India's Export Competitiveness With BIMSTEC Countries

India's Export Competitiveness With BIMSTEC Countries

DOI: 10.4018/978-1-7998-1730-7.ch008
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This chapter analyzes the export competitiveness of India against BIMSTEC countries. To identify the comparative advantage/disadvantage of India's exports with BIMSTEC countries, revealed comparative advantage (RCA) approach is used at HS 6-digit. It provides an understanding of challenges and opportunities that India's export sector faces as it becomes rapidly integrated into global markets. The study identifies those export categories in which India loses, gains, or maintains its comparative advantage with following the stages of comparative advantages. The study concludes that India's export sectors witnessed competitive positioning of some of its product, and these trends have not been uniform across all Industries. Rapid export growth of some sector does not imply that the sector is displaying high demand growth in BIMSTEC markets. In an ideal situation, there would be the emergence of an export structure that has a heavy concentration in those industries that exhibit high growth in the BIMSTEC market.
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Economic integration within regional trading blocs adds the significant value to economic growth, trade, and investment. Being a founder member of the Association of Southeast Asian Nations (ASEAN) and the largest member country in terms of population as well as territory, India despite being preoccupied with the idea of getting its partnership with ASEAN enhanced made efforts to live up to the expectation of its colleagues in the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) and to carry forward the BIMSTEC vision of mutually beneficial regional cooperation. In BIMSTEC region, mutual cooperation in various areas is more or less covered by India’s bilateral economic relations with other countries. It fosters the rate of economic growth by tapping regional synergies (Devi, 2007).

BIMSTEC is an international organization linking a cluster of nations in South Asia and Southeast Asia, including India, Thailand, Bangladesh, Myanmar, Sri Lanka, Bhutan, and Nepal. The Bay of Bengal is a bay that forms the north-eastern part of the Indian Ocean. It resembles a triangle bordered by India, Sri Lanka, Bhutan, Bangladesh, Myanmar, Thailand, Malaysia, and Indonesia. On June 6, 1997, a new sub-regional alliance was established in Bangkok and received the name BIST-EC (Bangladesh, India, Sri Lanka, and Thailand Economic Cooperation). Myanmar participated the foundational gathering as a spectator and joined the organization as a full member at the Special Ministerial conference held in Bangkok on December 22, 1997, upon which the name of the alliance was changed to BIMSTEC. This new organization was established with the objective to merge the “West Look” policy of Thailand and ASEAN with the “East Look” policy of India and South Asia. Therefore, BIMSTEC can be explained as association among ASEAN and South Asian Association for Regional Cooperation (SAARC) (Uperti, 2007).

It is generally recognized that trade is essential for growth and that growth is useful for economic development. The composition and volume of global trade has witnessed significant changes during the last two decades. Trade liberalization, rising income, and technological advancements have been the main determinants (Erokhin, 2016a, 2016b). Against the backdrop of a rapidly changing global export pattern, and the success of Southeast Asian economies, there is strong case for India to pursue an export-led growth strategy that ultimately leads to the improvement of economic conditions in a country. However, given India’s recent macroeconomic performance and its current export structure, such a turnaround would require major structural transformation of the economy and changes in its export specialization patterns.

Openness in trade and patterns of specialization are, however, interconnected variables (Mahmood, 2005). In the context of on-going multilateral trade negotiations, the study analyses the comparative advantage/disadvantage of India's exports with BIMSTEC countries, by using the revealed comparative advantage (RCA) approach at HS 6-digit. This is to provide a unique understanding of challenges and opportunities that India’s export sector faces, as it becomes rapidly integrated into global markets.

It is important to note that supply and demand-side conditions play a crucial role in changing the comparative advantage profile of a country. The objective of this study is to identify export categories, in which India is losing, gaining, or maintaining its comparative advantage with following the stages of comparative advantages given by Balassa (1965) and technological classification of products given by Lall (2000). The effort is also taken to examine the extent to which India’s leading export product lines have witnessed a shift in their comparative advantage away from traditional labor-intensive production to export of technology-based production activities. This insight is important to envision if past specialization patterns have witnessed any change, or if they have been reinforced over time due to internal and external forces. Specifically, the chapter investigates whether India has succeeded in moving from low value-added to technology-intensive high-value manufacturing with BIMSTEC countries. While identifying the dominance of certain sectors and a lack of shift in the revealed comparative advantage pattern of export structure provides a broad picture of country’s export competitiveness, it falls short of identifying industries that, though exhibit revealed comparative advantage, are under threat.

Key Terms in this Chapter

Globalization: The tendency of businesses, technologies, people or philosophies to spread throughout the world, or the process of making this happen.

Free Trade Agreement: A pact between two or more nations to reduce barriers to imports and exports among them. Under a free trade policy, goods and services can be bought and sold across international borders with little or no government tariffs, quotas, subsidies, or prohibitions to inhibit their exchange.

Revealed Comparative Advantage: An index used in international economics for calculating the relative advantage or disadvantage of a certain country in a certain class of goods or services as evidenced by trade flows.

Export Competitiveness: An ability of a country/region to export more in value-added than it imports.

Economic Integration: An arrangement among nations that typically includes the reduction or elimination of trade barriers and the coordination of monetary and fiscal policies.

BIMSTEC: An international organization of seven nations of South Asia and South East Asia, including Bangladesh, India, Myanmar, Sri Lanka, Thailand, Nepal, and Bhutan, the countries dependent on the Bay of Bengal.

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