7 Zijbemr Vol2 Issue2 Feb2012

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ZENITH International Journal of Business Economics & Management ResearchVol.2 Issue 2, February 2012, ISSN 2249 8826Online available at http://zenithresearch.org.in/

AN ANALYSIS OF INDIAS EXPORTS (1991-2006)

DR. KULWINDER SINGH*; DR. SURINDER KUMAR SINGLA**

*Assistant Professor,Baba Farid College,

Bathinda, Punjab, India.**Project Associate,

CSWAS, Punjabi University,Patiala, Punjab, India.

ABSTRACT

Indian economy has been experienced globalization in the sense that it is fastly integrating withworld economy. India commenced its major thrust towards globalization in July 1991, with twosimultaneous forces, unilateral and multilateral playing a pivotal role. Over more than one and ahalf decade of reforms and a decade of WTO regime, Indias exports grew at an average of 11.56

per cent per annum (in US $ terms). In the context of the phenomenal expansion in world exports(7.32 per cent), this growth of Indias exports was relatively much higher and Indias share inworld exports grew continuously from 0.56 per cent in 1991 to 1.07 percent in 2006. Theanalysis of instability shows that majority of India's exports experienced high growth and lowearnings instability. Further, export instability was primarily due to the dominance of quantityvariables. Demand for India's export has subject to relative prices and income of importingcountries during the concerned period. The analysis based on the relative prices of India's overallexports and market share indicates increasing price competitiveness of India's exports in global

export market. The analysis based on the RCA and RSCA indices reveals competitive advantagein majority of selected commodities. The constant market share analysis makes it clear thatincreasing world demand (World Demand Effect) for exports has played a significant role in theIndia's outstanding export performance Apart from expanding world demand India's export


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India s outstanding export performance Apart from expanding world demand India s export


utilizing the full capacity of plant size where domestic demand is less than full capacity

production; getting benefit of greater economies of scale due to large market; expandingaggregate demand; increasing the rate of investment and technological changes; enabling importof essential raw materials and capital goods, result industrialization and thus rapid economicgrowth in developing economies (Chennery, 1979; Kavoussi, 1984; Ram, 1987; and Moon,1998).

Indian economy has been experienced globalization in the sense that it is fastlyintegrating with world economy (Parikh and Radhakrishanan, 2004-05). India commenced its

major thrust towards globalization in July 1991, with two simultaneous forces, unilateral andmultilateral playing a pivotal role. This New Trade Regime is a momentous in Indias economichistory as it witnessed a successful transition of India from a closed, slow growing economy to aopen economy that has now found a place amongst the fastest growing economies in the world.Unilateral economic reforms were undertaken with regard to exchange rate, foreign investment,external borrowing and foreign trade policy (Chadha et al., 1999). Trade reforms formed anintegral part of the overall structural reform process (RBI, 2001-02). The multilateral aspect ofIndias trade policy refers to Indias commitments to the World Trade Organization (WTO) with

regard to trade in goods and services, Trade Related Investment Measures (TRIMs), TradeRelated Intellectual Property Rights (TRIPs). This open trade regime has been viewed as theleast vulnerable form of globalization with enormous opportunities for higher growth emanatingfrom higher exports (Krueger, 1998). Exports, being a major part of India's foreign trade, haveassumed a place of paramount importance and play a significant role in economic developmentprocess through generating investible surplus and financing imports by earning foreign exchange(Kaur, 1993). Declining from respectable share of 2.00 per cent to 0.50 per cent during 1950-60,and hovering around 0.50 per cent during 1960-90, Indias share in world merchandise export

has increased from 0.56 per cent in 1991-92 to 1.07 per cent in 2005-06.Trade policy reforms inrecent past with their focus on liberalization, openness, transparency and globalization as well ascreation of WTO have provided an export friendly environment with simplified procedure fortrade facilitation (Economic Survey 2004 05)


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RESEARCH METHODOLOGY AND DATA SOURCES

The paper is entirely based on the secondary data. The attempt is to present acomprehensive picture of Indian export sector by putting the things in a most disaggregativemanner. A representative bundle of 30 commodities at SITC digit-3 has selected by taking intoaccount their continuous presence in Indias exports basket, which constitutes more than 75 per

cent of India's exports during the concerned period. Selected commodities are: Fish (fresh &simply preserved) (SITC-031); Rice (SITC-042); Fruits (fresh and nuts excluding oil) (SITC-051); Tea and mate (SITC-074); Feed-stuff for animals excluding unmilled feed-stuff (SITC-

081); Iron ore & concentrates (SITC-281); Petroleum products (SITC-332); Organic chemicals(SITC-512); Synthetic organic dyestuffs, natural industries (SITC-531); Medicinal &pharmaceutical products (SITC-541); Plastic materials; regenerated cellulose (SITC-581);Chemical materials and products (SITC-599); Leather (SITC-611); Articles of Rubber (SITC-629); Textile yarn and thread (SITC-651); Cotton fabrics (woven) (SITC-652); Textile fabrics(woven) (SITC-653); Made-up articles, wholly or chiefly (SITC-656); Floor coverings,tapestries, etc. (SITC-657); Lime, cement & fabric building materials (SITC-661); Pearls(precious and semi-precious) (SITC-667); Ingots & other primary forms of iron (SITC-672); Iron

and steel bars, rods, angles etc. (SITC-673); Universals, plates and sheets of iron (SITC-674);Copper (SITC-682); Machinery and appliances (non electric materials) (SITC-719); Electricpower machinery and switch (SITC-722); Road motor vehicles (SITC-732); Clothing (except furclothing) (SITC-841); Footwear (SITC-851); and Jewellery and gold/silver (SITC-897).

Export growth, both in terms of value and volume, have been calculated by using theexponential function. Export Instability Index (EXPII), defined as the standard deviation of theobserved deviation from the estimated exponential time trend, has been used to examine the

instability of exports. The components of the variance of the logarithm of earnings are examinedin case of selected export commodities to assess the relative importance of price and quantityfluctuations. The elasticity indices have been calculated for the exports by using the double-logspecification with the method of least square which provides direct estimates of the magnitude


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ECONOMIC REFORMS, WTO AND EXPORT RELATED ISSUES

After the severe macro economic crisis, a serious attempt was made to free up trade,domestic competition and technology inflow and attract foreign investment (Joshi and Little,1996). A major objective of the trade reforms has been to reduce and eventually eliminate thegap between domestic and export profitability. The focus of the export policy, by and large, shiftedfrom product-specific incentives to more generalized incentives based primarily on theexchange rate. A major element of this policy shift was the downward adjustment in theexchange rate of the rupee against the major currencies in July 1991. Further rupee was

devalued twice in July 1991 leading to 20 percent depreciation in its value. It was held that amore realistic exchange rate would make exporting inherently more attractive. In 1993, thegovernment adopted full convertibility of the rupee on the current account. The exchange ratewas henceforth to be determined by demand for and supply of foreign exchange in the foreignexchange market (Veeramani, 2007). Exports were encouraged more actively, quantitativerestrictions on imports were relaxed (though not removed, particularly on consumer goods) andtariffs (particularly on industrial inputs and capital goods) lowered. The government easeddomestic licensing, and gave large private firms greater freedom to grow. It also launched a

somewhat reluctant privatization process. The trade regime inward oriented import substitutionis now replaced with outward oriented export promotion. New foreign equipment andtechnologies are more accessible and there is a significant rise in inward foreign directinvestment. Custom duties were cut drastically. Tariffs on capital goods and intermediate goodswere significantly brought down to 25 per cent and 40 percent respectively. In 1992-93, EOU-EPZ system was expanded to agricultural and allied exports. An electronic HardwareTechnology Park Scheme was introduced on par with the EPZ in 1994-95. Special EconomicZone (SEZ) policy was announced on April 2000 to overcome the shortcomings of EPZs such

multiplicity of controls and clearances, absence of world class infrastructure and instable fiscalregime. SEZ policy act 2005 supported by SEZ rules came into effect on February 10, 2006(Economic Survey, 2006-07). Further these reforms also include sufficiently large export creditat internationally competitive rates creation of private bonded warehouses green channel


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as safeguards measures such as anti dumping duty, countervailing duty; Technical Barriers to

Trade-SPS; environmental standards; labour standards and intellectual property rights etc. havewidespread implications for Indian agricultural and manufactured exports.

GROWTH AND STRUCTURE OF INDIA'S EXPORTS

Indian exports have responded sharply to the export policy reforms and WTOestablishment. Indias exports have increased sharply from Rs. 44042 crore in 1990 -91 to Rs.456418 crore in 2005-06. Exports as percentage of GDP (at market price) increased from 5.80

per cent in 1990-91 to 10.80 per cent in 2005-06. Export to import ratio has improved from 66.2percent in 1990-91 to 80.7 percent in 2005-06 and trade deficit (as percentage of GDP) alsoreduced continuously from 3.00 percent in 1990-91 to 2.50 per cent in 2005-06. Over more thanone and a half decade of reforms and a decade of WTO regime, Indias exports grew at an

average of 11.56 per cent per annum (in US $ terms). In the context of the phenomenalexpansion in world exports (7.32 per cent), this growth of Indias exports was relatively muchhigher and Indias share in world exports grew continuously from 0.56 per cent in 1991 to 1.07

percent in 2006. It clearly highlights that actual growth of exports has been quite higher than its

potential growth during the study period. India's Export growth has been mainly attributed to therapid growth of world export and exchange rate depreciation during 1991-95 (Mirjit andChaudary, 1997 and Srinivasan, 1998). The decline in growth rate of Indias export s during thesecond half of 1990s (1996-2000) is mainly attributed to East Asian crisis, which has put a strainon India's exports not only by shrinking world demand but by also adversely affectinginternational competitiveness of India's exports due to sharp depreciation of East currencies(Kumar, 1998). Tremendous growth of India's exports during the 2001-2006 has attributed totheir competitiveness. However, export growth (11.51 per cent in Rs. terms) was lower than that

of import growth (12.14 per cent in Rs. terms). It reflects a continual tendency for the economy'sresources utilization to exceed the amount of resources generated within the economy (Kaundal,2006), but even then it is significant to narrow down the ever increasing trade deficit (Table 1).


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1995-96 106353 122678 229031 25.26 4201.88 0.68

1996-97 118817 138920 257737 27.22 4465.64 0.68

1997-98 130101 154176 284277 31.08 4961.97 0.68

1998-99 139753 178332 318085 31.97 5126.51 0.65

1999-00 159561 215237 374798 34.65 5464.89 0.70

2000-01 203571 230873 434444 42.63 6385.56 0.76

2001-02 209018 245200 454218 47.43 6382.49 0.77

2002-03 255137 297206 552343 52.1 6636.68 0.88

2003-04 293367 359108 652475 57.22 7036.22 0.90

2004-05 375340 501065 876404 64.8 7849.51 0.95

2005-06 456418 660409 1116827 79.63 8427.65 1.07

Average Annual Growth Rates (AAGR)

1991-2006 11.51 12.14 11.87 11.66 7.32 --

1991-1995 16.12 22.12 19.28 16.55 7.50 --

1996-2000 8.68 8.85 8.79 8.96 8.46 --


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constraints on Textile exports and relative decline in growth rate vis--vis non-quota sectors

(Chakraboty and Chakraboty, 2005). Manufactured exports and petroleum exports experiencedhigh growth as compared to primary exports during the post-reforms period. Thus, performanceof Indias primary exports (except iron and ores) has been quite poor in comparison to

manufactured exports. Increasing share of petroleum products in Indias exports is a tremendousachievement for Indias export sector and needs special attention for further expansion. The poorperformance of India's agricultural exports has been particularly due to East Asian crisis as theirgrowth rate found to be negative (in case of majority of agricultural exports) during 1996-2001.

TABLE 2: COMPOSITION OF INDIA'S EXPORTS (1991-2006) (PERCENTAGES)Percent Share Growth Rates

Commodity

1991-

199

4

1994-

199

7

1997-

200

0

2000-

200

3

2003-

200

6

1991-

200

6

1991-

199

5

1996-

200

0

2001-

2006

I. Primary products22.0

422.2

120.18

16.28

15.87

8.11

15.19

-1.93

12.71

A.

Agriculture and alliedproducts

17.65

18.56

17.44

13.20

10.62

6.68

17.02

-2.33

4.40

1 Tea 11.49 5.79 7.96 5.92 4.46 0.09 -7.41 6.09 -5.41

2 Coffee 4 22 7 066.5 3.7 3.1 2.3 39.7 -

1 41


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cashew nut shell liquid 2 5 3 6 4 9

8 Spices 4.52 4.486.48

5.45

4.70

7.68

13.39

3.78 1.45

9 Oil meals15.6

913.1

59.45

6.70

9.60

0.93

14.13

-20.2

4

17.55

10 Fruits and vegetables 3.71 2.75 2.39 3.50 4.87 9.29 4.72 3.98 12.10

11Processed fruits, juices,

miscellaneous processed items2.39 3.85

2.98

4.60

3.64

10.49

32.80

2.12-

3.20

12 Marine products19.2

219.9

118.84

21.88

16.73

5.96

18.65

6.29-

3.85

13 Sugar and molasses 2.43 2.460.43

4.59

1.77

5.68

-0.99

-31.6

8

-41.2

6

14 Meat and meat preparations 2.83 3.013.25

4.62

5.35

12.58

19.09

10.77

14.08

15 Others 6.15 8.8511.85

11.58

14.94

14.09

33.25

8.0416.9

6

2 7 3 0 5 2 12 37 7


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1 3 6 2

B.Chemicals and relatedproducts

15.05

15.36

15.98

17.93

20.11

14.77

20.21

11.56

14.99

C. Engineering goods19.3

618.6

218.25

21.05

28.03

15.31

18.19

8.4322.4

9

D. Textile and textile products37.7

5

34.6

0

33.

84

30.

77

23.

77

8.1

1

15.2

2

8.61 2.05

E. Gems and jewellery15.2

521.1

922.79

21.95

21.96

16.21

18.34

15.36

10.84

F.Handicrafts(excludinghandmade carpets)

2.08 1.882.23

1.84

0.76

4.63

16.17

11.73

-17.9

5

G. Other manufactured goods 0.94 1.090.90

1.13

1.32

15.05

31.11

9.6716.2

6

III.

Petroleum products 2.23 1.480.46

4.64

8.42

24.97

0.38 7.4241.9

7

I

V.

Others 1.05 1.061.3

0

2.5

7

2.7

0

21.

88

20.1

4

35.5

8

13.4

3

Total Exports100.

0100.

0100.0

100.0

100.0

11.51

16.12

8.6813.5

5


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Having negligible share in Indias export earnings in 1991, China alone emerged as the leading

market for Indian exports during post-reforms period. Hong Kong also registered an increase inits share in Indias exports. Singapore registered a remarkable increase in its share in India'sexport earnings (Table 3). Directional change toward developing countries may be attributed toIndias involvement in regional trading agreements particularly with developing countries,liberalization of economies in Asia and Africa and impact of WTO commitments on tradepolicies of member countries. However, there is a compositional change (within the broadproduct groups) and geographical change (within the major markets) during post-reform period(Table 2), but the analysis of concentration of exports, using Hirschman-Gini's index, asserts that

Indias exports have concentrated to a small number of commodities and markets and thus Indiahas failed to diversify its exports and export destinations.

TABLE 3: DIRECTION OF INDIA'S EXPORTS (1991-2006) (PERCENTAGES)

Percent Share Growth Rates

Group / Country

1991-1994

1994-1997

1997-2000

2000-2003

2003-2006

1991

-2006

1991

-1995

1996

-2000

2001

-2006

Developed Countries

Australia 1.15 1.22 1.17 0.65 0.86 8.4018.1

0 2.32 8.40

Belgium 3.74 3.51 3.69 2.26 2.87 9.2815.0

0 9.65 10.10


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Russia 5.12 2.92 2.48 1.17 0.86

-

2.30

-

6.10 3.95

-

11.00

U.K. 6.37 6.29 5.74 3.47 4.68 8.3915.7

0 3.98 12.60

U.S.A. 17.80 18.70 21.30 14.50 17.10 11.617.6

011.9

0 7.87

Developed CountriesTotal 58.40 54.40 53.90 33.40 40.40 9.07 14.90 4.71 9.71

Developing Countries

Bangladesh 1.89 2.78 2.32 1.52 2.111.1

034.1

0 1.45 4.51

China, PR 0.76 1.28 1.60 1.94 5.9733.0

055.9

0 5.39 50.20

Hong Kong 4.39 5.68 6.00 3.81 4.6212.0

033.0

012.4

0 7.44

Indonesia 0.87 1.64 0.9 0.86 1.5715.1

044.8

0-

8.30 15.90

Malaysia 1.09 1.30 1.19 0.99 1.2713.2

018.9

0 3.96 2.86

10 5 10 4


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Developing Countries

Total 22.30 26.00

25.00

0 19.10 34.60

15.7

0

26.8

0 7.71 20.00Others 19.32 19.61 21.16 47.53 25.07 - - - -

Total100.0

0100.0

0100.0

0100.0

0100.0

011.5

116.1

2 8.68 13.55

Source: Handbook of Statistic on Indian Economy, RBI (Various Issues).

GROWTH AND INSTABILITY OF INDIAS EXPORTS

Except the six commodities: Fish (SITC-031), Fruits (SITC-051), Tea and mate (SITC-074), Feed-stuff for animals (SITC-081), Woven cotton fabrics (SITC-652), and Floor coverings,tapestries, etc. (SITC-657), all other commodities registered high rate of growth. Amongselected 30 commodities, majority of the commodities except Iron ore & concentrates (SITC-281), Petroleum products (SITC-332), Ingots & other primary forms of iron (SITC-672) andCopper (SITC-682) experienced low instability. It means that majority of India's exports(selected commodities) experienced high growth and low earnings instability during post-reformas well as post-WTO period. The analysis of instability of Indias exports further show thatexport instability was primarily due to the dominance of quantity variable in case all the selectedcommodities except five commodities: Tea and mate (SITC-074), Feed-stuff for animals (SITC-081), Articles of rubber (SITC-629), Universals, plates and sheets of iron (SITC-674) andElectric power machinery and switch (SITC-722), in which instability was caused by pricevariables during the study period.

TABLE 4: EXPORT GROWTH, INSTABILITY, ROLE OF PRICE AND QUANTITY INEXPORT INSTABILITY AND STABILIZATION EFFECT: SELECTED

COMMODITIES (1991-2006)


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SITC-281 15.74 9.44 112.98 43.71 -56.69 Q 1.56

SITC-332 31.11 16.05 - - - ND 2.67

SITC-512 20.2 2.21 2.94 111.39 -14.33 Q 0.84

SITC-531 7.19 2.1 43.7 242.55 -186.3 Q 0.67

SITC-541 15.17 1.53 - - - ND 0.45

SITC-581 26.88 4.78 7.15 131.38 -38.52 Q 1.53

SITC-599 18 2.99 5.54 104.6 -10.14 Q 0.93

SITC-611 6.4 3.5 21.49 86.55 -8.04 Q 0.97

SITC-629 19.51 8.87 10.5 71.17 18.33 P 1.47

SITC-651 9.04 3.26 106.9 216.23 -223.1 Q 1.09

SITC-652 1.63 2.02 3086.4 2401 -5387 Q 0.65

SITC-653 11.74 5.09 1628.8 1310.5 -2839 Q 0.78

SITC-656 12.67 1.36 144.52 71.49 -116 Q 0.58

SITC-657 4.13 2.47 81.73 100.99 -82.72 Q 0.48

SITC-661 15.09 3.8 25.52 152.91 -78.44 Q 1.49


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SITC-897 21.03 2.55 - - - ND 1.45

Note: Q = Quantity, P= Price, var P = Variance of Price Variable. var Q = Variance of QuantityVariable. 2 COV P.Q = Covariance of Price and Quantity.

Source: Comtrade-WITS Database, United Nations.

TABLE 5: MARKET-WISE EXPORT INSTABILITY AND STABILIZATION EFFECT:1991-2006

Countries IDXi Ri IDXi*Ri CPi

De/Stabilization

Effect

(CP/R)

Developed Countries

Belgium 6.54 3.39 22.19 1.40 0.41

France 7.10 2.21 15.68 0.99 0.45

Germany 5.89 5.31 31.26 1.97 0.37

Italy 9.52 2.94 28.01 1.76 0.60

Netherlands 10.09 2.19 22.07 1.39 0.63

U.K. 8.71 5.59 48.7 3.06 0.55


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Iran 13.23 0.77 10.15 0.64 0.83

Iraq 52.05 0.12 6.5 0.41 3.28

Saudi Arabia 9.50 1.87 17.73 1.12 0.60

U.A.E. 8.57 5.79 49.65 3.12 0.54

Bangladesh 15.02 2.17 32.57 2.05 0.95

Maldives 21.21 0.05 0.96 0.06 1.33

Sri Lanka 8.83 1.45 12.78 0.8 0.56

China, Peoples 24.04 2.55 61.22 3.85 1.51

Hong Kong 12.26 5.02 61.57 3.87 0.77

South Korea 17.29 1.27 21.88 1.38 1.09

Malaysia 14.08 1.24 17.39 1.09 0.89

Singapore 16.80 2.95 49.59 3.12 1.06

Thailand 9.88 1.27 12.52 0.79 0.62

Latin American countries 14.35 1.82 26.18 1.65 0.90

Others / unspecified 47.25 15.4 727.8 45.8 2.97


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machinery and switch (SITC-722), Clothing except fur clothing (SITC-841) and Footwear

(SITC-851) were found to have strong stabilization effect on Indias overall export earnings. Theothers more or less causing destabilization of Indias export earnings. On the basis of analysis, itis held that manufactured exports (from SITC-5 to SITC-8) experienced higher export earninginstability than that of primary exports (from SITC-0 to SITC-4) (Table 4).

The market-wise analysis shows that the developed countries like USA, Germany, Italy,Belgium, France, Netherlands, Australia and Switzerland occupy the lowest position in theinstability ranking as compared to the developing countries and found to be most stable markets

for Indians exports. Thus, these markets have strong stabilization effect on Indias exportearnings during study period. On the other hand, among the developing economies: Indonesia,Iraq, Maldives, China, South Korea, Singapore and other unspecified developing economies aremost unstable and prove as excessive contributors to Indias export earnings instability (i.e. havedestabilization effect on Indias exports). On contrary to these, other developing economies such

as Saudi Arabia, UAE, Bangladesh, Sri Lanka, Honk Kong, Malaysia, Thailand, and LatinAmerican Countries have strong stabilization on Indias exports earnings as revealed by CP/R(having value less than one) during the period under study. However, growth of exports to

developing countries found to be much higher than that of the growth of exports to developedcountries (Table 5).

PRICE/INCOME ELASTICITIES OF DEMAND FOR INDIA'S EXPORTS

TABLE 6: ELASTICITY OF DEMAND FOR RICE (SITC-042) EXPORTS: 1991-2006

CountryConstan

t

PEC IEC R-SqAdj R-

Sq

D-W F ND

FUSA 9.41 -1.48 -1.00

0.61*

0.55 1.950

10.07

16

13


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1.35)***

GERMANY -1.44

(-0.46)

-1.20

(-2.89)*

4.18

(2.68)*

0.82*

0.79 1.68029.4

416

13

ITLY -31.93

(-3.23)*

-0.26

(-0.38)

19.45

(3.88)*

0.87*

0.84 1.68041.6

516

13

BELGIUM -9.33

(-2.07)**

-0.73

(-0.98)

8.16

(3.60)*

0.85*

0.82 2.34035.6

516

13

SINGAPORE 3.42

(4.34)*

-1.94

(-6.65)*

1.91

(4.67)*

0.87*

0.851.31NC

44.6

16

13

HONGKONG

7.07

(3.02)*

-1.26

(-3.35)*

-0.75

(-0.64)

0.51*

0.44 2.260

6.8216

13

FRANCE 2.15

(0.79)

-0.88

(-1.79)**

2.47

(1.80)*

*

0.76*

0.58 2.090

9.0316

13

Note: N = Number of Observations. * Significant at 1 % level. ** Significant at 5 % level. ***Significant at 10 % level.


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TABLE 7: ELASTICITY OF DEMAND FOR COTTON FABRICS WOVEN (SITC-652)EXPORTS: 1991-2006

CountryConstan

tPEC IEC R Sq

Adj RSq

D-W F NDF

USA 13.50

(15.19)*

-0.71

(-7.07)*

-3.00

(-6.70)*

0.94*

0.931.32

NC

98.2216

13

U.K 17.55

(16.65)*

-0.85

(-10.32)*

-5.16

(-9.71)*

0.97*

0.97 0.75-222.9

616

13

U.A.E 8.07

(32.91)*

-1.12

(-

28.94)*

0.25

(1.86)**

0.99*

0.99 2.060520.9

816

13

JAPAN 17.24

(6.88)*

-7.76

(-10.40)*

-5.53

(-4.42)*

0.95*

0.94 2.030

112.97

16

13

CHINA 5.38

(7.35)

-0.95

(-3.78)*

1.03

(2.35)*

0.52* 0.45 0.66- 7.14

16 13

-0 81


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HONGKON

G

7.95

(5.71)*

-0.79

(-3.43)*

-0.60

(-0.86)

0.68* 0.63 0.65

-

13.5616 13

FRANCE 13.25

(20.33)*

-1.01

(-26.01)*

-3.36

(-10.23)*

0.99*

0.99 2.040

684.76

16

13

Note: N = Number of Observations. * Significant at 1 % level. ** Significant at 5 % level. ***Significant at 10 % level.

PEC = Price Elasticity Coefficient. IEC = Income Elasticity Coefficients

Values in parenthesis are t statistics.

Source: Comtrade-WITS Database, United Nations

The analysis highlights that both relative prices of exports and income of the importingcountries have great importance in determination of quantity demanded for India's exports ofselected 29 commodities in selected 11 markets during the period under study. Apart from priceand income factors, this study also highlights the importance of non-price and non-incomefactors in determining demand of India's exports in several cases. The study rejects the demanddeficiency hypothesis as both price and income elasticities of demand for India's exports havebeen relatively elastic for both primary and manufactured exports. It is clear from the tables 6

and table 7 respectively for the commodities Rice (SITC-042) and Textile Fabrics Woven (SITC-652) as elasticity coefficients are more than one in almost all the cases in all the selectedmarkets. The results are similar in majority of the selected commodities. Thus, it is held thatd d f I di ' t h bj t t l ti i d i f i ti t i d i


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appliances-non electric (SITC-719) and Footwear (SITC-851) highlights the pricecompetitiveness. On the other hand, increasing unit value with increasing market share in case of12 selected commodities: Feed-stuff for animals (SITC-081), Iron ore & concentrates (SITC-281), Petroleum products (SITC-332), Leather (SITC-611), Textile fabrics woven (SITC-653),Made-up articles, wholly or chiefly (SITC-656), Lime, cement & fabric building materials(SITC-661), Universals, plates and sheets of iron (SITC-674), Copper (SITC-682), Electricpower machinery and switch (SITC-722), Road motor vehicles (SITC-732) and Clothing exceptfur clothing (SITC-841) shows their non-price competitiveness. Three commodities (SITC-074,SITC-541 and SITC-652) showed decreasing market shares and in case of two commodities

(SITC-667 and SITC-897) unit value data is not available.

TABLE 8: INDIA'S RELATIVE EXPORT PRICES AND GLOBAL MARKET

SHARE: 1991-2006

YEARS

INDIA'SEXPORT

UNIT VALUEINDEX

WORLDEXPORT

UNIT VALUEINDEX

INDIA'S RELATIVEEXPORT

PRICE INDEX

INDIA'SGLOBAL

MARKETSHARE

1991 89.91 91.11 98.68 0.57

1992 89.98 93.03 96.72 0.61

1993 85.9 88.29 97.3 0.67

1994 87.19 90.92 95.9 0.70

1995 82.52 99.6 82.85 0.70


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2004 89.27 95.52 93.45 0.98

2005 100 100 100 1.11

2006 105.3 104.5 100.8 1.18

Source: Comtrade-WITS Database, United Nations

The analysis based on the RCA and RSCA indices reveals competitive advantage inmajority of selected commodities. The 24 commodities among the selected ones, in which Indiahas comparative advantage, are: Fish (SITC-031), Rice (SITC-042), Fruits (SITC-051), Tea andmate (SITC-074), Feed-stuff for animals (SITC-081), Iron ore & concentrates (SITC-281),Petroleum products (SITC-332), Organic chemicals (SITC-512), Synthetic organic dyestuffs,natural industries (SITC-531), Medicinal & pharmaceutical products (SITC-541), Leather(SITC-611), Articles of rubber (SITC-629), Textile yarn and thread (SITC-651), Woven cottonfabrics, (SITC-652), Textile fabrics woven (SITC-653), Made-up articles, wholly or chiefly(SITC-656), Floor coverings, tapestries, etc. (SITC-657), Lime, cement & fabric building

materials (SITC-661), Pearls and precious and semi-precious (SITC-667), Ingots & otherprimary forms of iron (SITC-672), Iron and steel bars, rods, angles etc. (SITC-673), Universals,plates and sheets of iron (SITC-674 Clothing except fur clothing (SITC-841), Footwear (SITC-851) and Jewellery and gold/silver (SITC-897). On the other hand, among selected commodities,India's comparative/competitive disadvantage primarily lies in six commodities: Plastic materials,regenerated cellulose (SITC-581), Chemical materials and products (SITC-599), Copper (SITC-682), Machinery and appliances-non electric (SITC-719), Electric power machinery and switch(SITC-722) and Road motor vehicles (SITC-732) (Table 9).

Average RSCA indices for the period 1991-2006 are constructed for selected developingand developed countries (including India). The comparison of Indias average RSCA to 25

selected developing and developed countries shows that India has a competitive advantage in a


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TABLE 9: ABSOLUTE PRICE, GLOBAL MARKET SHARE, RCA AND RSCA OFINDIA'S SELECTED EXPORTS: SELECTED COMMODITIES (1991-2006)

Commodity

Codes

Absolute Price (UnitValue)*

Global Market ShareRSCAIndex

RSCAIndex

19911996

2001

2006

1991

1996

2001

2006

1991-2006 1991-2006

SITC-031 0.31 0.28 0.27 0.29 2.09 3.07 3.02 2.61 3.75 0.58

SITC-042 0.05 0.04 0.03 0.03 7.3613.6

39.91

14.91

15.92 0.88

SITC-051 0.40 0.15 0.17 0.14 1.85 1.75 1.88 1.94 2.56 0.44

SITC-074 0.23 0.21 0.20 0.2220.7

015.4

412.3

713.1

821.04 0.91

SITC-081 0.01 0.02 0.02 0.02 2.37 4.15 2.34 3.77 3.92 0.59

SITC-281 0.01 0.01 0.01 0.01 7.71 5.45 4.7012.0

19.30 0.81

SITC-332 -- 0.02 0.02 0.05 0.52 0.47 1.44 4.20 1.42 0.18

SITC-512 0.25 0.31 0.22 -- 0.45 0.85 1.06 1.97 1.25 0.11

SITC-531 0.74 0.64 0.41 0.44 3.21 4.23 5.31 7.47 6.00 0.71


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SITC-657 0.65 0.46 0.57 -- 7.02 7.63 7.41 9.87 10.06 0.82

SITC-661 0.02 0.02 0.01 0.02 0.89 2.26 3.12 4.59 3.54 0.56

SITC-667 -- -- -- --12.4

911.5

813.7

714.7

918.30 0.90

SITC-672 0.14 0.03 0.04 0.06 0.16 0.48 0.64 2.35 1.06 0.03

SITC-674 0.04 0.05 0.04 0.09 0.15 0.56 1.02 1.87 1.18 0.08

SITC-682 0.42 0.43 0.18 0.69 0.03 0.07 0.47 2.60 0.63 -0.23

SITC-719 6.40 1.14 0.48 -- 0.10 0.14 0.25 0.54 0.28 -0.56

SITC-722 0.16 1.07 0.66 1.05 0.11 0.19 0.27 0.77 0.30 -0.54

SITC-732 31.1930.9

7

38.0

4 -- 0.10 0.17 0.12 0.35 0.20 -0.66

SITC-841 0.35 0.36 0.39 -- 2.36 2.76 3.02 3.47 3.75 0.58

SITC-851 0.79 0.83 0.83 0.66 0.69 1.00 1.13 1.67 1.41 0.17

SITC-897 -- -- --43.8

72.16 2.99 5.64

12.11

6.32 0.73

Note: RCA- Revealed Comparative Advantage Index. RSCA- Revealed Systematic ComparativeAdvantage Index.


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INDIAS EXPORT PERFORMANCE: A CONSTANT MARKET SHARE ANALYSIS

TABLE 10: DECOMPOSITION OF GROWTH OF INDIA'S OVERALL EXPORTS(1991-2006) (IN US $ MILLIONS)

Years

Actual

Increase in

India's Exports

World

Demand

Effect

Commodity

Composition

Effect

Market

Distribution

Effect

Residual

Competitiveness

Effect

1991-

2006

103326

(100.00)

44921

(43.48)

-6305

(-6.10)

27805

(26.91)

36905

(35.72)

1991-

1995

13777

(100.00)

8222

(59.68)

72

(0.53)

498

(3.61)

4985

(36.19)

1995-

2000

10708

(100.00)

9178

(85.71)

-4826

(-45.07)

22359

(208.81)

-16003

(-149.45)

2000-

2006

78841

(100.00)

36852

(46.74)

1050

(1.33)

-415

(-0.53)

41354

(52.45)

1991-

2000

24485

(100.00)

15728

(64.24)

-3639

(-14.86)

15219

(62.16)

-2823

(-11.53)


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CONCLUSIONS AND POLICY ISSUES

Based on the above results, it is concluded that India's export performance was outstandingas Indias export growth was much higher than world exports during the study period. India hasbeen unable to diversify its exports as well as export destinations. Export from India hasexperienced instability primarily in the developing countries. The export instability was primarilyattributed to quantity variables during the concerned period. Demand for India's exports was foundto be relatively elastic to both relative prices and income of the importing countries. The analysisalso reveals that India has a competitive advantage in a broader range of export commodities. The

rapidly increasing world demand for India's exports has played a significant role in the satisfactoryexport performance. Apart from expanding world demand, India's export performance benefitedfrom the competitiveness and market-wise distribution during the study period. The gap betweenactual growth and potential growth of India's exports is primarily attributed to their competitivestrengths. Export promotion measures, adopted by Indian policymakers, have significant effect onits export competitiveness as it would be difficult for exports to sustain competitiveness in this eraof global competition and flexible of exchange rate. No doubt, rapidly increasing world demand forexports, as highlighted by the strong world trade effect, has been the outcome of the free trade wave

initiated by WTO negotiations and increasing popularity of regional trading agreement during theperiod. Hence, export friendly environment, provided by export policy reforms with their focuson liberalization, openness, transparency and globalization (outward-orientation) as well ascreation of WTO, is crucial determinant of export performance during the period. Developingcountries of Asia and Africa have been found to potential markets for Indian exports during theperiod as export growth to these countries has been recorded very high, but the issue of instabilityneeds to tackle quite consciously. The commodities viz. Rice (SITC-042), Organic chemicals(SITC-512), Synthetic organic dyestuffs, natural industries (SITC-531), Textile yarn and thread

(SITC-651), Made-up articles, wholly or chiefly (SITC-656), Floor coverings, tapestries, etc.(SITC-657), Lime, cement & fabric building materials (SITC-661), Pearls, precious and semi-precious (SITC-667), Ingots & other primary forms of iron (SITC-672) and Jewellery andgold/silver (SITC 897) have been emerged as leading export sectors as export growth of these


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behaviour of price and income elasticities would positively affect the demand for export, andfurther would eliminate the negative market distribution and commodity composition effects.Controversial issues in WTO framework (especially TRIPs, labour standards, environmentstandards, SPS-TBT measures, contingency trade policy measures) have put a strain on growthof exports. Proactive approach towards the process of global liberalization launched by the WTOunder the auspices of free trade doctrine as well of regionalism would provide moreopportunities for the export expansion.

REFERENCES

Aggarwal, M.R. (1982), Export Earning Instability and Economic Development in LessDeveloped Countries: A Statistical Verification, Indian Economic Journal, Vol. 29, No.3, pp. 60-70.

Bannock, G., R.E. Baxter, and E. Davis (1992), The Penguin Dictionary of Economics,Penguin Book Ltd., London, England.

Chadha, V., and Sandhu, S. (1999). An Analysis of Nature and Extent of IndiasGlobalization, Foreign Trade Review, Vol. XXXIL, No. 2, July-Sept.

Chakraboty, Debashis and Pavel Chakraboty, (2005), Indias Exports in Post WTOPhase: Some Exploratory Results and Future Concerns, Foreign Trade Review, Vol. XL,No. 1, April-June, pp. 3-26.

Chennery, (1979); Chennery, H.B (1979), Structural Change and Development Policy,

Oxford University Press, New York.

Economic Survey (2004-05, (2006-07), Ministry of Finance, Government of India NewDelhi.


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Krueger, A. (1998), Why Trade Liberalisation is Good for World?, The EconomicJournal, Vol. 108, September.

Kumar, N (1998), East Asian Crisis and South Asian Growth Prospects, RIS Digest,

September 14.

Mirjit, Sugata and A.R Chaudhri (1997), Indias Exports, Oxford University Press, NewDelhi.

Moon, B.E. (1998), Exports, Outward-Oriented Development and Economic Growth,Political Research Quarterly, Vol. 51, No. 1, pp-7-37.

Parikh, K. and R. Radhakrishanan (2004-05), India Development Report,, Indira GandhiInstitute for Development Research, Mumbai, pp-155.

Ram. R. (1987), Exports and Economic Growth: Some Additional Evidence Economic

Development and Cultural Change, Vol. 33, pp- 415-423.

Reserve Bank of India (2001-02), Report on Currency and Finance, New Delhi.

Srinivasan, T.N. (1998), Indias Export Performance: A Comparative Analysis inIndias Economic Reforms and Development: Essays for Manmohan Singh, I.J

Ahluwalia and I.M.D Little (eds.) (1998), Oxford University Press, Great ClandrenStreet, Oxford, New York.

Veeramani. C (2007)), Sources of Indias Export Growth in Pre- and Post-Reformperiods, Economic and Political Weekly, June 23, pp-2419-27.


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www.zenithresearch.org.in

106

TABLE 11: RANKING OF ALL THE SELECTED EXPORTER (BOTH DEVELOPED AND DEVELOPING COUNTRIES)ON THE BASIS OF RSCA INDEX

Developed Countries Developing Countries

Commo

dity

Australi

Belgium

Canada

France

German

Italy

Japan

Netherla

Russia

Switzerl

U.K

USA

Banglad

China

Egypt

Hong

India

Indonesi

Iran

South

Malaysi

Soudi

Singapo

Sri

Thailan

UAE

SITC-031 6 18 7 16 21 20 19 10 15 26 12 11 1 8 23 17 4 3 22 9 13 25 14 5 2 24

SITC-042 4 8 23 12 16 5 15 10 20 24 13 6 19 7 2 17 3 14 22 26 25 21 18 11 1 9

SITC-051 9 8 20 10 19 5 25 6 22 26 21 7 24 14 4 15 3 13 1 17 16 23 18 2 12 11

SITC-074 17 10 20 16 14 26 21 11 15 18 6 19 3 5 7 12 2 4 9 25 22 24 13 1 23 8

SITC-081 3 6 8 7 9 17 22 2 20 14 11 4 26 12 15 23 1 10 24 21 13 19 18 16 5 25

SITC-281 1 11 3 8 16 15 21 7 4 24 17 6 26 19 23 20 2 9 5 18 10 13 22 25 14 12

SITC-332 11 8 14 16 19 13 24 6 2 25 12 18 23 21 1 22 9 10 20 7 15 4 3 26 17 5

SITC-512 23 2 18 12 10 14 11 3 16 1 4 8 26 15 22 21 6 13 20 9 17 7 5 24 19 25


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107

SITC-531 19 6 21 8 3 15 11 7 17 1 13 14 26 4 18 5 2 12 20 9 23 24 10 22 16 25

SITC-541 10 2 15 4 6 8 14 7 20 1 3 9 23 12 11 16 5 19 24 17 21 26 13 22 18 25

SITC-581 21 1 14 8 4 7 11 2 22 9 15 6 26 20 19 5 17 18 23 3 16 12 13 25 10 24

SITC-599 14 7 21 1 4 9 8 3 24 2 5 6 26 17 16 15 11 23 22 19 13 25 10 18 12 20

SITC-611 6 20 25 15 13 2 22 16 18 23 12 11 1 9 8 4 3 14 10 5 24 21 17 19 7 26

SITC-629 22 12 7 3 9 8 4 11 17 21 10 14 26 15 16 23 6 13 24 2 20 25 19 1 5 18

SITC-651 22 11 20 15 14 7 19 17 23 12 16 18 5 6 2 4 1 3 24 8 13 25 21 10 9 26

SITC-652 23 10 25 11 14 5 15 16 20 13 19 17 6 3 4 2 1 7 24 9 18 26 21 12 8 22

SITC

-653 23 10 21 9 12 4 11 20 24 18 15 19 5 3 22 2 7 6 25 1 16 26 17 14 8 13

SITC-656 19 10 21 14 15 11 25 12 24 18 13 16 1 4 3 8 2 7 20 9 22 26 23 5 6 17

SITC-657 18 3 17 10 11 19 26 4 25 14 7 9 13 5 6 20 2 12 1 21 23 16 24 8 15 22


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108

SITC-661 21 6 10 11 14 1 18 19 15 24 17 22 26 3 4 20 2 9 7 13 16 12 25 23 5 8

SITC-667 9 2 14 17 18 21 15 22 10 4 5 8 26 12 24 7 1 19 25 20 16 23 13 3 6 11

SITC-672 9 2 15 5 11 13 6 10 1 22 14 17 26 12 7 20 8 16 4 3 18 23 21 25 19 24

SITC-674 13 1 12 5 6 10 3 7 4 20 11 14 24 17 18 9 8 16 23 2 21 22 19 25 15 26

SITC-682 1 3 4 8 5 11 7 21 2 20 16 19 26 17 24 9 18 12 14 6 10 23 13 15 22 25

SITC-719 17 12 13 6 3 1 4 11 19 2 7 5 20 14 23 15 18 22 26 9 16 25 8 24 10 21

SITC-722 20 18 15 9 7 12 3 14 21 2 11 10 24 8 23 1 19 16 25 13 5 26 4 17 6 22

SITC-732 12 4 1 5 3 9 2 10 17 15 8 7 26 16 24 18 13 20 22 6 21 23 19 25 11 14

SITC

-841 23 13 21 12 16 8 25 14 24 18 15 19 1 3 9 4 5 6 22 10 11 26 17 2 7 20

SITC-851 23 9 22 12 15 3 25 11 24 16 13 21 7 1 18 2 6 4 14 10 17 26 20 8 5 19

SITC-897 17 18 19 14 16 3 21 24 25 1 9 15 26 8 20 5 2 11 22 12 6 23 13 10 4 7

Source: Comtrade-WITS, United Nations.

7 Zijbemr Vol2 Issue2 Feb2012

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