An Analysis of India's Export Performance with China (1991-2010)
Dr. Surinder Kumar Singla1, Mr. Maninder Singh1
1Assistant Professor, School of Commerce and Economics, Lovely Professional University, Phagwara, (Punjab)
ABSTRACT:
India and China are two rapidly emerging economies in world. With their high growth rates and huge markets, these two Asian giants have attracted the attention of international business mangers to take a fresh look at the rapidly emerging opportunities in the two countries. Today, India-China relations are conspicuous by the fast rise of their merchandise trade, which has already crossed US $ 42 billion in 2009-10. China has already become India’s second largest trade partner only after U.A.E. Besides this, China has also become one of the most favorite destinations for Indian exporters. China's share in India's global exports has increased rapidly from just 0.10 per cent in 1990-91 to 6.47 per cent in 2009-10. However, this growth of Indian exports to China has not been equally distributed over various commodity groups. In fact, Indian exports to China are mainly dominated by natural resource based raw material or semi-manufactured products which is not considered to be healthy from Indian point of view. Hence, there is an urgent need to add some technologically advanced products in the export basket to China. According to the need of the time, the present study examines the various trends occurred in growth and structure of Indian exports to China during the last two decades.
KEY WORDS: Exports, Merchandise Trade, World Bank, HCI, MFN.
1 INTRODUCTION:
All the factors of production are not adequately available in a country. Hence, for grafting their varied needs, countries engage in international trade. As Ohlin stated that international trade mitigates the disadvantages of disproportionate geographical distribution of productive resources1. International trade decidedly increases the exchangeable value of possessions, means of enjoyment and wealth of the countries concerned. Thus, international trade plays an important role in economic development and growth of a country2. India is not exception to this rule. The dramatic policy shifts of early 1990s have brought about considerable changes in India’s foreign trade scenario. India’s foreign trade, in volume and value terms, registered a considerable growth in the post-reform period. During the reforms years, the world trade also witnessed impressive growth under the trade policy reforms initiated and implemented under the auspices of WTO.
Exports have assumed a place of paramount importance in the development process of an economy and played a major role in generating investible surpluses and in financing imports. The greater exports happen in the situation of liberalisation of imports. This would not only result in greater competition for a highly protected domestic industry and give greater choice to those who previously compelled to use domestically produced goods, but would also reduce the constraining effect of scarce inputs on the growth of the more efficient firms3.
Thus, export performance of a country plays a decisive role in her development process. The liberalisation policies, adopted by India, brought major changes in growth, composition and direction of her exports. Though India’s share in world exports is still low, but in absolute terms it is consistently rising. Thus, the need for augmenting exports is always recognised by the planning authority of India.
One very important feature of India’s merchandise trade is its growing ties with China. The value of India-China trade, during the last two decades, grew at a fabulous rate. Today, India-China relations are conspicuous by the fast rise of trade, which has already crossed US $ 42 billion in 2009-10. China has already become India’s second largest trade partner only after U.A.E. However, in the past their trade relations were not remained as same as today. After the border war in 1962, India’s trade ties with China were almost cut down for fourteen years. This attributed to the continuation of strain in their political relations and restrictive trade practices followed by them towards each other. As a result of this syndrome, trade advantages emanating from geographical proximity and ethnic similarity have always remained elusive. However, the economic and diplomatic relations between India and China restarted in late seventies. In 1984, both the countries offered Most Favoured Nations’ (MFN) status to each other, which opened the boundaries of the two neighbours for their economic interactions. After that high level officials’ visits put a positive impact on their trade relations.
However, their trade relations got a big momentum only since 1990, when India started its liberalization process. Further, the end of cold war and emergence of a vibrant Asian economy have altered the global balance of power during the nineties and China has emerged as one of the fastest growing economies in the world and become one of India’s major trading partners4. Chinese accession to WTO, in 2001, further strengthened the trade ties between these two neighbours. But, their mutual trade could not be untouched from global economic slowdown and it declined to some extent during the last few years. Hence, the importance of India and China in international business is becoming apparent with each passing day. In fact, India-China trade is extremely a fascinating subject for the simple reason that both the countries are close neighbours, having huge populations, and enjoy unbounded cultural affinity. Any attempt for strengthening trade relations or economic ties between these two countries would, therefore, be most rewarding for their rapid development. Moreover, since 1991, China has emerged as one of the major destinations for Indian exports. During 1991-2010, China's share in India's global exports increased very rapidly. Though, Indian export basket to China is dominated by few items hitherto, even then many new items have also been added in this basket. But the most worrying point is that India is exporting too much amount of her natural resources to China, which is quite alarming for the Indian policy makers. Hence, the present study examines the performance of India's exports to China via exploring their growth and structure.
The plan for the paper is as follows: Section 1 provides the basic introduction and general context of the problem. Section 2 presents the growth of India's merchandise trade with China. In Section 3, a comprehensive picture of India's exports growth and structure with China has been presented. Keeping in view the dominant role of ores, slag and ash in India's exports basket to China, section 4 tries to answer the question that why India is exporting too much amount of this commodity to China? Section 5 compares the extent of concentration in Indian exports basket to China vis-a-vis Chinese exports basket to India. Section 6 comprises the summary and conclusion. The present study is based on secondary data which have been collected mainly from Monthly Statistics for Foreign Trade of India; and Statistics of Foreign Trade of India by Countries, Directorate General for Commercial Intelligence and Statistics (DGCI and S), Kolkata; and UN Commodity Trade Statistics, United Nations (UN). The analysis has been made for the period from 1990-91 to 2009-10.
2. Growth of India-China merchandise trade
India-China trade relations experienced various changes during the last twenty years. Table 1 depicts the value of India's merchandise trade with China from 1990-91 to 2009-10. In 1990-91, India’s exports to China were merely Rs. 33 crore which increased to Rs. 54714 crore in 2009-10. Similarly, India’s imports from China also rose quite tremendously from Rs. 64 crore in 1990-91 to Rs. 146049 crore in 2009-10. With the substantial growth of exports and imports, India’s total trade with China also increased remarkably, from Rs. 96 crore in 1990-91 to Rs. 200763 crore in 2009-10. India’s total trade with China decreased only once, by 5.74 per cent in 1998-99. That was due to the sharp decline in India’s exports to China. During the year 1998-99, India’s political relations with China became terse, which adversely affected their trade relations. After that the annual growth rate of total trade between the two Asian giants remained healthy up to 2006-07 but beyond that it got affected by the financial crisis in the world economy and declined quite rapidly. In fact, due to this crisis, India’s exports to China declined in 2008-09 and similarly its imports from China also declined in 2009-10. As a result of this decline in exports and imports, the annual percentage change of total trade remained only 5.52 per cent in 2009-10.
Table 1: Value of India-China Merchandise Trade (Crore Rs.)
Years |
Exports |
Imports |
Balance of Trade |
Total Trade |
Annual Percentage Change |
1990-91 |
33 |
64 |
-31 (0.29) |
96 |
- |
1995-96 |
1113 |
2716 |
-1603 (9.88) |
3829 |
20.14 |
2000-01 |
3798 |
6863 |
-3065 (11.23) |
10660 |
35.03 |
2001-02 |
4540 |
9712 |
-5172 (14.29) |
14252 |
33.69 |
2002-03 |
9560 |
13512 |
-3952 (9.39) |
23073 |
61.89 |
2003-04 |
13579 |
18625 |
-5046 (7.68) |
32204 |
39.58 |
2004-05 |
25233 |
31892 |
-6659 (5.30) |
57125 |
77.38 |
2005-06 |
29925 |
48117 |
-18192 (8.92) |
78042 |
36.61 |
2006-07 |
37530 |
79009 |
-41479 (15.44) |
116538 |
49.33 |
2007-08 |
43597 |
109116 |
-65519 (18.38) |
152713 |
31.04 |
2008-09 |
42661 |
147606 |
-104944 (19.66) |
190267 |
24.59 |
2009-10 |
54714 |
146049 |
-91335 (17.63) |
200763 |
5.52 |
Note: Figures in parentheses show the percentage share in India’s overall negative balance of trade.
Source: Calculated from Monthly Statistics of Foreign Trade of India, DGCIS; Kolkata, (Various Issues)
Though, the values of India’s exports to and imports from China remained quite phenomenal however one major problem from India’s point of view was its rising trade deficit with China. By and large, the balance of trade remained in China’s favour, except the years 1990-91 and 1992-93, when India enjoyed favourable balance of trade with China of Rs. 67 crore and Rs. 44 crore respectively. But, except these two years, India suffered unfavourable balance of trade with China. Further, the trade deficit with China accounted for only 0.29 per cent of India’s overall trade deficit in 1990-91, which rose to its maximum i.e. 19.66 per cent during 2008-09, and then slightly reduced to 17.63 per cent during 2009-10.
3. Growth and structure of India's exports to china
The end of the cold war and the emergence of a vibrant Asian economy have altered the global balance of power during the nineties. China has emerged as one of the fastest growing economies in the world and has become a competitor for India in its major export-markets4. It is also observed that China has become one of the major destinations for Indian exports. Since nineties, India’s exports to China increased at a tremendous pace. This is illustrated in Table 2. During the period 1990-91 to 2009-10, India’s exports to China increased at much higher rate than India’s overall exports (i.e. 40.31 per cent and 17.83 per cent respectively). The similar trend could also be seen during the different sub-periods, except the last one i.e. from 2005-06 to 2009-10. During the first sub-period, i.e. from 1990-91 to 1994-95, Indian exports to China grew at a fabulous rate. There are mainly two reasons behind this phenomenal growth rate. First, India initiated its liberalisation process during this phase. Secondly, the political relations between these two nations turned to be good one, which positively affected their trade relations. However, during the second sub-period, i.e. from 1995-96 to 1999-00, their political relations again became gloomy, due to their nuclear considerations, which negatively affected the growth of their mutual trade. Thus, during this period, the growth rate of India’s exports to China fell substantially. In third sub-period, i.e. from 2000-01 to 2004-05, the growth rate of India's exports to China improved significantly. The major reason behind this was that during this sub-period, China joined WTO and put its door wide open for the world market. India also utilised this opportunity. But, in the last sub-period, i.e. from 2005-06 to 2009-10, the growth rate of Indian exports to China again went down sharply due to the financial crisis. Thus, during the study period, the growth of India's exports to China has been influenced from time to time by their politico-economic relations.
The share of Chinese economy in India’s global exports can be illustrated with the help of Chart 2. As is clear in 1990-91, this share was only marginal, i.e. 0.10 per cent, which improved to 1.05 per cent in 1995-96 and 1.87 per cent in 2000-01. However, since then, the share of Chinese economy in India’s global exports increased quite tremendously and reached to 6.72 per cent in 2004-05. After that with some fluctuations, this share reached to 6.47 per cent in 2009-10. The biggest fall was seen during 2008-09 which was the result of global economic slowdown. However, it is worth mentioning that after Chinese accession to WTO in 2001, China’s share in India’s global exports increased with a rapid pace. This means WTO has paved the way for Indian exporters to enter Chinese market.
The usefulness of foreign trade depends upon the structure and pattern of trade which is determined by the nature of commodities exported and imported by a country5. During the study period, the share of selected six commodities in India’s total exports to China fluctuated sharply and hovered between 49.77 per cent and 83.05 per cent. However, one important point should be noted here is that during most of the years one commodity group namely ores, slag and ash dominated Indian exports basket to China. In fact, during many years, its share was even more than half of India's total exports to China. Hence, this commodity group has remained the major driving force for the growth of Indian exports to China. In fact, the rapid depletion of China's iron ore reserves, thereby, making its front-running steel industry dependent on imports from India to meet the growing demand for steel for its construction and defence industries. The other noticing commodity was iron and steel whose share rose from 0.61 per cent in 1990-91 to 25.43 per cent in 2002-03 but after that it started declining and reached to 2.65 per cent in 2009-10. The share of remaining commodities was remained quite unstable and it is difficult to draw a single conclusion. However, it is not wrong if we say that there is lack of stability in India's exports to China (Table 3).
Period |
China |
Overall |
|
||
1990-91 to 1994-95 |
131.56 |
26.16 |
|
||
1995-96 to 1999-00 |
13.75 |
10.23 |
|||
2000-01 to 2004-05 |
62.96 |
16.91 |
|||
2005-06 to 2009-10 |
14.28 |
17.57 |
|||
1990-91 to 2009-10 |
40.31 |
17.83 |
|||
Note: Figures represent the average annual percentage growth of India’s exports to China and to world.
Source: Calculated from Monthly Statistics of Foreign Trade of India, DGCI and S, Kolkata, (Various Issues).
Table 4 presents percentage share of China in India’s global exports of selected commodities. China’s demand for Indian ores, slag and ash increased fabulously from 0.52 per cent in 1990-91 to 83.54 per cent in 2009-10.
Table 3: Percentage Share of Selected Commodities in India’s Exports to China
Commodities |
1990- 91 |
1995- 96 |
2000- 01 |
2001- 02 |
2002- 03 |
2003- 04 |
2004- 05 |
2005- 06 |
2006- 07 |
2007- 08 |
2008- 09 |
2009- 10 |
1. Ores, slag and ash |
18.77 |
33.78 |
18.68 |
27.62 |
25.02 |
29.34 |
52.13 |
51.26 |
45.89 |
56.88 |
51.35 |
47.80 |
2. Iron and steel |
0.61 |
11.43 |
3.29 |
1.73 |
25.43 |
20.42 |
11.78 |
6.28 |
5.76 |
2.06 |
4.02 |
2.65 |
3. Cotton |
0.68 |
6.65 |
8.47 |
7.24 |
3.22 |
3.64 |
1.56 |
7.62 |
9.04 |
9.98 |
4.07 |
10.76 |
4. Organic chemicals |
0.77 |
7.43 |
13.00 |
11.86 |
7.87 |
7.50 |
6.45 |
6.81 |
6.25 |
5.78 |
4.27 |
4.40 |
5. Inorganic chemicals |
28.94 |
2.94 |
0.46 |
1.95 |
4.31 |
3.42 |
4.02 |
4.86 |
4.24 |
1.45 |
2.22 |
0.95 |
6. Plastic |
0.00 |
3.57 |
9.74 |
11.95 |
7.52 |
9.03 |
7.11 |
4.05 |
5.18 |
2.13 |
1.53 |
2.70 |
Total |
49.77 |
65.8 |
53.64 |
62.35 |
73.37 |
73.35 |
83.05 |
80.88 |
76.36 |
78.28 |
67.46 |
69.26 |
Source: Monthly Statistics of Foreign Trade of India, DGCIandS, Kolkata, (Various Issues).
Table 4: Percentage Share of Chinese Market in India’s Global Exports of Selected Commodities
Commodities |
1990- 91 |
1995- 96 |
2000- 01 |
2001- 02 |
2002- 03 |
2003- 04 |
2004- 05 |
2005- 06 |
2006- 07 |
2007- 08 |
2008- 09 |
2009- 10 |
1. Ores, slag and ash |
0.52 |
18.66 |
33.74 |
48.30 |
47.14 |
66.34 |
78.31 |
77.82 |
78.07 |
88.28 |
88.27 |
83.54 |
2. Iron and steel |
0.06 |
4.52 |
2.42 |
1.75 |
26.28 |
23.29 |
15.68 |
11.14 |
8.53 |
3.41 |
5.10 |
6.81 |
3. Cotton |
0.01 |
1.11 |
2.92 |
3.46 |
2.89 |
4.37 |
3.86 |
17.25 |
19.12 |
21.00 |
12.22 |
27.23 |
4. Organic chemicals |
0.05 |
2.97 |
6.25 |
7.02 |
7.39 |
7.85 |
10.01 |
9.48 |
9.04 |
8.72 |
5.35 |
6.82 |
5. Inorganic chemicals |
3.07 |
4.73 |
1.62 |
7.02 |
21.17 |
23.83 |
35.35 |
42.41 |
43.88 |
19.06 |
18.37 |
11.41 |
6. Plastic |
0.00 |
2.56 |
11.55 |
14.70 |
14.82 |
19.98 |
18.98 |
12.67 |
15.68 |
8.27 |
5.69 |
11.36 |
Source: Monthly Statistics of Foreign Trade of India, DGCIandS, Kolkata, (Various Issues).
Chinese share in case of inorganic chemicals also shoot up from 3.07 per cent in 1990-91 to 43.88 per cent in 2006-07. But then it fell down severely to 11.41 per cent in 2009-10. In case of remaining commodities, China's share remained quite unstable. In few years their share went up to greater heights while in other years it went down to be negligible. One thing should be noteworthy here is that India’s exports to China were mainly dominated by raw materials and semi-manufactured products. Though, India’s overall exports of manufactured items have increased but not in the case of China. It is still exporting a great extent of natural resource based raw material to China.
4. India’s exports of ores, slag and ash to china
As is clear from the above discussion that India’s exports to China, during the study period, were mainly dominated by one single commodity group namely ores, slag and ash. The share of this commodity group in India’s total exports to China increased dramatically from 18.77 per cent in 1990-91 to 47.80 per cent in 2009-10. In fact, during the last few years, this commodity group constituted more than a half of India’s total exports to China. Further, in 2009-10, India is exporting 83.54 per cent of its global exports of ores, slag and ash to China alone. Hence, it would be interesting to see why India is exporting such a huge amount of this commodity to China alone. It is done at the most disaggregate level (i.e. 6-digit HS classification).
Table 5 provides the composition of Indian exports of ores, slag and ash to China at 6-digit HS classification. It is clear that the sub-commodity group namely iron ores and concentrates (non-agglomerated) played a drastic role in the enhancement of India’s overall exports of ores, slag and ash to China. In 1990-91, its value was mere Rs. 2.10 crore which rose quite superbly to Rs. 24134.23 crore in 2009-10. Consequently, its share increased from 34.38 per cent in 1990-91 to 92.29 per cent in 2009-10. During the study period, the share of two more commodities namely iron ores and concentrate (agglomerated); and chromium ores and concentrates also got stimulated but recently these commodities have lost their relevance. The remaining commodities played a very small or negligible role in India’s total exports of ores, slag and ash to China. Since Indian exports to China are found to be heavily dependent on ores, slag and ash, it is important to examine the unit values realised by India for this commodity. For this purpose, the unit values realized by India from both China and Rest of the World (RoW) have been compared.
Table 5: Composition of Ores, Slag and Ash to China at 6-Digit HS Classification (Rs. Crore)
Commodities |
1990-91 |
1995-96 |
2000-01 |
2001-02 |
2002-03 |
2003-04 |
1. Iron ores and concentrates (Non-agglomerated) |
2.10 (34.38) |
138.30 (36.79) |
500.66 (70.56) |
850.78 (67.84) |
1808.15 (75.60) |
3310.70 (83.08) |
2. Iron ores and concentrates (Agglomerated) |
0.00 (0.00) |
94.04 (25.02) |
93.01 (13.11) |
135.78 (10.83) |
167.93 (7.02) |
473.67 (11.89) |
3. Mineral ores and concentrates |
0.00 (0.00) |
7.10 (1.89) |
8.91 (1.26) |
28.71 (2.29) |
14.52 (0.61) |
37.54 (0.94) |
4. Aluminium ores and concentrates |
0.00 (0.00) |
0.00 (0.00) |
0.00 (0.00) |
0.05 (0.00) |
42.73 (1.79) |
31.48 (0.79) |
5. Lead ores and concentrates |
0.00 (0.00) |
0.00 (0.00) |
5.76 (0.81) |
16.26 (1.30) |
2.47 (0.10) |
0.00 (0.00) |
6. Zinc ores and concentrates |
0.00 (0.00) |
0.00 (0.00) |
0.00 (0.00) |
18.84 (1.50) |
139.18 (5.82) |
56.70 (1.42) |
7. Chromium ores and concentrates |
4.01 (65.62) |
136.47 (36.30) |
100.60 (14.18) |
203.12 (16.20) |
216.52 (9.05) |
74.44 (1.87) |
8. Titanium ores and concentrates |
0.00 (0.00) |
0.00 (0.00) |
0.41 (0.06) |
0.29 (0.02) |
0.29 (0.01) |
0.14 (0.00) |
9. Others |
0.00 (0.00) |
0.00 (0.00) |
0.23 (0.03) |
0.19 (0.02) |
0.00 (0.00) |
0.09 (0.00) |
10. Total |
6.11 (100.00) |
375.90 (100.00) |
709.57 (100.00) |
1254.01 (100.00) |
2391.79 (100.00) |
3984.76 (100.00) |
Commodities |
2004-05 |
2005-06 |
2006-07 |
2007-08 |
2008-09 |
2009-10 |
1. Iron ores and concentrates (Non-agglomerated) |
10707.04 (81.39) |
13201.14 (86.05) |
14926.23 (86.67) |
20468.96 (82.54) |
18926.35 (86.40) |
24134.23 (92.29) |
2. Iron ores and concentrates (Agglomerated) |
1333.43 (10.14) |
1288.83 (8.40) |
157.17 (0.91) |
1284.44 (5.18) |
986.38 (4.50) |
129.62 (0.50) |
3. Mineral ores and concentrates |
66.32 (0.50) |
25.09 (0.16) |
11.45 (0.07) |
70.14 (0.28) |
80.23 (0.37) |
89.89 (0.34) |
4. Aluminium ores and concentrates |
5.71 (0.04) |
17.62 (0.11) |
188.45 (1.09) |
585.04 (2.36) |
100.13 (0.46) |
10.43 (0.04) |
5. Lead ores and concentrates |
139.69 (1.06) |
29.31 (0.19) |
442.68 (2.57) |
270.53 (1.09) |
564.92 (2.58) |
243.43 (0.93) |
6. Zinc ores and concentrates |
148.81 (1.13) |
161.17 (1.05) |
777.50 (4.51) |
905.31 (3.65) |
237.91 (1.09) |
556.41 (2.13) |
7. Chromium ores and concentrates |
710.55 (5.40) |
595.85 (3.88) |
702.37 (4.08) |
1076.28 (4.34) |
836.81 (3.82) |
718.90 (2.75) |
8. Titanium ores and concentrates |
8.45 (0.06) |
13.95 (0.09) |
8.76 (0.05) |
32.76 (0.13) |
12.96 (0.06) |
94.05 (0.36) |
9. Others |
35.09 (0.27) |
7.87 (0.05) |
6.51 (0.04) |
104.39 (0.42) |
158.93 (0.73) |
173.68 (0.66) |
10. Total |
13155.09 (100.00) |
15340.82 (100.00) |
17221.12 (100.00) |
24797.86 (100.00) |
21904.63 (100.00) |
26150.63 (100.00) |
Note: Figures in parentheses show the percentage share.
Source: Calculated from Statistics of Foreign Trade of India by Countries, DGCI and S; Kolkata, (Various Issues).
Table 6: Unit Values Realised from Exports of Ores, Slag and Ash to China and to RoW (Rs. Lakh Per ton)
Commodities |
|
1990-91 |
1995-96 |
2000-01 |
2001-02 |
2002- 03 |
2003-04 |
1. Iron ores and concentrates (non-agglomerated) |
China |
0.003 |
0.005 |
0.009 |
0.009 |
0.008 |
0.010 |
RoW |
0.003 |
0.005 |
0.007 |
0.008 |
0.007 |
0.008 |
|
2. Iron ores and concentrates (agglomerated) |
China |
- |
0.010 |
0.013 |
0.015 |
0.014 |
0.023 |
RoW |
0.005 |
0.009 |
0.009 |
0.016 |
0.015 |
0.016 |
|
3. Mineral ores and concentrates |
China |
- |
0.021 |
0.048 |
0.033 |
0.022 |
0.024 |
RoW |
0.014 |
0.011 |
0.021 |
0.016 |
0.020 |
0.015 |
|
4. Aluminium ores and concentrates |
China |
- |
- |
- |
0.189 |
0.007 |
0.076 |
RoW |
0.003 |
0.031 |
0.010 |
0.007 |
0.010 |
0.016 |
|
5. Lead ores and concentrates |
China |
- |
- |
0.043 |
0.109 |
0.617 |
- |
RoW |
- |
0.214 |
0.216 |
0.089 |
0.558 |
0.500 |
|
6. Zinc ores and concentrates |
China |
- |
- |
- |
0.114 |
0.113 |
0.122 |
RoW |
- |
0.070 |
0.116 |
0.115 |
0.034 |
0.117 |
|
7. Chromium ores and concentrates |
China |
0.032 |
0.046 |
0.031 |
0.023 |
0.022 |
0.316 |
RoW |
0.023 |
0.051 |
0.025 |
0.025 |
0.047 |
0.604 |
|
8. Titanium ores and concentrates |
China |
- |
- |
0.137 |
0.143 |
0.129 |
0.020 |
RoW |
0.017 |
0.040 |
0.068 |
0.143 |
0.071 |
0.057 |
|
9. Others |
China |
- |
- |
0.186 |
0.231 |
- |
0.092 |
RoW |
- |
- |
0.186 |
0.454 |
- |
0.004 |
|
10. Total |
China |
0.007 |
0.009 |
0.011 |
0.011 |
0.009 |
0.011 |
RoW |
0.003 |
0.006 |
0.008 |
0.009 |
0.008 |
0.010 |
Commodities |
|
1990-91 |
1995-96 |
2000-01 |
2001-02 |
2002- 03 |
2003-04 |
1. Iron ores and concentrates (Non-agglomerated) |
China |
0.019 |
0.020 |
0.020 |
0.035 |
0.031 |
0.028 |
RoW |
0.008 |
0.016 |
0.017 |
0.023 |
0.033 |
0.028 |
|
2. Iron ores and concentrates (Agglomerated) |
China |
0.042 |
0.037 |
0.036 |
0.055 |
0.057 |
0.024 |
RoW |
0.027 |
0.059 |
0.040 |
0.042 |
0.015 |
0.022 |
|
3. Mineral ores and concentrates |
China |
0.022 |
0.017 |
0.033 |
0.044 |
0.051 |
0.036 |
RoW |
0.022 |
0.025 |
0.028 |
0.026 |
0.083 |
0.070 |
|
4. Aluminium ores and concentrates |
China |
0.045 |
0.016 |
0.015 |
0.016 |
0.019 |
0.009 |
RoW |
0.013 |
0.013 |
0.015 |
0.017 |
0.023 |
0.018 |
|
5. Lead ores and concentrates |
China |
0.199 |
0.298 |
0.587 |
0.025 |
0.697 |
0.668 |
RoW |
0.293 |
0.275 |
0.070 |
0.067 |
0.093 |
0.100 |
|
6. Zinc ores and concentrates |
China |
0.182 |
0.076 |
0.036 |
0.253 |
0.272 |
0.324 |
RoW |
0.127 |
0.336 |
0.096 |
0.256 |
0.113 |
0.300 |
|
7. Chromium ores and concentrates |
China |
0.074 |
0.090 |
0.066 |
0.138 |
0.057 |
0.116 |
RoW |
0.056 |
0.107 |
0.064 |
0.118 |
0.032 |
0.117 |
|
8. Titanium ores and concentrates |
China |
0.021 |
0.035 |
0.036 |
0.045 |
0.054 |
0.038 |
RoW |
0.039 |
0.047 |
0.058 |
0.074 |
0.086 |
0.073 |
|
9. Others |
China |
0.029 |
0.033 |
0.018 |
0.028 |
0.041 |
0.028 |
RoW |
0.008 |
0.023 |
0.012 |
0.016 |
0.005 |
0.028 |
|
10. Total |
China |
0.021 |
0.022 |
0.021 |
0.037 |
0.033 |
0.029 |
RoW |
0.011 |
0.021 |
0.020 |
0.025 |
0.018 |
0.029 |
Note: RoW refers to Rest of the World (whole world minus China).
Source: Calculated from Calculated from Monthly Statistics of Foreign Trade of India and Statistics of Foreign Trade of India by Countries, DGCI and S; Kolkata, (Various Issues).
Table 6 shows the unit values realised for exports of ores, slag and ash from China and RoW. Some trends are discernible in some cases. For instance, the unit values for exports of iron ores and concentrates (non-agglomerated) were higher in case of China during most of the years. In case of other commodities, the unit values showed mixed scenario. The noticeable point is that in this commodity group as a whole, the average unit values realised from China were higher than the rest of the markets (except the year 2009-10, where, the unit values realised from China as well as from RoW remained same i.e. Rs. 0.029 lakh per ton). In 2008-09, average unit value for ores, slag and ash from China (i.e. Rs. 0.033 lakh per ton) was nearly double than that of RoW (i.e. Rs. 0.018 lakh per ton). Moreover, during the study period, the unit values of this commodity for both China and RoW got stimulated. Perhaps, that was one of the major reasons for growing share of this commodity group in India’s total exports to China.
5. How diversified is the Indian export basket to china?
It is very important to know that how much India’s trade with China is diversified. In other words, what is the extent of concentration in India's exports basket to China? The Export Concentration Index or Hirschman’s Concentration Index (HCI) is being used to measure the commodity concentration in export-trade of a country6. The index is calculated by using the following formula:
HCI |
= |
sqrt [ sum (Xi/Xt)2 ] |
Where Xi stands for country j’s exports of product i; Xt stands for country j’s total exports; and sqrt stands for square root. Highest value for this index is unity that occurs when exports consist of only one good. The lower value of concentration index shows that the exports are more evenly distributed over the various possible categories. Table 7 presents the HCI of India’s exports to China and that of China’s exports to India. In 2008, the value of HCI of India’s exports to China reached at its maximum point i.e. 0.61, which reflects that India’s exports basket to China is concentrated around only few items (particularly around ores, slag and ash). Similarly, the value of HCI of China’s exports to India have also shown a rising trend in the recent past and it reached its maximum point in 2009 i.e. 0.41. This suggested that like Indian exports basket to China, Chinese exports basket to India is also getting narrow one. However, it should be noted that the annual average value of HCI of India’s exports to China (i.e. 0.44) remained well above than that of Chinese exports to India (i.e. 0.34). Thus, this shows that during the study period Chinese exports to India remained more diversified vis-à-vis Indian export to China.
Table 7: Hirschman’s Concentration Index (HCI): India and China
Years |
HCI of India’s Exports to China |
HCI of China’s Exports to India |
1996 |
0.38 |
0.35 |
2001 |
0.35 |
0.31 |
2002 |
0.38 |
0.33 |
2003 |
0.38 |
0.31 |
2004 |
0.55 |
0.33 |
2005 |
0.53 |
0.32 |
2006 |
0.49 |
0.35 |
2007 |
0.54 |
0.37 |
2008 |
0.61 |
0.37 |
2009 |
0.48 |
0.41 |
Annual Average (1996-2009) |
0.44 |
0.34 |
Source: Calculated from UN Commodity Trade Statistics, United Nations.
6. SUMMARY AND CONCLUSIONS:
The analysis of India’s exports in post-reform period reveals the major changes in its composition and direction. The composition of Indian exports indicates the rising share of manufactured exports. This has been the result of rising level of industrialisation in the country and improvement in the quality of exportables, which became possible with the opening up of the economy in multiple ways and stages. Thus, India emerged as the credible exporter in the global export business. The direction of Indian exports also showed a major change during post-reform period. Indian exports to developing countries, such as Asia, increased rapidly, while to industrial countries decreased sharply. However, the destination of exportables is greatly influenced by political relations and other events. India’s ability to compete with other nations is of great importance in determining its share in the world trade, and it would be a more critical factor in sustaining the higher rates of growth of the economy.
The trade and economic relationship between India and China is developing its own momentum and dynamism. During the last two decades, China’s share in Indian exports increased at a tremendous pace. But, this rapid growth of Indian exports to China is presently limited by the narrowness of export basket. The Hirschman's Concentration Index (HCI) clearly reveals that China's exports to India are more diversified than that of India's exports to China. In fact, Indian exports are mainly dominated by exports of ores, slag and ash. Importantly, during the recent few years, this commodity constituted more than half of India’s exports to China. Similarly, during 2009-10, out of India’s global exports of ores, slag and ash, nearly 84 per cent was exported to China alone. Moreover, within this commodity group, the share of iron ores and concentrates (non-agglomerated) as commodity sub-group was as high as 92.29 per cent in 2009-10. Hence, this export item was the actual export driver for enhancement of India’s export trade with China. In fact, the rapid depletion of China's iron ore reserves, thereby, making its front-running steel industry dependent on imports from India to meet the growing demand for steel for its construction and defence industries. Further, it has also been found that China has paid higher unit values to India in case of ores, slag and ash than rest of the world. Thus, the lower product prices and acceptable quality of Indian ores, slag and ash has strengthen its demand in Chinese market.
Moreover, it has also been found that most of the Indian export items to China fall in the category of natural resource based products. However, some of these products are exhaustible in nature like iron ore, granite crude, etc. Therefore, increase in exports of these products may not be desirable to India in the long run. To increase the complementarities with China, there is an urgent needed to diversify the export basket towards technologically advanced products. However, with given industrial structure and advancement it seems highly difficult in the immediate future.
This raises vital question related to policy handling of exports. China has established its place as the workshop of the world and demonstrated capacity as the exporter of manufacturers. After all, why India’s exports to China has been dominated by raw materials and not by manufacturers. It seems that on the other side China has been shifting its sources of raw materials to a neighbouring country, to cut on the transportation costs, in order to meet her needs of export industries. Actually, the global relocation and shifting of supply sources or production facilities is a part of strategic trade policy with eye at cost cutting and ensuring supply of critical inputs.
This became possible in the globalised world economy on a bigger and faster scale. It seems that there is better possibility for India to exercise more bargaining power in case of this commodity with China. However, the better and more balanced answer lies in enhancing the country’s exports of manufactured goods to China instead of depending upon exhaustible resource based narrow range of exportables. Hence, country specific aspects of export policy are given more emphasis along with overall alignment of export regime.
7. REFERENCES:
1. Ohlin, B. Interregional and international trade. Cambridge University Press, Harvard. 1952.
2. Krueger, A.O. Trade policy as an input to development. The American Economic Review. 1980; 70 (2): 288-292.
3. Wolf, M. India’s exports. Oxford University Press, Oxford. 1982.
4. ITPO. A strategy for enhanced economic cooperation between India and China. Trade Information Department, Indian Trade Promotion Organisation, New Delhi. 2003.
5. Singla, S.K. and Brar J.S. India’s exports during post-reform period with special reference to China. Journal of Agricultural Development and Policy. 2008; 18 (1 and 2): 57-72.
6. World Bank. Trade indicators and indices: data and statistics. The World Bank Group, Washington. http://web.world bank.org. 2008.
Received on 14.01.2014
Modified on 01.03.2014
Accepted on 03.04.2014
A&V Publication all right reserved
Research J. Humanities and Social Sciences. 5(2): April-June, 2014, 154-162