C. Veeramani

Trade barriers, multinational involvement and intra-industry trade: panel data evidence from India

The article analyses the effects of trade barriers and multinationals on the intensity of intra-industry trade (IIT) in a panel of Indian manufacturing industries from 1988 to 1999. We find that the intensity of IIT increases with the reduction of trade barriers. This is expected as greater competition from imports leads individual plants in the domestic industry to specialize in the manufacturing of unique varieties. The analysis suggests that horizontal (market seeking) multinational activities in the domestic industries exert a negative influence on IIT. This is consistent with the view that horizontal multinationals displace exports to the host country. At the same time, our results indicate that IIT will be stimulated to the extent that the entry of multinationals induces intra-industry specialization. We also analyse the role of product differentiation and plant level scale economies in determining IIT.

Intensive and extensive margins of exports: What can India learn from China?

We decompose Indias export performance in manufactured products during 2000-2015 into changes at the intensive and extensive margins. Indias performance, along different margins, is compared and contrasted with that of China. The results show that while China outperforms India at both the margins, the gap is particularly wide at the intensive margin. Decomposition of intensive margin along quantity and price margins shows that Chinese products are generally sold cheaper than Indian products. Higher price margin, however, has not translated into high intensive margin for India due to its abysmally low quantity margin. We examine different explanations for Chinas superior performance relative to India, along different margins, using a gravity model. Our results suggest that Chinas exchange rate policy was not the prime reason for its export success. Neither do we find that FDI inflows were significant in explaining the export performance gap between them. The results show that Chinas export relationship bias towards high-income partner countries holds the key in understanding its superior performance. This bias is a natural consequence of Chinas high degree of specialization in labor-intensive activities. India, by contrast, due to an idiosyncratic pattern of specialization, has failed to exploit its export potential in high income countries.

Internationalization of Indian Enterprises: Patterns, Determinants, and Policy Issues*

This paper examines the emerging patterns and economic implications of Indian overseas direct investment (ODI) from a historical perspective. The novelty of the analysis lies in its specific focus on the implications of the liberalization reforms initiated in the early 1990s and the resultant changes in the overall investment climate for the internationalisation of domestic companies. The findings cast doubts on the popular perception that the recent surge in ODI from India is an unmixed economic blessing, a sign of “coming of age” of Indian companies in global business. Given the remaining distortion in the domestic investment climate, the net national gains from these investments could be much less than what the reported absolute numbers suggest.