A Study of Diversification in Exports of China and India

The paper presents a detailed comparative study of the evolution in the direction and composition of exports of China and India between 1993 and 2010. The changes in the direction of exports is analyzed through country/commodity intersection by grouping countries together on the basis of income of which there are eight groups, and changes in the composition of exports is examined by employing the Revealed comparative advantage index and decomposing the growth in exports in terms of Intensive (existing products) and Extensive margins (new products) following the methodology of Amiti and Freund (2007). To analyze the country/commodity intersection and to compute the RCA index, the exports are classified into 5 main groups/categories: Product A group: Primary Products, Product B group: Natural Resource Intensive Products, Product C group: Unskilled Labour Intensive Products, Product D group: Technology Intensive Products, and Product E group: Human Capital Intensive Products and Sectors not classified according to factor intensity. The main findings of the study are: i) High income OECD plus non- OECD countries had dominant but declining shares in all the five product categories of exports of China and India, ii) China’s comparative advantage has shifted from Unskilled labour intensive group to Technology intensive group, but India continues to have comparative advantage in exporting Primary and Unskilled labour intensive products and, iii) the growth in exports of China and India was mainly accounted for by high growth of Intensive margins rather than in Extensive margins.