When east meets south: economic gains from India-APEC trade

Abstract

As India, potentially one of the largest economies in the world, seeks membership to the Asia Pacific Economic Cooperation forum (APEC), a case for its inclusion in an expanded APEC is examined. The methodology and empirical design as developed in Marwah and Klein (1995) within the framework of a world trade matrix consists of seven regions divided into India, components of APEC, and the rest of the world. The growth of economic cohesiveness within APEC between 1965 and 1995 is quantitatively assessed by patterns of trade linkages through measures of bilateral reciprocity, multilateralism, and market diversification. Entropy indexes of the trade matrix are computed and used in the analysis. Since 1991, when massive economic reforms were implemented, India has experienced strong growth in exports and in imports, a departure from its previous performance. Furthermore, its external orientation has shifted positively and significantly since the reforms. Despite this, during the latest five years, India's integration with APEC hadn't changed to a level of statistical significance. The case for an expanded APEC, including India, is still somewhat prospective but the evidence is growing that it could prove beneficial to all the member countries. For India to benefit in this expanded APEC, it should continue to press its case for inclusion in the Asia Pacific Economic Cooperation forum (APEC).