an analysis for india and china - icrier

Foreword
This paper is the first to attempt a systematic evaluation of the similarities of the
patterns of revealed comparative advantage for India and China in the global market.
The study is timely as India has made an extensive effort to liberalize its international
trade since 1991 and the consequent increase in competitive pressures and technology
transfers, is expected to have led to a restructuring of the economy such that the
composition of exports reflects India’s comparative advantage in the global economy.
The timeliness of the study is also reinforced by the fact that increased trade
integration of China over the past few years is likely to have contributed to a shift in
comparative advantage in labour intensive manufactures in the world market. This
development is pertinent to India, as China and India are not just similar in size but also
in factor endowments. It is important therefore, to explore the extent of similarity in the
patterns of comparative advantage for the two economies.
The paper identifies the pattern of revealed comparative advantage using the
Balassa (1965) index for export data. The index has been calculated at the sector and
commodity level of the Harmonized System of classification. The paper also analyses
comparative advantage according to factor intensity. The analysis shows broad
similarities in the structure of comparative advantage for India and China. Both, India
and China enjoy comparative advantage for labour and resource intensive sectors in the
global market.
I do hope that this paper will serve as a useful source and provide valuable
reference material for researchers and policymakers associated with and interested in
export promotion strategy in India.
August 2005
Arvind Virmani
Director & Chief Executive
ICRIER
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