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

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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

Export Diversification in India and China : A Comparative Analysis*By Rajesh ChadhaGeethanjali Nataraj Anjali Tandon

*Work in progress

india china a brief comparison
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)
china s export story
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)
objectives
Objectives
  • Direction of Trade
  • Composition of Trade
  • Diversification of Trade
segregation of chinese and indian exports
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
ncaer classification derived from eta and unctad
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)
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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

inferences china
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.
inferences india
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)
conclusions
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.
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