List of Accepted Papers
_________________________________________________________________________________
Export
Performance of North East India: Few Empirical Issues Anindita Adhikary, Bedanta Bora
Department of Management Studies, Sikkim Manipal Institute
of Technology, East Sikkim
and
Sujit Sikidar, Department Of Commerce, Gauhati University
Welfare
Effect of Trade in Indian Context Tulika Kar University of North Bengal, Darjeeling,West
Bengal
and Anil Bhuimali University of North Bengal, Darjeeling,West
Bengal
And Madanmohan Ghosh
Economic Studies and Policy Analysis Division
Finance Canada, Ottawa
Export
Performance of North East India : Few
Empirical Issues Anindita Adhikary, Bedanta Bora
Department Of Management Studies
Sikkim Manipal Institute of Technology, East Sikkim
and Sujit Sikidar
Department Of Commerce
Gauhati University
India adopted economic policy reform
programme in the year 1991, which focused on liberalization,
openness, transparency and globalization. Since then
Indian economy is going through a transition phase where
restructuring of various sectors has taken place. The
era of globalization and liberalization has opened up
the economy of North East India (NEI) as well. NEI,
consisting of the states of Arunachal Pradesh, Assam,
Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura,
has a common border with foreign nations, namely, Bangladesh,
Bhutan, China, Myanmar and Nepal. NEI shares 2% of the
border with mainland of the country and 98% is linked
with international border. The region is endowed with
immense natural wealth, unique cultural heritage, magical
beauty and bewildering diversity. Thus, owing to its
richness in resources, NEI is a very significant part
of the country as far as trading is concerned. But in
spite of such richness, the potential for the region’s
exports has not been explored to the fullest extent
which calls for an introspection with regard to its
export performance. This study covers an empirical analysis
with special reference to NEI for a period beginning
from 1991-92 to 2005-06. The study examines (a) the
commodity composition of export trade from NEI; (b)
comparative advantage of NEI’s exports in the
international market and (c) export promotion measures
and their implication. A proper methodology has been
planned, keeping in mind the macro nature of the scope
of study. The study is based on secondary information
gathered from the Office of the Commissioner of Customs,
Shillong, Meghalaya; Government publications and records;
journals; magazines; internet and newspaper. In order
to testify the objectives, a few statistical tests have
been carried out namely cross tabulation, percentage,
measures of Revealed Comparative Advantage (RCA) and
Revealed Symmetric Comparative Advantage (RSCA). The
study reveals that NEI has major trade relationship
with Bangladesh and Myanmar. Apart from these two countries,
it exports to other countries like Bhutan, Germany,
Ireland, Japan, Kenya, Netherlands, Pakistan, Singapore,
Sri-Lanka, United Arab Emirates (UAE) and United Kingdom
(U.K.). Present export from this region by and large
consists of primary commodities to manufacturing products
like tea, minerals, spices, fresh fruits, agricultural
products, cement and other chemical and allied products.
Measures of relative competitive advantage reveal that
NEI has been competitive in exporting minerals and agricultural
and allied products. But it must vigorously take up
various measures, in consistent with export promotion
schemes, in order to have a further boost. Inadequate
infrastructural supports coupled with lack of sincere
efforts have been the immediate cause of major deterrent
in boosting trade. Findings reveal that the encouragement
of ‘Trade in goods and services’ holds out
an assured prosperity for the region which will, in
turn, assist in crystallizing the process of further
development. Hence, transforming market access opportunities
will permit to take advantage of untapped openings
abroad which has enormous potential to foster export
promotion.
Intra-Group Trade in the South: Story of a Lost Decade and Prophecy of yet-to-be Lost Decades
: Chukwuma Agu
African Institute for Applied Economics, Enugu
Uchenna Amaeze
Department of Economics, University of Nigeria, Nsukka
and Frank Amagwu
First City Monument Bank, Garden Avenue, Enugu
Even though the WTO encourages formation of regional integration arrangements,
there is evidence that intra-group trade among regional blocs, particularly since 1995
has been on the decline. This presents a unique challenge – formal endorsement of RTAs
alongside a behind-the-scene crowding out of the central reason for its existence –
improved intra-group trade. In this paper, we juxtapose what has been termed the
‘spaghetti bowl’ in Africa with evidence of downward trends in intra-group trade in many
developing regions, including Africa. The paper looks at some conceptual and practical
issues raised by this paradox with a view to raising debate in this area.
‘Full’
or ‘Fuller’ Capital Account Convertibility:
Is India on the Right Path?
Sankhanath Bandyopadhyay
Institute of Chartered Financial Analyst of India Business
School (ICFAI Business School), Kolkata
Regarding the issue of Capital Account
Convertibility (CAC), there are a number of theoretical
benefits and associated costs of CAC have been discussed
and empirically tested by several academicians. The
important point to note is that whether a country is
in a position to take advantage of CAC by maximizing
(or at least maintaining) the net benefit through CAC.
A pessimistic attitude may point to the East-Asian crisis,
the countries experienced associated stock market and
real estate boom and bullish financial market before
severe crisis. Whether India is ready to digest the
impact of CAC over the long run is a vital question.
Though India is in a much favorable position with strong
macroeconomic fundamentals, sound financial market,
huge FOREX reserves, and low external debt, still some
important anomalies are present which needs to be taken
care of before approaching towards full CAC. The timing
and sequencing should be carefully judged as the macroeconomic
conditions differ among countries and the benefits of
CAC are largely country specific.
India’s
Leather Export in a Globalized World: Quantity versus
Quality Sarmila Banerjee
Calcutta University
and Saswati Sanyal
Rammohan College, Calcutta
The Leather industry is enjoying the
status of a major foreign exchange earner in India nearly
over last thirty years. Source of this comparative advantage
lies in large raw material base, availability of cheap
labour and rich craftsmanship. Over the years the leather
industry has evolved from being exporter of raw materials
in the sixties to that of high value added finished
products by the turn of the century. In this paper an
analysis of both quantitative and qualitative performance
of different components of the leather industry is carried
out since 1991 to explore how the relaxation of tariff
and imposition of non-tariff barriers have influenced
the functioning of the industry. Emphasis is placed
on analyzing the effectiveness of domestic policy to
complement and supplement the global position through
creation of proper incentives to reap advantage of the
competitive World market. It is observed that since
the latter half of the nineties the share of leather
, both semi-finished and finished, in the export basket
has gone down significantly and that of leather goods,
saddler-harness and footwear have more than compensated
this loss. In value chain India has started concentrating
on high value, high quality leather and for the total
export of the sector the realization value has remained
always higher than that of the real exchange rate.
Modeling
and Forecasting Asymmetric Volatility in the Indian Capital Market
Chinmaya Behera
Department of Economics, University of Hyderabad
Volatility is the major concern, those
who involved in the financial market which also plays
a vital role in the process of economic growth and development.
The objective of this study is to examine volatility
in the Indian capital market and to empirically examine
the asymmetric behavior of the market volatility. The
sample data consist of daily closing price of Sensex
and S&P CNX Nifty index from 1st June, 2000 to 12th
August, 2008. The present study uses time series techniques
such as ARCH & GARCH to examine volatility and EGARCH
& GJR-GARCH to examine asymmetric behavior of the
market volatility. The empirical evidence suggests that
there exist volatility clustering in the Indian capital
market and also asymmetric behaviors are there in market
volatility. One-step-ahead forecast model has also been
formulated from above mentioned time series techniques.
FDI
and Technology Spillover: Evidence
across Indian Manufacturing Industries
Smruti Ranjan Behera
Department of Economics, Delhi School of Economics
The present paper tries to analyze
the spillover effect across Indian manufacturing industries.
It gives a narrative picture of the technology spillover
effect over the manufacturing industry due to the import
penetration effect of the foreign direct investment
(FDI). Foreign presence by way of FDI brings new channels
of technological spillover to the domestic firm/industry
in the form of efficiency and diffusion of knowledge
spillover in the long run. The analysis will try to
give a long run equilibrium relationship in form of
technology spillover effect across sixteen Indian manufacturing
industries. By estimating Pedroni cointegration and
FMOLS the paper will try give a broader idea regarding
the technology spillover in short run and long run dynamics.
In other way it also tries to give the determinant of
foreign direct investment (FDI) at the industry level
with respect to Indian manufacturing industries. In
fact, from the analysis it is clear that the market
size of the industry, high labor productivity of the
domestic firms/industry, low technological gap between
foreign and local firms, and high percentile for the
technology import intensity and R&D intensity of
the domestic/foreign firms can be acting as a determinant
for the foreign investor to invest foreign capital in
some of the Indian manufacturing industries.
Nonlinearity and Real Exchange Rates:
The Case of the Maghreb Countries
Mohamed Benbouziane
Economic Research Forum Associates, Cairo, Egypt
The main objective of this paper is to test the validity of
the purchasing power parity in the Maghreb countries (namely, Algeria, Morocco and Tunisia).
We apply the threshold autoregressive non-linear model (TAR) proposed by Caner and Hansen (2001).
First; a review of literature on PPP is presented, analysing its empirical validity and the
econometric techniques that have been applied. After that, and investigating for the joint hypothes
is of nonlinearity and non-stationarity in the exchange rate behaviour, the TAR model is presented
and used for the PPP in the Maghreb countries. The results indicate that the RER shows nonlinear behaviour.
Moreover, The Moroccan Tunisian (DH/DT) bilateral exchange rate is found to be highly persistent and follows
a random walk, whereas the two others (Algerian Moroccan and Algerian Tunisian bilateral real exchange rates)
are characterised by partial unit roots. This implies that PPP holds in one threshold regime but not in the other.
Corruption,
Private Investment and the Economic
Growth (Case Study, Iran)
Shahzad Broumand
Islamic Azad University, Mobarekeh Branch, Tehran, Iran
Mohammad Taghi Ziaei Bigdeli
Economic Research Institute, Tehran, Iran
Ebrahim Rezaei
Allameh University, Tehran, Iran
This paper is going to analyze the
effect of corruption on economic growth through it’s
effects on the level and composition of public expenditures
and/or private sector investment. The main point here
is that, the application of another method as to reveal
the corruption index. This method is based on the Principals
Components Analysis. After the calculation of the corruption
index through PCA, the relations between the variables
are assessed through OLS and WLS methods. The findings
show that the corruption has negative effect on economic
growth; moreover, there is strong relation between the
level of corruption and the level of private sector
investment and/or the size of the public sector in Iran.
Foreign
Financial Inflows in India and Domestic Credit Policy
Sharanjit S. Dhillon
Punjab School of Economics, Guru Nanak Dev University,
Amritsar
and Manjinder Kaur
P.G. Department of Commerce, Guru Gobind Singh Khalsa
College, Sarhali
This paper investigates reaction of
Indian credit policy to foreign financial inflows. For
this sterilization coefficient which measures degree
of independence of domestic credit policy is calculated
by analyzing monthly data on net foreign exchange assets,
net domestic assets, month end exchange rate of Indian
rupee in terms of US dollar, index for industrial production,
wholesale price index as endogenous variables and monthly
dummies as exogenous variables. The present study uses
the data for the period from May 1993 to December 2005.
The study found that value of ‘sterilization coefficient’
based on ‘vector error correction model’
implies only partial sterilization of domestic credit
policy to control adverse impact on domestic inflation
of foreign financial inflows. The study concludes that
credit policy is neither completely independent nor
fully sterilized from the impact of foreign financial
inflows. The study suggests that monetary authorities
should work out policies for reducing the adverse impact
of foreign financial inflows.
Case
for Compensatory Restrictions on National Treatment
in Services Trade: An Example from Indian Commercial
Banking
Joseph George
Indian Institute of Foreign Trade, New Delhi
Although the General Agreement on Trade
in Services (GATS) is a separate agreement from that
of the GATT, both encompasses certain common basic principles
and binding clauses like National Treatment, which oversee
differential treatment between foreign and domestic
producers/products within a host country. However, due
to the specific characteristics of services trade, particularly
with regard to the different modes of supply and trade-political
considerations surrounding services trade, the traditional
application of National Treatment clause has been modified
in the GATS. The result is arguably a more complicated
applicability of National Treatment than the GATT, with
much room for uncertainty with respect to the legal
consequences of commitments made. This may be observed
by examining specific cases like India’s trade
in banking services. Banking services forms an integral
part of Financial Services, which are singularly important
and actively negotiated amongst the types of services
considered under the domain of the GATS. As a signatory
to the Agreement, India has entered into certain National
Treatment commitments entailing banking services, holding
certain important implications for the entry and regulation
of foreign banks operating in India, subsequently concerning
her domestic commercial banking sector as a whole. This
is especially so because of an already significant foreign
presence in Indian commercial banking apart from a large
number of prospective entrants. This paper seeks to
examine certain aspects of the application of National
Treatment clause in the Agreement and to draw certain
implications with respect to India’s commercial
banking service sector.
Smooth
Transition Effects in Price Transmission: The Case of
the International Wheat Export Prices
Atanu Ghoshray
University of Bath, UK
This paper attempts to model the price
relationship between the major exporters of wheat.
The motivation of such research is to reveal whether
prices are integrated and whether potential nonlinearities
in price adjustment exist. Given the perception that
transactions costs may be highly variable in the wheat
market, the paper aims to test for the presence of cointegration
in the presence of smooth transition adjustment. The
results conclude that the further the prices deviate
from each other, the larger will be the arbitrage and
substitution that will drive the prices close to each
other. However, the results suggest that the arbitrage
will be limited as the various wheat prices employed
in this study may be linked to highly variable transactions
costs or some other form of imperfect competition.
Rules
of Origin in the India-Sri Lanka Free Trade Agreement:
Design and Implementation Issues
Sejuti Jha
Indian Institute of Foreign Trade, New Delhi
This study is placed in the context
of the recent debate on Rules of Origin (RoO) and their
effects in Free Trade Agreements (FTAs). Analysis of
India-Sri Lanka Free Trade Agreement RoO brings out
their high restrictiveness on a comparative scale to
other FTAs. Absence of supplementary rules in their
design seems to be the culprit, though such absence
renders them procedural simplicity. Such restrictiveness
will affect Sri Lankan exporters more due to the heavy
import dependence of the island-nation. On the implementation
side, this study details the circumvention of RoO in
case of copper exports from Sri Lanka. Hence, it emphasises
for more policy focus on proper enforcement of these
rules.
Market
Access and Productive Capacities Key to Growth - Study
of African LDCs
Anil Kumar Kanungo
Indian Institute of Foreign Trade, New Delhi
Last Hong Kong Ministerial and subsequent
WTO meetings have noticed increasing participation of
Least Developed Countries (LDCs) on issues of critical
importance. Their active participation in multilateral
fora indicated that these countries are today conscious
of their trading rights and want to attain a fair share
of world trade for their economic development, which
would help them in advancing their goal of poverty reduction.
Though some studies indicate that in 2004 and 2005 LDCs
as a group registered a better growth rate compared
to 1980s and 1990s, yet their share of world trade is
quite miniscule, hovering around 0.54 per cent (UNCTAD,
2006). What could then explain their poor performance
in international trade? Having embraced trade as a viable
alternative to promote growth for a significant period
since 1980s why haven’t they been able to better
off their share in world trade or not being able to
integrate with world economy?
The paper makes an attempt to analyze
and assess why their present share of world trade is
so negligible and what hinders them from improving their
world share. Answer to these two research questions
will be proved by analyzing data of UNCTAD, World Trade
Atlas, and also through analysis by doing a literature
survey. Its further research findings concludes that
two major determinants in the current scheme of global
economic integration, namely market access and productive
capacities play a dominant role in any economy to raise
its share in world trade and help them to improve their
economic development, which African LDCs seriously lack.
It suggests measures to improve these two key constituents.
While analyzing positioning of African
LDCs in world trade, it points out why Asian LDCs have
performed better than their counterparts in Africa and
what lessons African LDCs can learn from Asian success.
The paper further predicts that these lessons may come
handy for African LDCs to reconsider as the current
global economic slowdown engineered by increasing prices
for oil, minerals, and primary commodities in Africa
will lead to a further decline in demand that is likely
to create adverse impact on growth prospects of African
LDCs. On the other hand, the paper suggests, increased
demand for low-skilled, labour-intensive manufactures
and IT services in Asian LDCs will boost growth prospects
of Asian LDCs.
Lastly, it evaluates the policy options
which may prove useful in attaining African LDCs’
immediate and long-term goals.
Anil Bhuimali
University of North Bengal
Darjeeling,West Bengal
Any country in the world produces goods
and services especially to feed its citizens. If there
is any surplus amount left after consumption that must
be exported abroad with a view to earning foreign exchanges.
It is a well-known fact that trade does have both positive
and negative effects on the trading nations. The present
paper analyses, with supportive data, the trade effect
of growth in a developing economy like India in the
context of new global order.
International
Competitiveness of Textile and Apparel Exports of India
in the Changing Global Context
Mausumi Kar
Women’s Christian College, Kolkata
The Textile and Clothing sector is
the largest industrial sector of modern India as well
as the largest net foreign exchange earner of the country.
In spite of that, India’s share in world exports
of textile and apparel is too low as compared to that
of other nations, specifically, the Asian Giants. In
fact, the overall picture of the textile and apparel
trade in India is one of great potential but under-performance.
This potential is particularly important in light of
the liberalization in textiles and apparel trade foreseen
under the Uruguay Round agreement of GATT negotiations,
as well as ambitious export-led growth and liberalization
programs undertaken by the Indian government since 1991.
The abolition of the MFA quotas creates
opportunities for developing countries, but also exposes
them to additional competition from other, formerly
restrained, exporters. The outcome for any individual
country therefore, depends heavily on its policy response.
Countries that take the opportunity to streamline their
policies, and improve their competitiveness, are likely
to increase their gains from quota abolition. This study
attempts to treat rigorously the issue of India’s
competitiveness of textile and apparel exports vis-à-vis
its major Asian competitors in major regional markets
of the world using Constant Market Share analysis, before
and after liberalization of MFA quota, separately, in
two phases. Then we have tried to compare the entire
situation by observing whether there exists any structural
break in the values of exports of these Asian countries
to the major regional markets of the world over the
entire period of our study especially between the decades
of Pre-WTO and Post -WTO. The analysis of structural
break has been carried out with the help of CUSUM and
CUSUM of Squares Test.
We have got quite an interesting result
from the entire exercise presented in this paper. India’s
share declines if we compare the two extreme years of
the entire time period along with some other competitors.
China and Bangladesh are the two real beneficiaries
of the entire dismantling process whose shares of exports
go up at the cost of Pakistan, Indonesia, Malaysia and
Thailand. Our study concludes that if India does not
pay adequate attention to make its exportables more
competitive vis-à-vis others, both on price and
quality aspects, the free market in international textile
trade will not permit India to remain as a distinguished
exporter. On the other hand, China and Bangladesh have
the potential to extract the growing market share in
the competitive scenario by exploitation of their huge
resources of manpower, raw material and improved production
techniques to satisfy the enhanced global need.
The
international trade policies in the context of néo-liberal
globalization: which prospects for
the countries of the South ?
Boutaleb Kouider
and
Chaib Baghdad
Sciences Economiques et de Gestion
Université de Tlemcen
Algérie
The problem of the efficient international
trade policies were undoubtedly never posed with as
much acuity for the developing countries, more particularly
in Africa, than in the new context generated by the
phenomenon of globalization with its procession of consequences
unprecendtly in the economic history.
From where need for essentially revisiting
the involved theses on the stakes (industrial and trade)
of globalization, to especially locate the dangers which
it is carrying in reference to multiform imbalances
which affect the nations and the dubious future the
poorest countries whose populations are more than ever
victims of process of exclusion
If globalization described, indeed, the constitution
of “ an international system which tends towards
unification of its rules, its values, its objectives
while claiming to integrate in its centre the
whole of humanity” (1), it does not remain
about it less carrying serious consequences when it
functions with exclusion which is transformed
more and more into dramatic distances of weakest and
poorer “in a world which, paradoxically, while
opening, is locked up on its acquired selfishness and
its interests”.
The apprehension of the development
in this new context is based, in accordance with the
neoliberal philosophy, on an approach centered primarily
on the opening of the economies, in the broadest sense
of the term, by the means of the deregulation and of
the generalization of the processes of exchanges which
present the cardinal virtue as claimed to convey progress
by competition and competitiveness.
This postulate is however shaken, many
works (2) started a long ago already to call it into
question in the light of undeniable facts, as we will
try to show it in this modest contribution coming back
on the conceptions and the instruments which are in
the heart of the trade policies in the context
of globalization. In this sense, we will approach
successively:
1. In the first part, bases of the practices of the
international trade in the context of globalization.
(Expression of the trade policies of the industrials
countries in the context of globalization and the forms
of imposed regulation)
2. In the second one, the position of the developing
countries in the process of the exchanges (In particular
the place of the African continent in the international
trade)
3. In a third part, problems of rehabilitation of the
trade policies founded on other perceptions and conceptions
Foreign
Institutional Investment in India and Macroeconomic
Aggregates
Manjinder Kaur
P.G. Department of Commerce, Guru Gobind Singh Khalsa
College
and
Sharanjit S. Dhillon
Punjab School of Economics, Guru Nanak Dev University,
Amritsar
The study aims at exploring the impact
of foreign institutional investment in India on macro-economic
stability. For this, nature of causal relation between
FIIs investment on the one hand and selected macro economic
indicators i.e., sensex, money supply, index for industrial
production and wholesale price index has been analysed
by applying Toda & Yamamoto (1995) long-run Granger
non-causality test. The study found that there exist
inter-linkages between foreign institutional investment
and selected domestic economic fundamentals. Furthermore,
there is (a) bi-directional causality between FIIs investment
and Sensex (b) bi-directional causality between money
supply and FIIs (c) bi-directional causality between
index for industrial production and FIIs. (d) Uni-directional
causality from wholesale price index to FIIs investment.
Thus, on the basis of empirical analysis study concludes
that there is a two-way positive relationship between
most of the domestic economic fundamentals and flow
of FII investment to India. Further, weak economic fundamentals
will lead to withdrawal of FIIs investment from Indian
stock market, which may result in financial crisis in
India by adversely affecting various macroeconomic aggregates.
Trade
flows and Cross-border transport Infrastructure in
the Greater Mekong Sub region: The Impactof
the North-South Economic Corridor on Lao PDR
Jens Krüger
Kiel Institute for the World Economy, Germany
The Asian Development Bank (ADB) launched
a regional cooperation initiative in the Greater Mekong
Subregion1 (GMS) in 1992. One of the main objectives
that were identified by ADB is to enable the free flow
of goods between the GMS member countries.
To do so, several Economic Corridors
were identified. One of them is the North-South Economic
Corridor that links Yunnan Province of People’s
Republic of China (PRC) with Bangkok via Lao People’s
Democratic Republic (PDR).
Taking this as a background, this paper
focuses on ADB’s activities in the GMS and examines
the impacts of cross-border transport infrastructure
in the GMS and in Lao PDR in particular by analyzing
a cross-section time-series data set as well as data
that was obtained from the Lao Expenditure and Consumption
Survey (village level of Lao PDR). Insights obtained
during a field trip that was undertaken in December
2007 complement the quantitative findings.
Examining the impacts on a low developed
and sparsely populated transition country (Lao PDR)
is interesting as literature predicts that small countries
will benefit less than larger ones from integration
efforts such as improved cross-border transport infrastructure
(Helleiner, 1996, 759). Therefore, the main hypothesis
that is tested is that only PRC and Thailand have benefitted
from an improvement of CBTI.
The empirical results reveal several
remarkable findings. First, by analyzing a crosssection
time-series data of the GMS from 1980 to 2005 it is
shown that improved crossborder transport infrastructure
leads to reduced bilateral trade flows in the GMS. Second,
the analysis of data obtained from the Lao Expenditure
and Consumptions Survey provides evidence that access
to markets or cross-border transport infrastructure
does not necessarily lead to lower prices for products
due to the monopsony power that is exploited by the
(foreign) traders.
Hence, the empirical findings support
the hypothesis that mainly PRC and Thailand benefitted
from the improved cross-border transport infrastructure
which was part o fteh regional cooperation initiative.
This means that a regional cooperation strategy needs
to be developed that takes into account that costs and
benefits are unequally distributed amongst GMS member
countries and also may change over time.
Pricing
to Market in Indian Exports: The Role of MarketHeterogeneity and Product Differentiation
Sushanta Mallick
and Helena Marques
Queen Mary, University of London, UK University of Manchester,
UK
This paper studies the pricing to market
(PTM) behaviour of Indian exporters during the economic
reforms period (1992-2005). A PTM model has been estimated
using panel data at the four-digit level of classification
for the G3 and three emerging markets (Brazil, China
and South Africa), distinguishing also homogeneous from
differentiated goods. Overall, we observe that there
is clear evidence of incomplete exchange rate passthrough
(ERPT) to buyers’ currency prices. This degree
of ERPT is net of changes in the level of protection
faced by India’s exporters (import tariffs in
destination markets), inflation and openness in the
export destination market, a macroeconomic policy index
partly reflecting changes in exporter’s costs,
the share of the exporter in the destination market
and the share of the product in the exporter’s
total exports. When distinguishing between G3 and emerging
markets, the empirical results indicate that Indian
firms do practice PTM and have some pricing power in
G3 markets, but they fully pass-through the exchange
rate changes in emerging markets. On the contrary, Indian
exporters seem to be taking advantage of trade liberalisation
in destination markets by marginally increasing the
exporter currency prices into emerging markets but not
into the G3. We also find a similar impact of trade
liberalisation in the case of differentiated goods.
Indian
IT Industry: A Firm Level Analysis Using DEA & Malmquist
Index
Somesh K. Mathur
RIS, New Delhi
The present paper analyzes the performances
of the Indian IT industry by working out the technical
efficiency of the software and telecommunication firms
using the mathematical model of the Data Envelopment
Analysis (DEA). The DEA is a non linear programming
way of calculating technical efficiency of the decision
making units. The study also examines the impact of
various determinants on technical efficiency of software
firms & net exports across the IT firms and further
examines the determinants for new technology adoption
by telecommunication industries because the success
of the software firms in
terms of its exports is
intertwined with the performance of telecommunication
industry. The study uses a Malmquist index to estimate
total factor productivity (TFP) change for common set
of software firms existing between 1996 and 2006 using
prowess data base. The total factor productivity is
decomposed into efficiency change (catching up phenomena)
and technical change (innovations) for the common set
of software firms existing between 1996 and 2006 in
India. At the end the study works out the performance
of the Indian ICT sector in comparison with countries
which are front runners using the DEA and global
information technology report,2006 data base. The study
will quantify the changes needed in the relatively good
Indian ICT environment and ICT readiness indices to
increase its ICT usage among individuals, business and
government.
The paper confirms the improvements in productivity,
efficiency change and technical change of the Indian
Software industry from 1996 to 2006.
Volatility
across India and Some Developed and Emerging Equity
Markets: An Exploration
Paramita Mukherjee
ICFAI Business School, Kolkata
The opening up of financial markets in India has
led to significant transformation in the financial
sector. Particularly, the capital market witnessed
a considerable development and it has become more
integrated with international stock markets. The general
concern that emerged with such development is the
increased volatility of equity returns. This paper
explores the relation between the Indian equity market
volatility and volatility in some other developed
and emerging markets, with which there exists significant
co-movement of the Indian equity market in terms of
returns. This study includes countries like US, UK,
Japan as well as emerging markets such as Hong Kong,
Singapore and Korea and examines whether volatility
transmission takes place between these markets and
Indian equity market. BSE Sensex is taken as representative
of the Indian market. Based on a daily data set for
more than one year, this paper takes a non-traditional
approach in explaining volatility effect. It analyses
such association in terms of volatility by simplistic
methods such as regression, granger causality and
estimation of vector auto regression (VAR) model.
These are applied on constructed rolling sample series
on volatility for two different windows, viz. 7-day
and 15-day. The findings are quite interesting as
it provides good insights for policy makers in this
context. First, the return volatilities in
the US, UK, Japan and HongKong have a definite effect
on return volatility in India. This is evident from
the regression, granger causality as well as VAR estimation.
Second, the VAR suggests that Singapore also
has some impact on India. But the most interesting
finding is obtained from the granger causality tests.
These indicate that volatility in the Indian market
is not only affected by market leaders like US, UK
or Japan, it, in turn, also affects volatility in
markets like Japan and Hong Kong. Given the fact that
Japan is the leader and has a unique role in the integration
of Asian markets, evidence of volatility transmission
from India to Japan (as well as Hong Kong) seems to
be a finding that indicates the possibility that India
might also have a role in the integration of Asian
markets in future.
Openness,
Capital Flows and Nigeria’s Economic Growth: The
Empirical Evidence
H.E. Oaikhenan
Department of Economics And Statistics
University of Benin
Nigeria
The paper examines, empirically, the
impact of openness and capital flows on Nigeria’s
economic growth, using co-integration and error correction
techniques and the 1989-2004 sample period. The empirical
results show that the short-run impact of trade openness
and index of average world prices on Nigeria’s
economic growth were positive and significant. While
it finds the impact of private foreign capital inflows
on the country’s growth to be negative, that of
private capital outflow was found to be positive. These
counter-intuitive findings could be explained by the
dominant nature of volatile short term capital when
compared with the share of long term, development-targeted
capital in the country’s total capital flows.
These findings underscore the need for policy makers
to articulate and implement policies that are aimed
at regulating the nature and composition of capital
inflow in favour of long-term development-oriented capital.
This, in turn implies the need to create an investment-friendly
environment that is attractive to long term capital
inflow.
Monetary-Fiscal
Policy Interactions to Extract Optimal
Weights for Monetary Policy Design in EMU
Mehdi Pedram
Alzahra University, Tehran, Iran
This paper employs a simple delegation model of a
single monetary policy. By using a “weighted
mean mechanism”, the equilibrium is associated
with a single monetary policy, considering the viewpoints
of each council member by employing a suitable weight
that corresponds to his national data and preferences.
The results show that Euro system needs to take account
of the problems of asymmetry and the interaction between
fiscal and monetary policies to make suitable weight
for the point of view of each country about the monetary
policy to improve the quality of monetary policy.
Exchange Rate Pass-through and Import Prices:
A Sector-wise Analysis for India
Pradyut Kumar Pyne
Indian Institute of Foreign Trade, Kolkata
and Saikat Sinha Roy
Jadavpur University
The study investigates into the degree of exchange rate pass-through to prices of
non-oil imports in India during reforms. Exchange rate pass-through (ERPT) is the responsiveness of
trade prices (expressed in local currency) to unit change in exchange rate. ERPT is complete if there
is a proportional change in prices on account of a unit change in exchange rate and is incomplete if
the change in price is less than proportional. Theoretically, depreciation of home currency leads to
an increase in import prices in terms of home currency. Currency depreciation thus reduces the domestic
demand for imports and results in lowering of exporters’ market share. In order to maintain the existing
market shares, especially in the short run, exporters adjust their mark-ups. This explains why exchange
rate movements often do not bring about proportional change in import prices and pass-through is incomplete.
Existing empirical literature on the subject provides evidence on incomplete pass-through to import prices.
Even though most of these studies have sound theoretical basis, their empirical estimates are necessarily
weak based on single equation models. In this study, in sharp contrast, a simultaneous equation model
incorporating both demand and supply sides is set up for estimation. Food and food products, crude materials,
chemical and chemical products, manufacture of metals, machineries and some miscellaneous product groups are
studied. The empirical results, which are robust, show incomplete exchange rate pass-through to import prices
in India. The degree of pass-through is found to vary across commodity groups, the coefficient is found to be
insignificant in case of most import sub-sectors with the only exception of chemicals.
Causes
of Export Instability of Agricultural Exports In India
In The New Economic Environment
Geetha R. and V.C. Mathur
Division of Agricultural Economics, IARI, New Delhi
Indian agricultural trade has been
in the limelight ever since the economy was liberalized
in the early years of the last decade. In India, major
share of export earning is mostly concentrated on few
commodities and from a couple of nations. There are
various variables which causes export instability in
agriculture in India. The present paper is an attempt
to analyze whether commodity concentration and geographic
concentration index of India’s agricultural exports
and instability in agricultural GDP causes export instability
in India by using OLS method of regression analysis.
From this study it can be concluded that commodity concentration
index and agricultural GDP are reasonable explanatory
variables which causes agricultural export instability
in India.
Export-Led Growth in India –
Verification through Cointegration and Causality Process
N. C. Pradhan
Financial Markets Department, Reserve Bank of India, Mumbai
The export led growth (ELG) hypothesis for India is tested with the data at aggregate level covering post-liberalisation period. Study presents a test of the ELG hypothesis by adopting co-integration hypothesis (Johansen method) for the case of India. Following hypotheses are tested: (i) whether exports, imports and GDP are cointegrated, (ii) whether export growth Granger causes GDP growth, and (iii) and whether export growth Granger causes investment. The finding strengthens the argument against the ELG hypothesis for the case of India and strengthens the argument that inspite of reforms, it still retains some characteristics of an import substituting economy. Since aggregate export data for India includes sectors, such as, software exports, the euphoria about perceived successes in the ICT (information and communication technology) sector for India seem somewhat premature, given that at an aggregated level there is little evidence to support the export led growth hypothesis, which brings into doubt the implicitly assumed productivity differentials and resulting positive spillovers into the rest of the economy.
Analyzing
the Foreign Direct Investment (FDI) -Export nexus in
Developing Asia: An Unbalanced Dynamic Panel VAR approach
Gulasekaran Rajaguru
Faculty of Business, Technology and Sustainable Development
Bond University, Australia
and
Sadhana Srivastava
School of Economics
AUT Business School
Auckland, New Zealand
From an empirical point of view, the
connection between FDI and exports at best is described
as being “ambiguous”, suggesting mixed assessment
regarding FDI to act as a substitute or complement for
host country’s exports. This paper therefore empirically
analyzes the FDI-exports relationship for the developing
Asian economies.
Compared to most of the other developing
countries in Asia which opened up much earlier to international
trade and direct investment flows, viz. ASEAN, China
and the Asian NIEs, the Indian economy has been involved
actively in attracting FDI inflows as a part of its
economic reforms undertaken only from July 1991. The
study therefore covers the rapidly growing Asian countries
viz. NIC-3 (Hong Kong, Korea, Taiwan), ASEAN-5 (Indonesia,
Malaysia, Philippines, Singapore, and Thailand) and
two major emerging economies in Asia, viz. China and
India, both of which are expected to be among the leading
economies in the world in the coming years.
The paper uses an unbalanced dynamic
panel VAR approach for examining this relationship,
since it enables us to examine the inter linkages between
the variables of interest as opposed to the single equation
dynamic autoregressive distributed lag models that explains
the relationship in one direction. The panel vector
autoregression analysis reveals interesting dynamic
links between exports and foreign direct investment.
The result suggests that there is a
unidirectional complementary causality running from
FDI to exports across the emerging developing economies
in Asia under study, including the Indian economy, notwithstanding
the fact that Indian FDI data is underestimated by international
standards compared to most of the other countries. This
is in line with the fact that most of these economies
have relied heavily on inward foreign investment to
acquire advanced technology and capital.
Trade
Liberalization, Process Innovation and Welfare
Soma Roy
Dum Dum Motijheel College
and
Rajat Acharyya
Jadavpur University
The paper compares the size of domestic
innovation and domestic welfare under two different
trade policy regimes, protection and liberalization.
In protection a domestic firm has monopoly in its industry
and it incurs certain amount of process innovation which
is positively related with its R&D efficiency. Under
liberalization (mainly tariff reduction) a foreign firm
enters and competes with the domestic firm. We show
that in the initial stages of liberalization domestic
firm’s innovation level increases with successive
tariff reduction and by this way even a small innovation
may deter the entry of cost efficient foreign firm.
The firm may achieve maximum innovation also which is
not possible under protection. As liberalization proceeds
further we find just the opposite results. More precisely,
for sufficiently low R&D efficiencies, the innovation
level declines gradually as larger and larger tariff
cuts are implemented. For intermediate and high R&D
efficiencies the domestic firm continues to do the maximum
feasible innovation to some extent and then ultimately
it declines. Thus under partial liberalization (if tariff
rate is moderate) domestic firm’s innovation is
more than that in protection regime. If tariff reduction
is large innovation falls below the autarchic level.
We get the similar trend of domestic welfare
though consumers surplus will increase monotonically
with reduction in tariff. Policy implication that follows
is partial liberalization is the best trade policy to
encourage domestic innovation and to raise domestic
welfare.
Preferential
Trading in ASEAN: Implications for Asian Economic Integration
Rahul Sen
School of Economics, AUT Business School, New Zealand
The phenomenon of proliferation of
preferential trade agreements, bilaterally and regionally,
was particularly more pronounced both in the aftermath
of the regional financial and economic crisis that affected
East Asia in 1997-98 and in the inability of the WTO
to yield any substantial outcome to improve growth prospects
of the Asian economies. The importance of this “New
Regionalism” in shaping up an Asian economic integration
is being significantly debated in the wake of the first
ever East Asian Summit (EAS) in Kuala Lumpur in December
2005, wherein the ten-member The Association of Southeast
Asian Nations (ASEAN) grouping, China, India, Japan,
Korea, Australia and New Zealand, in part recognized
the need to create an Asia-wide economic community.
There has also been a recent proposal by Japan to create
a Comprehensive Economic Partnership in East Asia (CEPEA),
comprising of all the 16 participants at the EAS. It
has been argued that an Asia-wide regional grouping
would provide substantial welfare gains to Asia, and
to the rest of the world. With ASEAN entering into FTA
negotiations with each of the EAS members, its role
in regional economic cooperation efforts assumes significance.
This paper analyzes the implications
of ASEAN’s ongoing FTAs and examines its role
in fostering deeper economic integration within ASEAN
and in Asia. It analyzes the evolution and characteristics
of FTA proliferation in ASEAN, identifying major trends.
The paper argues that in its present state, there are
valid concerns that if not properly designed and managed
these FTAs could end up instead being a stumbling block
towards integration efforts. Implementation integrity
among FTA members therefore remains a key to its success,
and that empirical and policy research needs to be much
more forthcoming in this area in order to fully understand
the economic ramifications of these FTAs.
Finance-Openness
Nexus and Financial Institutions: A Case of Pakistan
Muhammad Shahbaz
and
Naveed Aamir Social Policy and Development Centre (SPDC),
Pakistan
There is scantiness of empirical research
on the specific relationship between financial institutions,
capital account liberalization and trade-openness but
there is no particular study in the case of Pakistan.
This study investigates the importance of financial
institutions, net financial capital inflows and trade-openness
for financial sector’s development in a small
developing economy like Pakistan. Further, it also examines
the hypothesis (Zingales and Rajan, 2003), predicts
combined influence of capital account liberalization
and trade openness on financial sector’s efficiency
but insignificant. We employed three approaches
(Johansen test, DOLS and ARDL bound testing) for the
robustness of long run relationships among the variables
utilizing the annual data for the period 1971-2006.
We found that, under the investigation of three new
alternative techniques, results are robust for long
run relationships in the case of Pakistan.
Coefficient of net capital inflows
is having positive impact on financial development in
the long run but insignificant in short run. Trade openness
is the main source of financial sector’s development
both in long run as well as in short run. On the other
hand, financial institutions and economic growth also
help to improve the development of financial markets
in both the periods. Finally, rise in inflation reduces
the efficiency of financial markets through its detrimental
channels in the economy in short run as well in long
run.
This paper investigates the social
interactions performed by immigrants in France. A theoretical
framework for immigrant’s location choice is derived
from recent studies on nonmarket interactions which
allows to explain how migrants concentrate. Applying
data on the distribution of immigrants in 21 French
regions the social interactions are subsequently estimated.
This “social component” of migration is
then tested on international trade and provides a direct
measure of the impact of social networks on the economy.
Enhancing
Indian Tiger Prawn Exports: A Branding Approach
Jitarani Udgata
Indian Institute of Foreign Trade, New Delhi Ruppal Walia Sharma
Indian Institute of Foreign Trade, New Delhi
and Sudhi Ranjan Dash
IMS, New Delhi
The present study focuses on the issue
of sustaining market share and increasing UVR of the
Indian black tiger prawns in the export market.
The Indian seafood industry is one of the most important
segments of Indian economy in terms of output, foreign
exchange earnings and employment generation. Contribution
of fisheries to Indian GDP is about 1.3 % (2006-07)
which forms about 5.2 % of the agricultural GDP. There
is a good demand of Indian sea foods, particularly of
the Indian tiger prawns. But a detailed analysis shows
that even though Indian exporters seem a satisfied lot
today there are danger signals for the future. This
year the export of prawns from India decreased from
65% to 52%. India’s UVR is also low compared to
that of countries like Vietnam, USA and Singapore. Challenges
like lack of value addition, lack of technological skills
and facilities and concern over hygienic standards can
create a threat for Indian exports. Another threat is
that of increasing penetration of lower priced cultured,
white vannamei prawns.
This paper analyzes the current scenario
of Indian tiger prawns exports, along with a study of
competitor shares and practices. The insights arising
from the detailed analysis, have been used to develop
a branding strategy for enhancing UVR and market share
of Indian black tiger prawn exports.
The analysis has been done, based on
two types of data i.e.secodary data and primary data:
Secondary data: secondary sources accessed include MPEDA(July
2008), WITS COMTRADE(June 2006), Prowess(July 2008)
database,FAO May 2008).
Primary data: The primary data has been taken from the
Mumbai based marine prawn expoters and officers of MPEDA.
A qualitative, in depth, exploratoty approach was adopted.
Methodology used was a structured questionnaire along
with telephonic discussions. Besides MPEDA officials
reponses were received from ten exporters of Indian
tiger prawn. Judgement sampling was used to select exporters
who have considerable experinece and presence in more
than one country. This data was collected to assess
the strengths, weaknesses and problems of Indian exports.
A Study of Exchange Rates in Thailand: With Special Reference to The Southeast Asian Currency Crisis
Sukhada Waknis
Dr. V N Bedekar Institute of Research and Management Studies,
Maharashtra
Among the several economic crises that took place across the globe in the decade of 1990s, the South East Asian crisis which occurred in the summer of 1997 is an important economic crisis, which took toll of major economies of the region. Even before the summer of 1997, there had been doubts about the sustainability of certain economic policies followed by the South East Asian countries. One such important policy that came under the scrutiny was the policy of unofficially fixing their exchange rates to the US dollar. After an intense period of speculation in foreign exchange markets, the Thai baht was devalued in July 1997. There were subsequent devaluations in Malaysia, South Korea, Philippines, Indonesia, Taiwan and Singapore. The maintenance of such pegs was widespread in much of East Asia, and so too were the problems that went with such a system. The difficulty was that over the years, the residents of these countries had found it advantageous to borrow US dollars rather than their own currency. This was because the dollar interest rates were lower than those of the baht, rupiah or peso.
The exchange rate regime is one of the central choices of the economic policy. However, the debate over fixed-versus-floating systems has often been muddied by the recommendations of the International Monetary Fund (IMF), which have shifted according to circumstances. In recent years, there has been a trend wherein the countries abandon their soft-peg exchange rate regimes. Since the Asian crisis of 1997-98, soft-pegs are no more considered viable. The de facto pegging regimes of Southeast Asia shifted to flexible exchange rate regimes in the wake of the crisis and under IMF pressure. The currencies of South East Asian countries (initially the Thai baht) had become over-valued because they were tied to a strongly appreciating dollar.
This is analytical paper, which attempts to analyze the trends in exchange rate of baht vis-à-vis other Southeast Asian currencies viz. Philippine peso, Malaysian ringgit, South Korean won, Indonesian rupiah. The exchange rate of baht over a period of 16 years i.e. from 1991 till 2006, i.e. to pre-crisis and post crisis has been studied. The paper seeks to understand the exchange rate regimes in Thailand in particular and other crisis affected economies in general and to plot graphically the trends in the exchange rates and analyze the macroeconomic fundamentals that affected these exchange rates. A 'Regression Analysis' was run on the data for 16 years using SPSS package. The interpretation of the results of the statistical analysis states that exchange rate, which was taken as the dependent variable has positive relationship with imports, current account, portfolio investments, money supply and negative relationship with international reserves, short-term debt , gross domestic investment, exports and FDI. R2 is 0.95, which means that it is significant.
The elasticity of the Thai baht and the device for meeting the exigencies at the time of crisis is also studied. The exchange rate regimes in Thailand in particular and other South East Asian countries in general both pre and post crisis have been analyzed in this paper.
Regional Trade and International Production Networks: The Context of Automobile Industry in Asia
Debdeep De
Institute for International Management and Technology , Gurgaon
The dynamics of regional development has moved on in analyzing the complex relationship in the changing international production networks. Regional integration in these days is not only limited in the formation of regional trade agreements and free trade agreements which has emerged in facilitating the economic cooperation with the stagnation in WTO but also a complex strategic coupling of those economic factors linking the industries operating in specific regions to their counterparts orchestrating production networks on a global basis. Development of automotive industry, covering automobile vehicle and component manufacturing, is usually in the interest of policymakers in developing Asian countries. Promotion of the automotive industry can lead to the expansion of numerous complementary investments by auto parts firms, thereby laying down the basis for broad-based industrial growth. With the increased global competition and emergence of Asia as the regional automo bile hub there is a need for understanding the industry dynamics in the context of international production networks built on this regional frame. Policy domain is conducive to maintain economic and policy environment in the entire region as well as to strengthen absorptive capability of indigenous manufacturers in regional trajectories. Thus the present paper tries to identify the linkages in the production networks and the trade agreements in the context of automobile industry. The key issue is how the growing formal trade agreements influence the international production networks which had been established and working relatively perfectly in the region. The paper analyses the intraregional trade in the automobile industry in Asia which is essentially empirical in design but the empirical analysis is carried out in the context of the existing literature. The paper concludes with the fact that regionalism can in fact trigger the formation of the networks thus facilitating the regiona l industrial growth.
An India-China FTA: Potential Economic Implications for the
Asian and the North American Economies
Manmohan Agarwal
Centre for International Governance Innovation (CIGI),
Waterloo, Canada
and
Madanmohan Ghosh
Economic Studies and Policy Analysis Division Finance Canada, Ottawa
In a recent visit to India the Chinese president Hu Jintao proposed closer economic relation between China and India, possibly a China-India free trade area. These two economies have been experiencing very rapid growth during the last couple of decades and more recently trade between them has grown spectacularly. This initiative, consequently, has special significance for bilateral trade and the multilateral trading system. This paper analyzes the implications of a possible India-China free trade area (FTA) on trade flows, real output and investment both at the aggregate and industry levels in India, China, rest of Asia, North American and European economies using a multi-sector, multi-region dynamic computable general equilibrium (CGE) model. The model is calibrated to the GTAP Database (version 6, 2001). Our simulation results suggest that the overall economic gains to India and China would be modest. The distribution of the economic gains, however, depends on the speed of elimination of the bilateral tariffs. China gains more if the tariffs are eliminated immediately, whereas India gains more if elimination of tariffs is staggered. India’s exports to China could expand by almost 60%, while imports from China could increase by over 240% implying an increased bilateral trade deficit. Output in each sector in India would increase. Sectors such as clothing, leather, textiles and motor vehicles and parts would gain the most in India.
