INDIA'S REVEALED COMPARATIVE ADVANTAGES IN MERCHANDISE TRADE WITH COUNTRY GROUPS AT DIFFERENT LEVELS OF DEVELOPMENT

This paper uses annual trade data for 16 product groups to analyze India's comparative advantage (CA) in merchandise trade with high, middle income, and least developed countries during 2003-2018. The results suggest that India has always had CA over all three groups of countries in animal, food products, and textiles and clothing, and had comparative disadvantage (CDA) in wood. There are important variations in its CA/CDA for other items across country groups. These results are largely robust to alternative CA measures and to restricted subsamples of countries within each group. The analysis of distributional dynamics indicates that India's CA over least developed countries is more persistent than over other two groups. In contrast, India's CDA over middle income countries is more persistent than over other groups. In general, the probabilities of switching from CDA to CA are higher than those for shifting from CA to CDA for all three groups. India's CA in various products are likely to result from the availability of certain natural resources including climatic condition and geographic location, relative abundance of cheap unskilled, semi-skilled, and highly skilled labor, together with the market-oriented reforms and trade liberalization. The results have specific implications for India's policies to promote industries and trade.