Copyright © The Author 2007. Published by Oxford University Press.
The changing pattern of foreign trade specialization in Indian manufacturing
* Università di Roma ‘Tor Vergata’, e-mail: m.alessandrini{at}hotmail.com
** SOAS, University of London, e-mail: bf11{at}soas.ac.uk
*** Università di Roma ‘Tor Vergata’ and SOAS, University of London, e-mail: ps6{at}soas.ac.uk
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Abstract |
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This paper examines the pattern of international trade specialization in Indian manufacturing since the mid-1980s by using data on trade flows. Low-technology sectors still dominate the categories for which India exhibits the largest degree of trade specialization. By contrast, high-technology sectors are prevalent among the categories for which India is import-dependent. Significantly, India has experienced an improvement in the degree of specialization in some of the most dynamic sectors of world trade.
Key Words: India • trade specialization • manufacturing • Lafay index
We are extremely grateful to Andrew Glyn and Andrea Zaghini for very generous suggestions and advice, to Benno Ferrarini for his kind help with the data, and to Barbara Annicchiarico, Daniel Gustafson, Yasmeen Khwaja, Salvatore Morelli, Beniamino Quintieri, Massimo Sbracia, and an anonymous referee for very helpful comments. We remain responsible for any mistakes.
1 The OGL was reintroduced in 1976 when it only listed 79 products. By 1988 it already included 1,170 capital goods and 949 intermediate goods (Panagariya, 2004).
2 According to Kohli (2006b, p. 1361): ‘By India's own past standards, the changes were quite dramatic. In a comparative and global perspective, however, India's opening to the world remains relatively modest.’ See also Ahluwalia (2002) and Kohli (2006a).
3 By contrast, the share of exports had actually declined from 2.2 per cent to 0.5 per cent between 1948 and 1985 (WTO, 2001).
4 See Patibandla and Petersen (2002) for a discussion of the role of transnational corporations in stimulating the growth of the software industry.
5 Interestingly, the share of manufacturing had an insignificant effect during the 1960s and 1970s.
6 Batra and Khan (2005) carry out an analysis of comparative advantage for India and China in terms of the Balassa index.
7 For instance, the categories ‘rice’, ‘medicinal and pharmaceutical products’, and ‘jewellery, goldsmiths, and other articles of precious metals’ did not feature in the top 15 in 1985/6, but entered the top group in 1995/6 and 2001/2. Also, a number of products have dropped from the top 15, especially in the category of ‘food and live animals’, but also in the manufactured goods category, such as ‘leather and manufactures of leather’.
8 An important proviso to the previous analysis is that one must be cautious in interpreting trade flow data as providing evidence of trade specialization, when barriers to trade are present. Hence, it is highly debatable whether the early figures from the mid-1980s can provide information on the pattern of comparative advantage. However, the figures from the more recent periods arguably offer a closer picture of the underlying structure of sectoral comparative advantage, following the removal of barriers to trade during the 1990s.
9 Table 7 reports the formulae and the values of these indices.
10 These are: Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovak Republic, Slovenia, Cyprus, and Malta.
11 Canada, Denmark, Finland, France, Germany, Ireland, Italy, Japan, Spain, Sweden, the United Kingdom, and the United States.
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