Revealed Comparative Advantage and Trade Specialisation: The Case of India

Abstract

The law of comparative advantage forms the basis of international trade, which has been the backbone of the commercial world for long. In a bid to open up the economy and integrate it with the world economy, India has been undertaking a series of economic reforms since 1991, including trade reforms. In this light, this paper attempts to identify the sectors/commodities where India holds comparative advantage. The study also attempts to map the technological structure of India‟s exports, and also analyse the structural changes in the pattern of trade specialisation. The study has been conducted using data relating to exports of all 97 commodities of the Harmonized System (HS-1992) classification for three periods namely average over 1996-98, 2003-05 and 2011-13. The study found that India holds comparative advantage in a variety of products. However, an overall deterioration in India‟s RCA indices over the three periods was also found. The examination of the structural changes in the Revealed Comparative Advantage to find out whether the initial pattern of trade specialisation has strengthened or weakened revealed that India is in the stage of de-specialisation. So, there is a need for India to take steps in order to strengthen its comparative advantage.