India and China: Changing Patterns of Comparative Advantage?

Abstract

The present paper attempts a comparative analysis of the changing patterns of exports and specialization in India and China since 1980. Drawing upon the Chinese experience, the study throws some light on what needs to be done for accelerating India’s exports. The analysis shows that the fear of “Chinese invasion” of India’s export markets is only a popular myth. On a more general level, the analysis provides some insights into the patterns of resource reallocation under trade liberalization and its implications for the cost of adjustments. The analysis excludes the service sector exports and uses data on merchandise exports at the 3-digit level of SITC during the period 1980-2003. The data are taken from the various issues of the Handbook of Statistics brought out by UNCTAD. The rest of the paper is structured as follows. A brief overview of trade policy changes in India and China is provided in Section II. The impact of the policy changes on aggregate exports in both the countries is briefly discussed in Section III. The changing patterns of exports and comparative advantages in the two countries are analyzed in Section IV. Some concluding remarks and implications of the findings for policy are provided in Section V.