India’s Merchandise Exports to Asia: A Constant Market Share Analysis

Published date01 May 2022
Date01 May 2022
Subject MatterOriginal Articles
India’s Merchandise
Exports to Asia: A
Constant Market Share
Mohd Fayaz1 and Sandeep Kaur1
The present study attempts to examine the structural changes in Indian mer-
chandise exports to Asia during the period 1980–2016 by using Constant Market
Share (CMS) analysis. The index values of the CMS analysis suggest that India
has mostly maintained and strengthened its export market share primarily in
resource-based and low tech/labour-intensive products. Major technology-inten-
sive exports include organic chemicals and dyes and colouring materials to all its
export destinations in Asia. The market effect result shows a positive impact on
India’s export performance which suggests that India has diversified its exports
to South Asia, Southeast Asia and West and Central Asia. However, market adap-
tation effect result shows negative impact in East Asian market which means that
India is lacking in adapting the import structure of this market.
JEL Codes: F1, F14, F43, L6, O53
Exports, Technology, India, Asia
Globalisation has contributed to development in many countries and led to notable
improvements in global output and dramatic changes in the world trade. Between
1950 and 1980, trade was mainly dominated by high-income countries (North-
North trade) (De, 2006). There were two key reasons for this development; first,
Original Article
1 Department of Economic Studies, Central University of Punjab, Bathinda, India.
Corresponding author:
Sandeep Kaur, Department of Economic Studies, Central University of Punjab, Bathinda, Punjab
151 001, India.
Foreign Trade Review
57(2) 178–197, 2022
© 2022 Indian Institute of
Foreign Trade
Reprints and permissions:
DOI: 10.1177/00157325211072923
Fayaz and Kaur 179
developed countries accounted for the largest chunk of global GDP and secondly,
developing countries had put in place stringent import restrictions (Krueger, 1980;
Bhagwati, 1982; Hanson, 2012). Starting in the mid-1980s, liberalisation of trade
led to a notable increase in intra-regional trade in emerging economies (Martin,
2001). Over the past two decades, regional, bilateral and multilateral agreements
signed by Asian countries and the rise of East Asia in terms of spectacular growth
has been considered as the driving force for this surge in intra-regional trade
(Moktan, 2008). Whereas Asian economies have been among the fastest growing in
the world as there was a general perception of the gravitational centre of the global
economy having shifted to the East with its rising share in global output, trade and
investment (Kohli et al., 2011). This region also has some of the most successful
blocs like the Association of Southeast Asian Nations (ASEAN), Asia Pacific Trade
Agreement (APTA) and South Asia Free Trade Agreement (SAFTA) besides others
(Shinoj & Mathur 2008; Jain, 2019; Kaur et al., 2020). If ASEAN is treated as a
single entity, it would rank as seventh largest in the world and third largest economy
in Asia. Asian countries have been experiencing a striking economic growth with
trade and investment as the main drivers of their success story (Ismail, 2013). Their
trade regime moved from an import substitution to export promotion and technology
driven. The volume of trade from Asia has progressively increased and the pattern
of trade has also changed – most of trade in Asia is intra-regional (Das, 1999;
Coulibaly, 2004; De, 2006; Rahman, et al., 2006; Finicelli, et al., 2011).
Noticeably, India’s regional trade initiatives started with an FTA with Sri Lanka
in 1998 followed by an FTA with SAARC members called as South Asia Free Trade
Agreement (SAFTA), a Comprehensive Economic Cooperation Agreement with
Singapore, and then the Bay of Bengal Initiative for Multi-sectoral Technical and
Economic Cooperation (BIMSTEC) (Ravenhill, 2011). The regional trade and
investment linkages of India witnessed rapid expansion owing to its increased eco-
nomic engagements. These regional and multilateral trade agreements have a sig-
nificant impact on trade patterns of India among Asian countries in general and its
export sector in particular. Against this background, it would be useful to look at the
composition and direction of Indian’s exports to Asian countries.
Brief Review of Literature
Theoretically, a country’s exports may not grow as fast as the exports of the world
for three reasons. Firstly, the concentration of exports may be in commodities, for
which demand is relatively slow, second exports may be going to relatively stag-
nant markets and thirdly the country is not able to contend effectively with other
sources of supply. These reasons can be understood better by using structural
decomposition technique, often used in the estimation of export market shares,
where it is known as Constant Market Shares (CMS) analysis (Memedovic and
Iapadre, 2010). The work of Tyszynski (1951) and Leamer and Stern (1976) made
the CMS analysis popular in applied international economics. Further, the studies
like Agarwal (1988), Kapur (1991), Gupta and Ray (1998), Laursen (1999),
Montobbio and Ramp (2005) and Veeramani (2007) beside others, have also used
this model for analysing the competitiveness and structural changes in exports.

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