Trade, Infrastructure and Regional Disparity in India and China Prabir De, RIS Fourth International...
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Transcript of Trade, Infrastructure and Regional Disparity in India and China Prabir De, RIS Fourth International...
Trade, Infrastructure and Regional Disparity in India and China
Prabir De, RISFourth International Russia-India-China
Annual Conference, New Delhi 20-21 November 2008
Introduction Removal of trade barriers has impact on industrial dynamics,
depending on the factor intensities of the industries. More trade engagement leads to reorientation of factors of
production from import competing sector to export sector [return is comparatively higher]
States / provinces attune their production structure to international demands, earn higher than other states, depending on infrastructure availability and quality.
Relative income of states depends on the extent of openness to trade and availability of infrastructure [economic + social].
For geographically large developing countries like India and China having disparate regions, it is essential to understand whether trade and infrastructure development have equalizing impact or not.
Almost no literature on India and China on the relationship between trade openness, infrastructure and regional disparity at sub-national level. Some recent works: Egger et al, (2005) – Europe; Tapalova (2005), De and Ghosh (2005), Marjit et al (2007) – India; Fang and Yang (2000), Yu and Gang (2004), Demurger, et al (2002), Xiaolu and Gang (2004) - China
Research objective
How open Indian and Chinese states are with respect to international trade
How the Indian and Chinese states are doing in infrastructure sector
What the regional disparity scenario is in context of trade and infrastructure in India and China at sub-national level
Broad data outline and sources Sub-national samples: 31
Chinese provinces and 29 Indian states
Period: 2000 to 2005 for India; 2000 to 2006 for China
Income: GSDP in US$ at current price
Openness: Trade as % of GSDP for China, and Marjit et al (2007) for India.
Infrastructure Development Index (IDI), constructed based on PCA
State-level India China
Infrastructure indicators [28 indicators]
India Infrastructure Database (Vol. I + Vol. II), (Ghosh and De, 2005)Statistical Abstract, various issues (CSO)
China Compendium of Statistics, 2005 (National Bureau of Statistics) China Statistical Yearbook, various issues (National Bureau of Statistics) NERI Index of Marketization for China’s Provinces (Fan, Wang and Zhu, 2007)
Income, Trade, FDI and others
CSO, DIPP, Marjit, Kar and Maiti (2007), based on DGCIS, NSSO
Coastal states are relatively richer
PCI (US$) Rank
Shanghai 8623 1 Coastal
Beijing 7529 2 Capital
Tianjin 5954 3 Coastal
Zhejiang 4879 4 Coastal
Jiangsu 4438 5 Coastal
Guangdong 4324 6 Costal
Shandong 3644 7 Coastal
Fujian 3395 8 Costal
Liaoning 3371 9 Costal
Hebei 2595 10Non-coastal
Top 10 Chinese Provinces in PCI, 2006
PCI (US$) Rank
Goa 1590 1 Coastal
Delhi 1399 2
NCRHaryana 881 3
Maharashtra 841 4 Coastal
Punjab 792 5Non-
coastal
Gujarat 775 6 Coastal
Himachal 767 7Non-
coastal
Kerala 695 8 Coastal
Tamil Nadu 679 9 Coastal
Karnataka 619 10 Coastal
Top 10 Indian States in PCI, 2006
*PCGSDP in US$ at current price *PCNSDP in US$ at current price
Laggards are non-coastal
PCI (US$) Rank
Hainan 1903 22 Coastal
Qinghai 1867 23 Non-coastal
Sichuan 1699 24 Non-coastal
Jiangxi 1655 25 Non-coastal
Guangxi 1642 26 Non-coastal
Tibet 1583 27 Non-coastal
Anhui 1582 28 Non-coastal
Yunnan 1381 29 Non-coastal
Gansu 1357 30 Non-coastal
Guizhou 958 31 Non-coastal
Bottom 10 Chinese Provinces in PCI, 2006
PCI (US$) Rank
Manipur 461 20Non-
coastal
Chattisgarh 457 21Non-
coastal
Jharkhand 432 22Non-
coastal
Jammu & Kashmir 422 23
Non-coastal
Assam 422 24Non-
coastal
Rajasthan 405 25Non-
coastal
Orissa 392 26 Coastal
Madhya Pradesh 355 27Non-
coastal
Uttar Pradesh 301 28Non-
coastal
Bihar 179 29Non-
coastal
Bottom 10 Indian States in PCI, 2006
*PCGSDP in US$ at current price *PCNSDP in US$ at current price
0.360.36
0.39
0.360.36
0.37
0.37
0.370.370.37
0.370.36
0.38
0.390.39
0.40
0.410.41
0.35
0.36
0.37
0.38
0.39
0.40
0.41
0.42
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
CV
0.95
00.
945 0.85
80.
784
0.84
20.
740
0.70
3
0.68
7
0.69
5
0.71
1
0.68
0
0.70
2
0.70
3
0.69
5
0.68
6
0.65
2
0.63
10.
612
0.00
0.40
0.80
1.20
1990
1992
1994
1996
1998
2000
2002
2004
2006
CV
Income per capita – divergent view
Chinese provinces
Notes: PCGSDP in US$ at current price
Indian states
Coefficient of Variation (CV) of Per Capita Income
Notes: PCNSDP in US$ at current price
Falling disparity
Rising disparity
Coastal Chinese provinces having higher openness, 2006
ProvinceOpenness
(%) Rank
Shanghai 174.93 1
Guangdong 160.35 2
Beijing 160.18 3
Tianjin 117.90 4
Jiangsu 104.57 5
Zhejiang 70.45 6
Fujian 65.59 7
Liaoning 41.69 8
Shandong 34.37 9
Hainan 21.54 10
Top 10 Provinces
ProvinceOpenness
(%) Rank
Guangxi 11.00 22
Jiangxi 10.57 23
Inner Mongolia 9.91 24
Shaanxi 9.45 25
Tibet 8.99 26
Sichuan 8.70 27
Qinghai 8.10 28
Hunan 7.74 29
Henan 6.29 30
Guizhou 5.65 31
Bottom 10 Provinces
Eastern coastal provinces Non-coastal provinces
Unchanging ranks of provinces on openness: Avg. rank correlation 0.967 (2000 – 2006)
6.29
Tianjin
Beijing
Shanghai
Fujian
Jiangsu GuangdonZhejiang
ShandongLiaoning
y = 27.574x + 1261.5R2 = 0.8392
0
1000
2000
3000
4000
5000
6000
7000
8000
0.00 50.00 100.00 150.00 200.00
Openness (% ), 2006
PC
I (U
S$
), 2
00
6
Rising inter-regional disparity in openness in Chinese provinces Provinces with higher
export share (mostly coastal) are relatively richer Production structures
are attuned to international demand [also having higher import content]
Higher openness leads to higher income
Rise in inter-regional disparity in terms of openness during 2000-2007 CV increased from 1.26
in 2000 to 1.28 in 2006
31.16
16.55
11.7210.41
6.054.26 3.92 3.46 2.92
1.33
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
Gu
an
gd
on
g
Jia
ng
su
Sh
an
gh
ai
Zh
ejia
ng
Sh
an
do
ng
Fu
jian
Be
ijin
g
Tia
njin
Lia
on
ing
He
be
i
%Provinces with >1% export share, 2006
Rising inter-regional disparity in openness in Indian states
Score Rank
Assam 11.94 1
Haryana 10.89 2
Bihar 10.56 3
AP 10.45 4
Kerala 9.78 5
Maharastra 9.61 6
Gujarat 9.34 7
Karnataka 8.77 8
UP 8.77 8
MP 7.24 10
Orissa 6.70 11
Rajasthan 6.62 12
WB 5.64 13
Punjab 4.77 14
TN 4.18 15
Avg. Openness Index, (1999-2000 - 2004-05)
*Methodology follows Marjit et al (2007)
Rise in inter-regional disparity in openness in India.
OrissaRajasthan
Kerela
KarnatakaWest Bengal
Tamil Nadu
Punjab Gujarat
MaharashtraHaryana
Andhra Pradesh
Madhya PradeshUttar Pradesh
Assam
Bihar
0
100
200
300
400
500
600
700
800
900
1000
0.00 2.00 4.00 6.00 8.00 10.00 12.00 14.00
Openness (%)
PCI (
US$
)
Coastal states having higher infrastructure endowment
States IDI Rank
Delhi 50.28 1 Capital
Goa 21.04 2 Coastal
Punjab 20.54 3Non-coastal
Haryana 16.62 4 NCR
Kerala 16.52 5 Coastal
Tamil Nadu 16.2 6 Coastal
Gujarat 16.02 7 Coastal
Karnataka 15.7 8 Coastal
Maharashtra 14.64 9 Coastal
Andhra Pradesh 13.58 10 Coastal
Top 10 States in India, 2004
States IDI Rank
Shanghai 6.64 1 Coastal
Beijing 6.27 2 Capital
Tianjin 5.96 3 Coastal
Guangdong 5.23 4 Coastal
Zhejiang 5.16 5 Coastal
Jiangsu 5.04 6 Coastal
Liaoning 4.76 7 Coastal
Shandong 4.71 8 Coastal
Fujian 4.66 9 Coastal
Hebei 4.46 10 NCR
Top 10 States in China, 2005
States with higher infrastructure earning higher income
Indian states Chinese provinces
Coastal states, with higher infrastructure endowment and higher openness, earning higher income
Shanghai
Beijing
Tianjin
Tibet
Guizhou
Guangdong
Zhejiang
y = 1897.3x - 5295.6R2 = 0.8756
-1000
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
10000
0 1 2 3 4 5 6 7
IDI
PCI
Delhi
Goa
Bihar
UP
Punjab
MaharashtraHarayana
HP TN
y = 26.271x + 267.84R2 = 0.5346
0
200
400
600
800
1000
1200
1400
1600
1800
0 10 20 30 40 50 60
IDI
PCI
Openness, infrastructure and income: India and China
9 .273 10.545 11.818 13.091 14.364 15.636 16.909 18.182 19.455 20.727 above
India
1667.217 2500.495 3333.773 4167.05 5000.33 5833.61 6666.887 7500.165 8333.443 9166.72 above
C hina
X: InfrastructureY: OpennessZ: Per Capita Income
Year: 2005 for India (15 states)Year: 2006 for China (31 provinces)
Conclusions Sub-national level data shows rise in income disparity in India
whereas China shows fall in income disparity China’s export-led globalization benefits coastal states. Same is
appearing in India Explicit shift in production dynamics attuning with global demand
[import competing to export sector] in Chinese provinces. India repeats the same, but in initial stage
States richer in openness and infrastructure [obviously coastal] having higher income
Coastal states growing faster than non-coastal states in India. China shows a mixed result.
Gap between coastal and non-coastal rising in terms of openness, infrastructure, and income.
Trade and infrastructure development yet to have equalizing impact.
Globalization making an uneven development of India and China [short term], ceteris paribus.
Policy should be reoriented for the growth and development of “outer periphery” of the economy, such as border regions, non-coastal states, etc.
Diverse, heterogeneous,.…......, growing high, …..rising interregional disparity….
Thank you