Price Competitiveness of India's Exports to Asean

Abstract

India emphasized the look east policy since early nineties. As a part of its export promotion strategy, it is essential to know the key determinants of export of these products to ASEAN. In this direction, the present paper has made an attempt to find the main determinants of India's exports of the major commodity groups to ASEAN. The top ten commodity groups, which have been found in this study, are gems & jewellery, machinery & instruments, dyes & intermediates, primary & semi-finished iron & steel, oil meal, drugs/pharmaceuticals & fine chemicals, transport equipment, electronic goods, inorganic/organic/agro-based chemicals, and manufactures of metals in recent years. Among these items, gems & jewellery, machinery & instruments, dyes & intermediates and transport equipment have registered higher growth in last five years. To explore the determinants, an export demand function has been formulated at the commodity level. As regards to results, it has performed very well in terms of sign and significance of the explanatory variables. It can be said that all the commodities under study, except oil-meal, are not only price competitive in the ASEAN market but also very much elastic in demand. These elasticities are indicative of the fact that real devaluation of Indian rupee against dollar has high impact on India's export of these products to ASEAN market. Further, economic growth in ASEAN region would also be helpful for expanding India's exports of these products to that region. This study reveals valuable insight for policymakers in formulating either a commercial or exchange rate policy.