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INDIAN INSTITUTE OF FOREIGN TRADE
Dr. Bibek Raychaudhuri
Comprehensive Analysis usingPrimary & Secondary Data
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Approach & Methodology for the study
Potential Products for Exports
NTBs & Market Access Issues Export Strategies & Implementation
Issues
Plan
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Objective
To find new export products from a geographicregion
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Uniqueness
Find products which are new export items Export potential at a sub-regional level
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Approach & Methodology
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Approach
Secondary Analysis
Primary Analysis
Policy Implications
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Data Source
The export data of India has been accessed from DGCI&S (Website ofMinistry of Commerce) for the year 2000-2001 & 2005-06 at four digitHS-96 Code
The production data of the state has been sourced from Annual Surveyof Industries at 3 digit of NIC-98 Code for the year 2003-04
Finally the codes has been matched by using the concordance tableprepared by Debroy & Santhanam and later developed by Debroy &Chakraborty
Agriculture data has been obtained from CSO for the year 2002-03. Asconcordance is not available for agricultural product, it has beenlogically matched
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Methodology
Items with high value of production and products having
production advantage (Production RCA>1) in Karnataka arematched with the set of commodities where export growth arehigh from India or there are potential markets for exportable fromIndia (according to the Shift Share Methodology)
The set of products with value of production are matched with
Karnatakas export items: If they matched potential have beenrealised, if not there is unrealised potential for exports. Samemethod has been applied for the products having high productionor production advantage in Karnataka and products havingpotential from India as identified by shift share approach
The union of the products identified through the two sets ofproduct matching in the earlier step have been identified asproducts having export potential from Karnataka.
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Through a survey of the various stakeholders (like exporters,producers, Govt. Officials, Export promotion bodies) in Karnatakawe have tried to verify the robustness of our methodology toidentify the products.
Secondly, products which couldnt be identified due to the
limitation of secondary data has been added through theperception of the stakeholders.
For the potential products the destination have been identifiedand market access issues have been analyzed for thosecountries, where relevant
Policy measures for Export promotion have been highlightedthrough the survey findings, focusing the exporters concerns
Methodology( Cont.)
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Limitations
The secondary analysis would not identify products which
can be exported from Karnataka based on skill availability
but are not produced in the state.
Secondly, A product with high value of production and/or
production advantage from Karnataka may not be exported
if domestic demand is very high.
Lastly due to problems in data collection and records both
at the state-level and the district-level may distort the data.
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Stakeholders & Districts Surveyed
Type of Stakeholders:Exporters 35%
Producers 9%
Government
officials 21%
EPBs/ CBs 35%Districts:
Belgaum,
Shimoga,
Mangalore,
Hubli,Bellary &
Bangalore
Sample Distribution
35
9 35
21
Exporters Producers
TPOs Govt. Off
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RCA
RCA (Export) =
= Export of commodity i by country J
= Export of all commodities by country J
= Export of commodity i by world
Export of all commodities by world
W
iW
J
iJ
X
X
X
X
iJX
JX
iWX
W
X
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Production RCA
RCA (production) =
Production of i-th commodity at Karnataka
Total production (of all commodities) atKarnataka
= Production of i-th commodity in India
= Total production (of all commodities) in India
I
iI
K
iK
P
P
P
P
iK
P
K
P
iIP
IP
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Shift Share: A Digression
Shift-share analysis requires measurements on avariable of interest (an exported product) for each
member of the group (exported items) at the
beginning and end of a specified period of analysis.
The growth rate (GR) of the item (i) can be
measured as:
ztitiiVVV ,,
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Shift Share: A Digression (Contd.)
Now the growth rate of all items (k) is the ratio oftotal value of terminal time periods to the total valueat the initial time period:
where i = 1---------n.
n
i
zti
n
i
ti
V
V
k
1
,
1
,
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Shift Share: A Digression (Contd.)
The expected value of the growth is the product of growth all itemsand the value at the initial time period:
The expected change of the value of a growth variable for aparticular item in a given time period is the difference between the
expected value and the actual value for the item at the end of theinitial time period. If E(Vi) is the expected change, then:
ztitikVVE
,, )(
ztitiiVVEVE ,, )()(
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Shift Share: A Digression (Contd.)
The difference between the actual change and theexpected change is the net shift. So, the Net Shift is :
Now the sum of positive net shifts or the sum ofnegative net shifts Srepresents the total absolute
net shift
)(ii
VEVNi
2
)(1
n
i
iiVEV
S
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Shift Share: A Digression (Contd.)
The relative gain or loss in the value of a growthvariable for a particular product i, in a given time
period is defined as the percentage net shift (which
represents market gain or loss) Pi
Where
%)100(S
NP
i
i
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Matching
SupplySide
High Value of Production
PRCA>1
Shift Share
Percentage Net Shift >0
RCA > 1
Demand Side
Set of
Potential
Products
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Findings: Potential Products
Jowar
Maize
Ragi
Arhar Horsegram
Groundnut
Coconut
Sunflower
Sugar
Drugs & Narcotics Cardamom
Dry Chillies
Dry Ginger
Turmeric
Arecanut
Banana
Cashewnut
Onion
Horticulture Crops
Flouriculture
Tobacco & Related Products
Coca & Chocolates
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Findings: Potential Products (Contd.)
Silk
Handicrafts
Wearing Apparel, Dressing & Dyeing Of Fur
Publishing, Printing And Related Activities Medical, Precision And Optical Instruments
Motor Vehicles, Trailers And Semi-Trailers
Electrical Machinery And Apparatus, N.E.C
Basic Metals
Aerospace
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Products Classified based
on the Degree of Potentiality
The products have been further divided into different subcategories according
to different entry barriers. This classification is primarily based on three typesof entry barriers in a country for the different products along with the exportersperceptions.
They are:
MFN Applied Tariff Import Penetration Ratio
Non-tariff Barriers
Products which are facing low MFN Applied Tariff and high Import PenetrationRatio in a particular country will indicate a high export potential.
Less stringent non-tariff barriers will be an added advantage for the product inthat particular country.
High MFN Applied Tariff and low Import Penetration Ratio with stringent non-tariff barriers will indicate a less potential for a product.
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Products Classified based
on the Degree of Potentiality (Contd.)
The classification of products is given below:
Products having less potential:
Jowar, Maize, Ragi, Cardamom, Sugar, Banana, Fruits, Paper,
Print equipment, etc.
Products having High Potential:
Safflower (Singapore), Groundnut (Singapore), Onion
(Malaysia), Turmeric (UAE), Silk (Hong Kong), Electrical
Machinery (Hong Kong), Precision engineering (Singapore)
Products having Medium Potential:
Sunflower (Germany), Tobacco (Germany), Ginger (Spain),
Flowers (Germany)
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Non-tariff Barriers and Market Access
Issues
Fruit Pulps:
Destinations:
Netherlands, USA, UAE, UK, Saudi Arab, Japan
Barriers:
The cost of labelling & testing are as high as 10-15 per cent ofthe total costs.
The cost of an imported gas chromotograph for evaluatingpesticide residues may cost as much as 50 per cent of one
consignment. The running costs may be an additional 2 per cent per
consignment.
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Non-tariff Barriers and Market Access
Issues (Contd.)
Spices:
Destinations:
USA, UK, Saudi Arab, UAE, Japan, Pakistan
Barriers:
Processing and sale of spices are regulated by food lawsnamely, protection of public health and promotion of fairdealing in food commodities.
Two types of food laws generally recognized are horizontal
regulations that regulate food standards, use of additives,prevention of food contaminations, labelling of food in themarket in general, and vertical regulations which are productwise application of regulations.
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Non-tariff Barriers and Market Access
Issues (Contd.)
Apparel: Destinations:
USA, Germany, France, UK
Barriers:
Textile products require quality certification for exports. Most importingcountries accept the quality certification from ISO and Bureau Veritas.
The NTB notification made in the NAMA negotiation are:
Excessive technical regulation and standards, and certificationrequirement
Excessive labeling or marking requirements
Specific Packaging requirements
Pre-shipment inspection requirement
Import restriction of fabrics
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Non-tariff Barriers and Market Access
Issues (Contd.)
Automobiles: Destinations:
USA, South Africa, Sri Lanka, Italy, UK
Barriers:
Non tariff barriers applied can be time consuming andburdensome certification requirements, standards and a lack ofmutual recognition, additional testing requirements, excise andluxury taxes that add on to the sales prices and negatively
effect a company's compatibility.
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Types of Non-tariff Barriers for Major
Countries
US Technical Standards
Environmental Regulations
SPS Measures
Anti-Dumping and Countervailing Measures
Government Procurement and Domestic Preference
Legislation
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Types of Non-tariff Barriers for Major
Countries
EU Communities
Anti-Dumping Measures
Technical Standards
SPS Measures
Child Labour
Source: UNCTAD, EU Market Access Database, USTR
Japan
Technical Standards
SPS Measures
Environmental Regulations
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Barriers of Exports:
Primary Findings from Districts
District SurveyedBelgaum, Hubli, Bellary, Mangalore, Shimoga
Major Findingso Development of Clusters emphasised
o Construction of Air Cargo Complex is important in Bellary
o High Fuel prices hindering exportso Containers depot is to be set up mainly for the agri-products
o Quality of road infrastructure needs to be revamped
o Karwar port to be developed for export of horticulture
o Local Levies like toll tax need to be rationalised for the exporters
o Port congestion at Mangalore affects the exports from the region
o For financing Agro-products it was suggested for lowering of thedemands for collateral, and adjusting the time of repayments.
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Barriers of Exports:
Primary Findings from Districts (Contd.) At Bellary Power cuts disrupting the timely delivery of quality products and
leads to the cost escalation
Lack of variety in design hindering the development of garment industry
Lack of market knowledge on the destination countries hindering the export
Agro complex should be developed at Mangalore
Route to be set up directly from Mangalore to Dubai (and not throughCochin)
As the Mangalore port is busy with heavy exportable, the small port shouldbe developed by following the model of Gujarat
Inland water transport can be developed as well
Service contract for the capital equipment can be done
Authority should be there to supply containers for each product in continuousmanner
For explosives export Mangalore port should be available
Wooden carriage should be available as in case of Gujarat to cut cost and toincrease capacity
The labour costs are to be equalised in Mangalore port
Hinterland development should get the prime focus
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Thank You