Extensive and Intensive Margins of Indias Exports Comparison.pdf

WP-2014-011 Extensive and Intensive Margins of Indias Exports: Comparison with China C Veeramani and Prachi Gupta Indira Gandhi Institute of Development Research, Mumbai March 2014 http://www.igidr.ac.in/pdf/publication/WP-2014-011.pdf Extensive and Intensive Margins of Indias Exports: Comparison with China C Veeramani and Prachi Gupta Indira Gandhi Institute of Development Research (IGIDR) General Arun Kumar Vaidya Marg Goregaon (E), Mumbai- 400065, INDIA Email (corresponding author): Veeramani@igidr.ac.in Abstract Should Indias export promotion policies be targeted at accelerating export growth at the extensive(new trading relationships) or at the intensive margin (increase in trade of existing relationships)? To help answer this question, we undertake a comparative study of exports from India and China by analysing the role of extensive and intensive margins in the export market penetration of the two countries during 1995-2011. We further decompose intensive margin into quantity and price margins. As far as extensive margin is concerned, our results show that the gap between the two countries is getting narrower as India is clearly catching up with China. By contrast, India lags significantly behind China in terms of intensive margin due to an abysmally low and stagnant quantity margin. Intensification, rather than diversification, has been the crucial driving force of Chinas export success. Indias exports of capital-int