India’s comparative advantages in services trade

Abstract

In the recent decades, India has not only experienced substantial growth in its services trade with the rest of the world but has also become a net exporter of services. Using the annual exports and imports data of 10 disaggregated service items from 2000 to 2013, this paper computes and analyzes various comparative advantage (CA) measures. The analysis reveals that India has had a CA in computer and information services and other business services (that include a wide range of information-intensive services) for the entire sample period. These two service categories together accounted for more than two-thirds of the total commercial services export from India. Furthermore, according to an alternative CA measure that considers intra-industry trade, India seems to have CA over the rest of the world in different services such as travel, communication services, and personal, cultural, and related services as well. This paper further explores the shape and dynamics of the distribution of the CA measures by employing a nonparametric method. The distributional dynamics analysis indicates that India is more likely to lose CA over the rest of the world than to gain dominance from a comparative disadvantage (CDA) position in services trade.