India – travelling under the radar?
Recent tralac research has shown that since 2001 Africa’s overall trade with the old friends (the United States and the European Union in particular) has dramatically declined while, conversely, that with the new friends (BRICs) is increasing. The intra-African share has remained consistent. While India’s involvement with Africa is less dramatic than China’s, its increasing profile mirrors China’s rise although this is happening with a less public profile. This paper examines India’s global profile and places the Indian rise in an international perspective.
In the first section we discuss India’s rise in international trade. The question remains whether this rise will be sustained and indeed what the future may hold. The second section seeks to address these questions and moves beyond simple linear extrapolations by employing a comparative static general equilibrium model.
This model takes various known and/or best estimates of macroeconomic variables, shocks and other developments into account to give a projection of the world economy up until 2025. Key assumptions include strong growth from Asian economies and to a slightly lesser extent growth in Africa, and moderate growth in the older economies of the US and Europe. We make use of the pre-release Version 9 Global Trade Analysis Project (GTAP) database with a base year of 2011. We consider that the results for 2025 are the best estimates for likely trade patterns between India and Africa, the EU, the US, China and the rest of the world calculated as the residual. The emphasis is on trade shares and shifts in these shares and we use an aggregation of the GTAP sectors for agriculture, natural resources, manufacturing and service sectors.
Our projections suggest that Indian exports will see declining domestic shares of agriculture and natural resources, while in the crucial textiles, clothing and leather sector exports increase but at a modest rate. In the traditional manufacturing sectors Indian exports increase significantly, as do services. It is projected that the percentage of Indian export shares will decline to the US and China while slightly increasing to Africa and the rest of the world.
For imports it is projected that India will increase its demand for particularly agricultural products and to a lesser extent natural resources and manufacturing imports. Overall, the projection is that again there will be a sharp decline in imports from the EU and a lesser decline from the US, but an increase from both Africa and the rest of the world of over two percentage points.
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