India's International Trade Integration & Internal Integration (Trade & Labour)

Transcription

1 MINISTRY OF FINANCE GOVERNMENT OF INDIA India's International Trade Integration & Internal Integration (Trade & Labour) Module 10.2 Contemporary Themes in India s Economic Development and the Economic Survey Arvind Subramanian Chief Economic Adviser 1

2 Overview International Trade Integration Internal Integration (Trade) Internal Integration (Labour) 2

3 Section 1 International Trade Integration

4 Overview Do you know your trade? Global Trade Trends India s Trade & Trade Policy Trends Can the world absorb another China as India? 4

5 Do you know your Trade? Are exports good or bad? Are imports good or bad? 5

6 .do you really know your Trade Exports can be bad X s reduce domestic absorption/consumption Imports can be good M s reduce prices X s reduce availability of domestic goods (hence export restrictions during global food crisis) X s results in over exploitation of some resources (Hence, X s of sugar = X s of water) M s are inputs into production and can increase competition M s bring in technology 6

7 We are in the fifth---post - Hyperglobalisation---phase Globalisation of the world (1870 to present) 30% 25% 20% First globalization Deglobalization Postwar Era Reglobalization Hyperglobalization Future??? 15% 10% 5% 0% Merchandise exports/gdp Service exports/gdp Non-oil Export (WTO)/GDP

8 Hyperglobalization coincided with Rapid Growth in emerging markets, including India & China GDP per capita growth ( % ) Postwar reglobalisation Era of hyperglobalization Source: IMF WEO High income countries Middle income countries 8

9 Rise of the mega-trader China Peak Merchandise exports as share of world exports by mega-traders in history, (%) Year United Kingdom Germany USA Japan China (projected) (projected) 15 Source: Maddison 1995, UNCTAD various years, Authors calculations 9

10 Low & declining Policy Barriers in Goods, High Barriers in Services Source: OECD 10

11 Proliferation of regional trade agreements (RTAs) Partial Scope Agreement 28 Free Trade Agreement and Economic Integration Agreement Free Trade Agreement Customs Union and Economic Integration Agreement Customs Union Source: WTO 11

12 India s Trends in Trade & Trade Policy 12

13 Why Trade Matters for India? Indian growth now so entwined with World growth Indian growth depends on Indian export growth Correlation coefficient: 0.20 Correlation coefficient: GDP Goods (non-oil) -X Services-X India World Source: IMF WEO 13

14 How/when do countries lower their trade barriers? On their own (unilaterally) Under World Bank/IMF programs Under the WTO Under bilateral and regional trade agreements 14

15 Indian now more open than China measured as Trade share of GDP China Service Trade India China Merchandise Trade India China India Total Trade

16 India actually trades a lot when its size is accounted for 16

17 India has reduced its tariffs dramatically Source: Business Standard 17

18 India has high restrictions on services trade Service Trade Restriction Index IND IDN VNM THA MYS CHN RUS BRA KOR JPN DEU GBR USA Per-capita GDP (current US$) 18

19 India and the World Trade Organisation (WTO) Original member of the GATT (precursor of WTO) Engagement until 1994 based on seeking special and differential treatment Since 1994, active participant but balancing the tensions of being large but poor 19

20 Evolution of India s FTAs over the years: Looking Close and Looking East Source: Department of Commerce and Industry, International Trade Agreements 20

21 Did India benefit from FTAs? How to measure it? Source: Economic Survey

22 Trade effects of FTAs Imports Mean gr. of import 3 years before FTA (%) Mean gr. of import 3 years after FTA (%) Non-FTA Countries FTA Countries 14.8% 17.9% 16.7% 25.3% Sources: Directorate General of Commercial Intelligence and Statistics, Kolkata; BACI dataset, maintained by CEPII, Paris. 22

23 Tariff changes under FTAs Imports Pre-FTA Post-FTA Non-FTA Countries 11.4% 10.1% FTA Countries 11.2% 5.8% Sources: Ministry of Commerce and Industry; World Trade Organisation and World Bank s TRAINS dataset 23

24 Can World Absorb Another China as India? Today World India China World (Fixed) Change in 10 years India China RoW (Notional) Goods exports/world GDP 21.1% 0.4% 2.9% 0.0% 0.8% 1.4% -2.1% Services Exports/world GDP 6.1% 0.3% 0.4% 0.0% 0.5% 0.2% -0.7% Goods exports and services/world GDP 27.3% 0.6% 3.3% 0.0% 1.3% 1.5% -2.8% Assumptions on GDP growth: World (3%), India (8%), China (5%) Assumptions on export growth: World (3%), India (15%), China (7%) 24

25 Section 2 Internal Trade Integration

26 Overview Inter-state trade in India: Trends Does language matter? Import/Export Patterns of Indian States

27 We have made Europe. Now we must make Europeans. * * Originally attributed to Massimo D Azeglio, We have made Italy. Now we must make Italians.

28 One India: Dil hai Hindustani!: We have created Indians

29 One Market: GST Co-operative Federalism Source:

30 Inter State trade in India accounts for at least 54 % of GDP 74% 76% 78% 54% 20% 20% 12% Indonesia Canada European Union India China Brazil United States

31 India s internal trade = 1.7 times international trade; 32 % of GDP 6 Ratio of Interstate/International Trade BRAZIL ('99) USA ('15) 2 INDIA (C+F, '15) CHINA ('09) 1 INDIA (C, '15) EU ('15) CANADA ('12) INDONESIA ('05) Log of Area (in millions)

32 Language (Hindi) not a possible barrier to trade

33 Exports of Indian States

34 Imports of Indian States

35 Trade Volume of Indian States

36 Trade Balance of Indian States

37 Section 3 Internal Labour Integration

38 Overview Who is a migrant and why do people migrate? Migration in India: NSSO, Census Migration in India, New Approaches: CMM and Railways Measures Trends in migration and remittances

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40 Who do we define as a migrant? According to the Census, a person is a migrant when he/she is enumerated in the census at a different place than his/her place of birth (measures in-migration) According to NSSO, a person is a migrant when he/she has stayed for more than six months in a place which is different from his/her last usual place of residence (measures both in and out migration)

41 Why do people migrate? Source Destination Not enough jobs Fewer economic opportunities Inadequate conditions Famine or drought Job opportunities Better living conditions Education Better medical care Industry

42 Migration in India : The NSSO Take Source: Tumbe (2015) Missing Men, Migration and Labour Markets. Indian Journal of Labour Economics.

43 Migration in India till 2011: The Census Take 50 Migrants stating economic reasons for migration (million) have increased rapidly between 1991 and 2011 according to Census In Millions

44 Migration in India till 2011: The Cohort-based Migration Metric (CMM) Take In Thousands Net in migrants in age cohort TN KL MH DL KA GJ GA (Thousands) (Thousands) In Thousands Net out migrants in age cohort PB HR HP AS AP WB OR MP* RJ BR* UP* (Thousands) (Thousands)

45 Migration in India since 2011: The Railway Nets Approach Millions Total Net Flows at All India Level

46 Top Inter-State Migration Routes with Highest Passenger Density

47 State-wise Heat Map for Passenger Flows in

48 District-wise Heat Map for Passenger Flows in

49 Out-Migration today has strong links with the past Regions that witnessed high outmigration in the late 19 th century tend to exhibit high rates of outmigration even today Migrations have often been maledominated, semi-permanent and remittance-based in nature Significance of Migration Networks Source: Tumbe (2012, Figure 2), Migration Persistence across 20 th century India, Migration and Development, 1 (1).

50 Out-of-district migration is emanating from a growing number of districts in India CMM Density plot across Districts

51 Female out-migration for economic reasons is increasing Millions Migrants stating economic reasons for migration* *Source: Census

52 Labour Migration and Income are highly positively correlated in both measures CMM Measure Average Passenger flow in millions ( ) Railways MeasureDL MH ASN WBAPC TN GJ TR KA CG PB OR HP JK KL UK MPRJ HR BRJH GA -3 UP Per Capita GSDP in Rs. Thousands ( )

53 Migration for work in India is less than half of that in China as of Millions Migrant workers estimates for China India (1) India (2) (1) is obtained by adding CMM estimates till 2011 and Railways estimates till 2016 (2) is obtained by adding Census estimates till 2011 and Railways estimates till 2016 Source for China data: China Labour Bulletin

54 How much do people remit when they migrate? Domestic remittance economy estimated at $10 billion in or $30 billion in % Inter-State transfers 80% towards rural households Financed over 30% of household consumption expenditure in remittance receiving households Domestic remittance dependency was high in Bihar, UP and Rajasthan and has generally grown since the 1990s, most notably in Orissa Source: Tumbe (2011) Remittances in India: Facts and Issues. Indian Journal of Labour Economics.

55 Making One India: Next Steps Does the law need to catch up with economic realities?

56 Recommended Resources J J Schott, Free Trade Agreements: Boon or Bane of the World Trading System, Peterson Institute of International Economics (PIIE) Angrist, Joshua D., and Jörn-Steffen Pischke. Mostly harmless econometrics: An empiricist's companion. Princeton University Press, 2008 Plummer, Michael G., David Cheong, and Shintaro Hamanaka. Methodology for impact assessment of free trade agreements. Manila: Asian Development Bank, 2010 Subramanian, Arvind, Living in the shadow of China s Economic Dominance, 2011 Subramanian & Kesseler (2014), The Hyperglobalisation of Trade and its Future, Peterson Institute of International Economics (PIIE) 56

57 Recommended Resources (Contd.) Chinmay Tumbe, Missing Men, Migration and Labour Markets: Evidence from India, October 2014 Report of the Working Group on Migration, January 2017 Last Train Home, 2009 (documentary) The Unreserved, 2017 (documentary) Rose, Andrew (2003), Do We Really Know that WTO Increases Trade?, American Economic Review, 94 (1), pp Directorate General of Commercial Intelligence Services (DGCIS), India s Internal Trade: A Review of Interstate Movement of Major Commodities, Report. Economic Survey ,