An Analysis of Export Pattern and Competitiveness of India-China in Global and Bilateral Market

In this paper we investigate the trend and composition of India-China trade in global and bilateral market. Applying Balassa RCA index, we find that there is a significant growth in products with respect to comparative advantage in the export basket of India and China. We also find a meaningful change in export structure of China from labour intensive to capital intensive products where India is lagging. In case of China the growth and changes in export structure became visible after accession to WTO while it has been observed post liberalisation in the case of India. The nature of change is found to be disruptive in China while gradual in India. India and China engage significantly more in inter-industry trade than intra-industry as lesser number of comparative advantage products are overlapping in their export baskets. The big gap between India’s export and import with China has become a challenge. Therefore, India needs to focus on high comparative advantageous products and convert it into bilateral market in order to reduce the trade gap without hurting bilateral trade growth.