export Composition Group wise, TE 2006 TE: Triennium Ending

  13. Import Composition Group wise, TE 2006 TE: Triennium Ending

  14. China's region wise trade balance in select manufacturing sectors, TE 2006 TE: Triennium Ending

  15. India's region wise trade balance in select manufacturing sectors, TE 2006 TE: Triennium Ending

  16. TE: Triennium Ending

  17. Inferences: China • China has relatively strong export penetration with most developed partners as comapred to India It has a trade surplus with all its major trading partners except Japan and ASEAN and with the world. • China continues to export more labour intensive products (C, E1 & E2) with increasingly more technology intensive exports(D1 & D2 ) • However, even higher imports of technology intensive products, particularly from ASEAN and Japan, result in a net trade deficit of these items in China’s external trade balance.

  18. Inferences: India • Unlike China, India has a trade deficit with all its major trading partners including China except the USA • Indian exports are relatively more diversified • India continues to be a major exporter of primary commodities (A), though its exports of technology intensive items (D2) have enhanced. • Dominance of labour intensive products as a group (C, E1&E2) continues. • Trade with China is highly skewed. • Nearly 67 percent of total exports to China of primary products (A) • Nearly 43 per cent of total imports of high technology intensive products (D2)

  19. Conclusions • China exports technology intensive products on the strength of its relatively large share of their imports: Processing Trade. • Indian manufacturing sector needs to gear up • Such expansion should come through intensive expansion ( of labour intensive products) as well as extensive diversification ( of technology intensive products) of India’s manufactured sector as well as exports. • Intensive expansion would create numerous job opportunities for the unemployed sections of India’s rural and suburban workforce • Learning from China, India must make the best us of production as well as assembling opportunities in technology-intensive goods. Finally, success in expanding India’s exports would be achieved mainly through overall opening up of the economy, further liberalisation and decentralisation.

  20. Thank You

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