Chandrima Sikdar

Welfare Implication of India-ASEAN FTA: An Analysis Using GTAP Model

The welfare effect under GTAP model computes a money metric equivalent of the utility change. This is calculated by measuring ‘equivalent variation’ (EV) which summarizes the regional welfare changes resulting from any policy shock and is given in dollar values (US

Bilateral trade between India and Bangladesh: A general equilibrium approach

million). In GTAP, this money metric change is broken into different components, each of which relates to a quantity change interacting with a distortion in the model. Considering the welfare decomposition effect under multiple regions as proposed by Huff & Hurtel (2001), the current study gives an insight into the sources of welfare gain under various simulations describing stages of India-ASEAN FTA. ASEAN is so far the biggest bloc with which India has an operational FTA. Almost 9% of India’s trade is with ASEAN as a group. In thiscontext, the paper makes an attempt to assess the welfare implication of this agreement considering various implementation stages.It has been noticed that relatively bigger ASEAN members will derive more benefits in terms of welfare growth. India will have higher benefits only when the agreement gets fully implemented. ASEAN members will gain from higher ‘terms of trade’ effect while India’s gain mainly will be from the resource reallocation and change in domestic production activities reflected through ‘allocative efficiency’. However, the overall gain gets dampened due to the presence of negative ‘terms of trade’ in India’s welfare equation. India’s import demand of several intermediate as well as final goods will remain high and ASEAN will have advantage to supply these at a higher price yet lower than average prevailing import price in India which will lead to negative ‘terms of trade’ effect for India. The value of ‘allocative efficiency’ for India increases significantly once there is full liberalization. With full liberalization India extends tariff concessions for large number of products which are otherwise included in its negative list and not allowed any concessions. This adds to allocative efficiency- firstly due to removal of protection from several inefficient production processes and second due to increased import taxes contributed by increased imports of many of the products otherwise featuring in the country’s negative list.Once we incorporate imperfect competition and presence of increasing return to scale in selected sectors in India, ‘scale economy’ effect, ‘profit shifting’, and various tax contributions will lead to more welfare gain in India. This indicates that with the presence of imperfect competition, profit shifting will allow India to invest in capital goods and technology leading to high ‘scale effect’ and thereby to increase exports further to ASEAN. The study brings up a very crucial issue that the gain from FTA with ASEAN hinges on India’s big firm’s ability to reduce average cost bringing better technology and quality inputs. This will improve production system in India which in turn will further boost the export sector.

Prospects of Bilateral Trade between India and Bangladesh

Abstract India and Bangladesh have pursued policies of trade liberalization since the early 1990s. However, owing to the differential speeds of opening up, Bangladeshs bilateral trade deficit with India widened substantially over the years. This aggravated the economic and the political tensions between the economies. It has been held that promotion of free trade between the two economies may enhance the trade and hence economic cooperation between them. Against this backdrop the present paper proposes a theoretical framework that provides a general equilibrium determination of the commodity pattern of trade and hence locates the comparative advantages of the economies. The empirical implementation of the model considers trade in 25 sectors comparable in the input–output tables of the economies. The study isolates the gains from free trade accruing to either economy. The paper also explores the pattern of bilateral trade when each economy produces goods by utilizing their own as well as the other countrys technology. The gains from this trading arrangement are also isolated.

India–Sri Lanka Bilateral Trade A General Equilibrium Approach

India and Bangladesh offer natural markets for each others export products. In their mutual trade, they enjoy the advantages of reduced transaction costs and quicker delivery due to geographical proximity, common language and a heritage of common physical infrastructure. That is why soon after the launching of liberalization in Bangladesh in 1982 Indias exports to Bangladesh registered unprecedented growth. On the other hand, Bangladeshs exports to India also increased, but not at a commensurate rate. This inevitably led to the increase of the official trade deficit of Bangladesh with India over the past decades. It has been held that this trade imbalance was not just an economic issue but generated strong enough political resonance that was inimical to the cordial relations between the two economies. Thus, in recent years, India-Bangladesh bilateral trade has been an issue that has called for much concern. It has been held at various levels of policy-making that a bilateral free trade area between the two economies will go a long way in dealing with this ever increasing trade gap. But the ultimate success of any bilateral trading arrangement between economies hinges on a number of factors like trade intensity index of an economy; its pattern of revealed comparative advantage and the extent of trade complementarities between the economies. The present paper seeks to discuss these concepts and to evaluate the prospects of bilateral trade between India and Bangladesh in the light of these indices.

The Nexus Between Carbon Emission, Energy Consumption, Economic Growth And Changing Economic Structure In India: A Multivariate Cointegration Approach

The India–Sri Lanka Free Trade Agreement (ISFTA) was signed between India and Sri Lanka in December 1998 and came into operation in March 2000. It is now 10 years since this FTA has been signed and during this period the bilateral trade between these two economies has reached new heights and dimensions. Against this backdrop the present article proposes a theoretical framework which provides a general equilibrium determination of the commodity pattern of trade between the economies that helps to isolate their pattern of comparative advantages. The empirical implementation of the model considers trade in 33 sectors comparable in the input–output tables of the economies. The study isolates the gains from free trade accruing to either economy. The article also explores the pattern of bilateral trade when each economy has a choice to produce goods by utilizing its own or the other country’s technology.

Impact of Sri Lanka's free trade agreement with China on India

ABSTRACT:India, one of the fastest growing economies of the world is also one of the largest CO2 emitters in the world. Challenge before the country is to reduce this alarming emission levels without hindering its growth prospects. Against this backdrop, the present paper studies the dynamic causal relationships between Indias CO2 emission, energy consumption, GDP growth and changing economic structure. The study uses cointegration and causality analysis for the same. ARDL bound testing approach along with Johansen-Juselius maximum likelihood procedure is applied to examine the existence of long run equilibrium relationship among the variables. Causal linkages between the variables are studied using Granger causality test in Vector Error Correction model framework. For this the study uses data on India for-CO2 emissions, primary energy consumption, GDP per capita and structural variables like, agriculture and service value added, urbanization, production of capital and intermediate goods and employment. Primary energy consumption, per capita GDP and trade openness explain variations in CO2 emissions over long run. Elasticity of CO2 emission with respect to energy consumption is 2 percent in long run and 1.8 per cent in short run. CO2 emissions are less responsive to changes in per capita GDP (0.52) and trade openness (0.10). Both trade openness and GDP per capita growth lower emissions by producing and exporting more labor-intensive environment friendly goods. Causality analysis shows that trade openness Granger causes CO2 emission both in short run and in long run while CO2 emission Granger causes service value added and production of capital and intermediate goods in the short run. Output in these sectors in turn Granger cause employment in the long run. Given the nature of causality, there is no way that India can reduce energy consumption in service sector or in capital and intermediate goods sector. Thus, faced with growing concern over rising emission levels and requirements to meet its growth potentials, India should take policies aiming at greater investment in and usage of cleaner energy, conservation of energy and improving energy efficiency. This way it can strike a balance between reducing its emission levels while maintaining its current growth momentum.

Productivity and research and development content of intermediate inputs - evidence from Indian industries

In October 2014 a free trade agreement (FTA) between Sri Lanka and China was announced with a time frame of June 2015 for signing the agreement. On the other hand, Sri Lanka and India have an FTA since 2000 and a CEPA between them is under negotiation. Thus, the emerging trade dynamics between India and Sri Lanka due to this FTA calls for an in-depth study. The present study attempts to do this. Using the global trade analysis project (GTAP) the study does a number of simulations by calibrating trade liberalisation scenarios between Sri Lanka and China and studies the impact of the proposed FTA on its partners and the consequent impact on India. The results show that Sri Lankas trade with India would fall as it will find it beneficial to substitute goods of Indian origin with goods of Chinese origin. While Sri Lanka takes home mostly positive gains, Indias loss due to this FTA are pretty much apparent.

Assessing the Prospects of Processed Fruit & Vegetable Export from India to Gulf Countries

Research and Development (R&D) investments are foundations for generating new knowledge through basic research and ultimately for generating products and services through applied research and commercialization. For this pay-off to happen and innovation-driven growth to flourish a successful R&D ecosystem is required. With current government support, R&D sector in India is all set to witness some robust growth in the coming years. Over the last decade researchers have emphasized the role of R&D expenditure in determining rate of growth of total factor productivity and hence in overall growth of an economy. Against this backdrop, the present study evaluates the extent to which R&D knowledge embodied in intermediate inputs is related to productivity at industry level in India. Industry-level Total Factor Productivity (TFP) with respect to R&D content of intermediates is computed for industries as a whole and for manufacturing sectors classified under high and low-R&D industries. A global input output matrix is used to separate total R&D content of intermediates into domestic and foreign R&D stocks. Using two way panel estimation, variation in TFP for twenty six industries for the years 2001, 2004 and 2007 are estimated as function of variations in domestic and foreign R&D content of intermediates. The study obtains much of the required data from GTAP databases – versions 6, 7 and 8 and from OECD Stan database, World Development indicators, India’s National Sample Survey Organization and its Department of Science and Technology. Results indicate that while industries, in general, as also manufacturing have shown increased productivity due to increased R&D in intermediate inputs, but it is the small scale low R&D sectors which are found to be the biggest beneficiaries. Particularly, the results point to the fact that it is the foreign R&D stock of inputs which have mainly contributed to improved productivity in these low R&D sectors. Thus, innovation by these sectors in the form of new machines, alternative materials, improved product quality etc. which they brought in via imports has resulted in their increased productivity. This finding is a contribution to existing literature which have mostly observed that that manufacturing output in general is responsive to R&D stock of intermediates. Large part of India’s population are employed in low R&D labor (mainly unskilled) intensive sectors. Thus, more R&D and innovation in these sectors via imported inputs may make them efficient in terms of value addition to output, employment and income and thus make innovation more inclusive.

Impact of India-ASEAN Free Trade Agreement: A cross-country analysis using applied general equilibrium modelling

India, the second largest producer of fruit and vegetable in the world, exports fresh fruits and vegetables, processed fruits and vegetables, animal products, other processed foods and cereals worth of US

Measuring the factor proportions of India's trade with Sri Lanka using Leontief and Leamer index

5.45 billion as on November 2010-2011 to different parts of the world. In the world exports of processed fruits/vegetable (in terms of value) India stood at US