Relative export competitiveness of agricultural commodities and its determinants: Some evidence from India

Abstract

In this paper, we derive time-varying relative export competitiveness (REC) of India’s top agricultural exports (rice, wheat, cotton and sugar) against India’s share of world agricultural exports (REC_WA) and world exports (REC_WE) from 1961 to 2012. We reveal that India’s exports of all four commodities became relatively competitive over time but these were not as competitive as the top, or selected emerging, exporters of the four commodities. We also examine the determinants of REC in these four commodities focusing on factors including crop-specific and aggregate factor endowments, domestic price, export prices, and GDP per capital, preferential trade agreements, export restrictions and bans, and India’s Green Revolution. The regression analysis was mainly confined to the 1981–2012, due to data constraints. We find that the time series regression results are similar in sign and significance for REC_WE and REC_WA. Our key findings suggest the REC in wheat, rice, and cotton deteriorated as a result of export restrictions. Capital had negative effects on cotton REC. Labor and farm size did not influence the REC in the commodities. The Green Revolution improved the REC in rice and cotton (in Phase 3). The WTO had a positive effect on the REC in rice. The South Asian Free Trade Area (SAFTA) Agreement adversely affected the REC in wheat and rice but strengthened the REC in cotton and sugar. Higher domestic price reduced the REC in cotton. Higher per capita income strengthens the REC in wheat with a lag. We explain these results and suggest policy implications.