Sanjib Pohit

India's Informal Trade with Bangladesh: A Qualitative Assessment

The large and vibrant informal trade between India, and Bangladesh continues to thrive despite unilateral/regional/multilateral trade liberalisation in these two countries. This calls for an in-depth analysis of Indias informal trade with Bangladesh. Using insights from the New Institutional Economics informal and formal institutions engaged in cross-border trade are contrasted to examine whether informal trading arrangements provide better institutional solutions. The analysis, carried out on the basis of an extensive survey conducted in India and Bangladesh reveals that informal traders in India and Bangladesh have developed efficient mechanisms for contract enforcement, information flows, risk sharing and risk mitigation. Further, informal traders prefer to trade through the informal channel because the transaction costs of trading in the informal channel are significantly lower than the formal channel implying that informal trade takes place due to the inefficient institutional set up in the formal channel. The principal policy implication from the study is that unless the transacting environment of formal traders improves, informal trade will continue to coexist with formal trade, even if free trade is established in the SAARC region.

Quantifying Transport, Regulatory and Other Costs of Indian Overland Exports to Bangladesh

In the globalised world, country borders ought to be arbitrary lines on the map. But recent studies have shown that informal trade barriers still do exist and inhibit trade flows, particularly so in the developing countries. This can arise due to a host of factors such as, complex customs procedures, which sometimes are changing, capacity constraints given limited facilities and/or corruption at the border. These types of non-tariff barriers of various sorts and structural impediments are less obvious and perhaps more interesting, but also much more difficult to directly measure. In this context, this paper attempts to quantify all the relevant costs resulting from informal trade barriers that impinge upon Indian overland exports to Bangladesh through the land custom stations (LCSs) at Petrapole (West Bengal, India) and Benapole (Bangladesh). The study is based on primary data collated through surveys conducted in West Bengal. Our estimate shows that the aggregate delay pertaining to all the phases of exports turns out to be approximately four days for a single shipment. It also shows that the additional transaction cost in terms of delays and speed money incurred by the Indian exporters during trading with Bangladesh is about 10 per cent of the shipment value. Our estimate has shown that informal barriers/para-tariff in Indian overland exports to Bangladesh are already high. Therefore, it is essential to improve the infrastructure and administration at the border to reduce transaction cost. It would be even more important to do this if trade is liberalised, because congestion costs will otherwise rise with the resulting increased demand for trade across the border. The paper concludes with feasible policy recommendations to make trade between India and Bangladesh more vibrant. JEL NO. F19, R41 Key words: Institutional barriers, transaction cost, and corruption

India's Informal Trade with Sri Lanka and Nepal: An Estimation

India has signed bilateral free trade agreements (FTAs) with both Sri Lanka and Nepal. Despite such agreements, informal trade continues to thrive in the South Asian region. Not much empirical evidence seems to exist on the magnitude and composition of such trade. Using the Delphi technique, the study makes an attempt to estimate Indias informal trade with Sri Lanka and Nepal through an extensive primary survey conducted in the three countries, covering several cities. Corresponding country estimates of Indo-Sri Lanka and Indo-Nepal informal trade, provide a possible range within which the estimates are likely to lie. The study shows that total two-way informal trade between India and Sri Lanka is almost a third of formal trade, while that between India and Nepal is almost as large as formal trade. The study also points out the lacunae in the Indo-Sri Lanka and Indo-Nepal FTAs and suggests how they can be addressed so that informal trade can be brought within the ambit of formal trade.

High Technology Merchandise Exports: Where does India Stand?

By and large, India’s performance on the high-technology manufacturing trade front is not too impressive. India is a small player in most of the product categories barring pharmacy sector. In the last 10 years’ period of observation, India has not been able to increase her presence significantly in most of the segment. By contrast, China, starting from a similar base like India in some of the segments, has exhibited marked improvement. It should also be mentioned that unlike China, India has not been able to enter high-end segment of product in most of the categories. Of course, India’s performance would have been better if India would have concentrated on products which have low NTBs. China has done the same in some cases.

Incentive structure of India's biofuel programs: status, shortcomings and implications.

With more than 95% of India’s ground transport dependent on imported fossil fuel, India has made a concerted effort in the last decade to promote biofuels. India launched a biofuel mission in 2003 and subsequently adopted a national policy on biofuels in 2009. It established a 20% blending target by 2017 for both biodiesel and bioethanol. Along with this, it has advocated various policy measures to implement the target. In tune with the national policy, different state governments have, in addition, introduced a gamut of incentives to promote its growth. The objective of this paper is to analyze the incentive structure of India‘s biofuel program and to contrast it with international perspectives, to understand the positive and negative aspects of the program. This review argues that while it will be possible for India to meet its biodiesel target, it is unlikely that it will meet its bioethanol target.

India-Pakistan: Trade Perception Survey

A Trade Perception Survey was undertaken to understand how stakeholders engaged in India-Pakistan trade perceived impediments faced by them in realizing the trade potential between the two countries. Based on an analysis of information collected in the survey on six indicators – awareness of trade policy, ease of meeting standards, market access, business facilitation, customs and documentation, and infrastructure at ports – the study recommends policy options that the Indian and Pakistani governments could consider to reduce impediments. As India and Pakistan are in the midst of a trade normalization process, the recommendations made would help the two governments address the impediments highlighted in the study.

India-Pakistan Trade Liberalization: A CGE Modelling Apporach

This study makes an attempt to assess the impact of bilateral trade liberalization on their respective economies and also on the rest of the South Asia. Our results indicate that there exist significant gains from India, Pakistan mutual trade liberalization. However, these gains are realized only when productivity gain occur in the modes of transport service engaged in trade between these two countries. This is expected given the logistics problems in trade between India and Pakistan

Land degradation and trade liberalization: an Indian perspective

This paper makes an attempt to use GTAP model to understand the interplay between the agricultural trade liberalization and land degradation in India. Like any other developing country, soil erosion happens to be one of the principal environmental problems caused by agricultural production in India. In this paper, our attempt is to simulate the on-site productivity impacts of erosion, along with standard intersectoral and inter-regional economic effects of trade liberalization. The deeper and fuller agricultural trade liberalization opens up opportunities for India’s agriculture. Our result indicates that paddy, wheat, and other agriculture are the sectors in India where production would expand following liberalisation while there would be a fall in production in cereal grain sector and livestock sector. Overall, there is a small increase in India’s welfare to the tune of US

India’s Biodiesel Programme: Status, Prospects, and Shortcomings

360 millions. While India’s agricultural expands due to opening up of opportunities, soil degradation increases with increased use of land. To what extent, the above result would change if we incorporate land degradation feedback mechanism in our analysis? Our results indicates that agricultural trade liberalisation reduces land productivity, but the effects are weak to negate the benefits of India’s welfare from agricultural trade liberalisation.

Reference and Policy Scenarios of CGE Model

Even after launching biodiesel programme more than a decade ago, India is yet to achieve significant progress. This calls into question whether India has followed a flawed approach. This chapter argues that though basic policy approach is not flawed, India needs to tweak the policy environment for the success of the programme. The principal changes required are multi-feed feedstock approach, attractive incentive mechanism both at feedstock stage as well as biodiesel production stage, and R&D for increasing the yield from feedstock.