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Extensive and intensive margins of India's exports: Comparison with China

Author

Listed:
  • C. Veeramani

    (Indira Gandhi Institute of Development Research)

  • Prachi Gupta

    (Indira Gandhi Institute of Development Research)

Abstract
Should India's export promotion policies be targeted at accelerating export growth at the extensive (new trading relationships) or at the intensive margin (increase in trade of existing relationships)? To help answer this question, we undertake a comparative study of exports from India and China by analysing the role of extensive and intensive margins in the export market penetration of the two countries during 1995-2011. We further decompose intensive margin into quantity and price margins. As far as extensive margin is concerned, our results show that the gap between the two countries is getting narrower as India is clearly catching up with China. By contrast, India lags significantly behind China in terms of intensive margin due to an abysmally low and stagnant quantity margin. Intensification, rather than diversification, has been the crucial driving force of China's export success. India's exports of capital-intensive products performed better compared to labour intensive products. The lacklustre performance in labour-intensive exports is entirely due to a lack of depth inIndia's market presence even as it expanded the range of its products and markets. Our analysis suggests that India can reap rich dividends by adopting policies aimed at accelerating export growth at the intensive margin. Contrary to the general perception, there exist a great potential for India to expand and intensify its export relationships with the traditional developed country partners.

Suggested Citation

  • C. Veeramani & Prachi Gupta, 2014. "Extensive and intensive margins of India's exports: Comparison with China," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2014-011, Indira Gandhi Institute of Development Research, Mumbai, India.
    • Handle: RePEc:ind:igiwpp:2014-011
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    More about this item

    Keywords

    Exports; Extensive Margin; Intensive Margin; India; China;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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