Comprehensive Analysis using Primary & Secondary Data

Dr. Bibek Raychaudhuri

INDIAN INSTITUTE OF FOREIGN TRADE

Plan

Approach & Methodology for the study Potential Products for Exports NTBs & Market Access Issues Export Strategies & Implementation Issues

Objective
To find new export products from a geographic region

Uniqueness
Find products which are new export items Export potential at a sub-regional level

Approach & Methodology

Approach

Secondary Analysis

Primary Analysis

Policy Implications

Data Source

The export data of India has been accessed from DGCI&S (Website of Ministry of Commerce) for the year 2000-2001 & 2005-06 at four digit HS-96 Code The production data of the state has been sourced from Annual Survey of Industries at 3 digit of NIC-98 Code for the year 2003-04 Finally the codes has been matched by using the concordance table prepared by Debroy & Santhanam and later developed by Debroy & Chakraborty Agriculture data has been obtained from CSO for the year 2002-03. As concordance is not available for agricultural product, it has been logically matched

Methodology
Items with high value of production and products having production advantage (Production RCA>1) in Karnataka are matched with the set of commodities where export growth are high from India or there are potential markets for exportable from India (according to the Shift Share Methodology) The set of products with value of production are matched with Karnatakas export items: If they matched potential have been realised, if not there is unrealised potential for exports. Same method has been applied for the products having high production or production advantage in Karnataka and products having potential from India as identified by shift share approach The union of the products identified through the two sets of product matching in the earlier step have been identified as products having export potential from Karnataka.

Methodology( Cont.)
Through a survey of the various stakeholders (like exporters, producers, Govt. Officials, Export promotion bodies) in Karnataka we have tried to verify the robustness of our methodology to identify the products. Secondly, products which couldnt be identified due to the limitation of secondary data has been added through the perception of the stakeholders. For the potential products the destination have been identified and market access issues have been analyzed for those countries, where relevant Policy measures for Export promotion have been highlighted through the survey findings, focusing the exporters concerns

Limitations

The secondary analysis would not identify products which can be exported from Karnataka based on skill availability but are not produced in the state. Secondly, A product with high value of production and/or production advantage from Karnataka may not be exported if domestic demand is very high. Lastly due to problems in data collection and records both at the state-level and the district-level may distort the data.

Stakeholders & Districts Surveyed

Type of Stakeholders: Exporters 35% Producers 9% Government officials 21% EPBs/ CBs 35% Districts: Belgaum, Shimoga, Mangalore, Hubli, Bellary & Bangalore

Sample Distribution

35

35 21

Exporters TPOs

Producers Govt. Off

RCA
RCA (Export) =
X iJ XJ X iW XW

X iJ
XJ
X iW

XW

= Export of commodity i by country J = Export of all commodities by country J = Export of commodity i by world Export of all commodities by world

Production RCA
PiK PK PiI PI

RCA (production) =

PiK Production of i-th commodity at Karnataka PK Total production (of all commodities) at Karnataka PiI = Production of i-th commodity in India PI = Total production (of all commodities) in India

Shift Share: A Digression

Shift-share analysis requires measurements on a variable of interest (an exported product) for each member of the group (exported items) at the beginning and end of a specified period of analysis. The growth rate (GR) of the item (i) can be measured as:

Vi Vi ,t Vi ,t z

Shift Share: A Digression (Contd.)

Now the growth rate of all items (k) is the ratio of total value of terminal time periods to the total value at the initial time period: where i = 1---------n.

V V
i 1 i 1 n

i ,t

i ,t z

Shift Share: A Digression (Contd.)

The expected value of the growth is the product of growth all items and the value at the initial time period: The expected change of the value of a growth variable for a particular item in a given time period is the difference between the expected value and the actual value for the item at the end of the initial time period. If E(Vi) is the expected change, then:

E (Vi ,t ) kVi ,t z

E (Vi ) E (Vi ,t ) Vi ,t z

Shift Share: A Digression (Contd.)

The difference between the actual change and the expected change is the net shift. So, the Net Shift is :

Ni Vi E (Vi )
Now the sum of positive net shifts or the sum of negative net shifts S represents the total absolute net shift

V
i 1

E (Vi ) 2

Shift Share: A Digression (Contd.)

The relative gain or loss in the value of a growth variable for a particular product i, in a given time period is defined as the percentage net shift (which represents market gain or loss) Pi Where

Ni Pi (100%) S

Matching
Demand Side

Shift Share Percentage Net Shift >0 Supply Side High Value of Production PRCA>1
Set of Potential Products

RCA > 1

Findings: Potential Products

Jowar Maize Ragi Arhar Horsegram Groundnut Coconut Sunflower Sugar Drugs & Narcotics Cardamom

Dry Chillies Dry Ginger Turmeric Arecanut Banana Cashewnut Onion Horticulture Crops Flouriculture Tobacco & Related Products Coca & Chocolates

Findings: Potential Products (Contd.)

Silk Handicrafts Wearing Apparel, Dressing & Dyeing Of Fur Publishing, Printing And Related Activities Medical, Precision And Optical Instruments Motor Vehicles, Trailers And Semi-Trailers Electrical Machinery And Apparatus, N.E.C Basic Metals Aerospace

Products Classified based on the Degree of Potentiality

The products have been further divided into different subcategories according to different entry barriers. This classification is primarily based on three types of entry barriers in a country for the different products along with the exporters perceptions. They are:
MFN Applied Tariff Import Penetration Ratio Non-tariff Barriers

Products which are facing low MFN Applied Tariff and high Import Penetration Ratio in a particular country will indicate a high export potential. Less stringent non-tariff barriers will be an added advantage for the product in that particular country. High MFN Applied Tariff and low Import Penetration Ratio with stringent nontariff barriers will indicate a less potential for a product.

Products Classified based on the Degree of Potentiality (Contd.)

The classification of products is given below:

Products having High Potential: Safflower (Singapore), Groundnut (Singapore), Onion (Malaysia), Turmeric (UAE), Silk (Hong Kong), Electrical Machinery (Hong Kong), Precision engineering (Singapore) Products having Medium Potential: Sunflower (Germany), Tobacco (Germany), Ginger (Spain), Flowers (Germany) Products having less potential: Jowar, Maize, Ragi, Cardamom, Sugar, Banana, Fruits, Paper, Print equipment, etc.

Non-tariff Barriers and Market Access Issues

Fruit Pulps:
Destinations:
Netherlands, USA, UAE, UK, Saudi Arab, Japan

Barriers:
The cost of labelling & testing are as high as 10-15 per cent of the total costs. The cost of an imported gas chromotograph for evaluating pesticide residues may cost as much as 50 per cent of one consignment. The running costs may be an additional 2 per cent per consignment.

Non-tariff Barriers and Market Access Issues (Contd.)

Spices:
Destinations:
USA, UK, Saudi Arab, UAE, Japan, Pakistan

Barriers:
Processing and sale of spices are regulated by food laws namely, protection of public health and promotion of fair dealing in food commodities. Two types of food laws generally recognized are horizontal regulations that regulate food standards, use of additives, prevention of food contaminations, labelling of food in the market in general, and vertical regulations which are product wise application of regulations.

Non-tariff Barriers and Market Access Issues (Contd.)

Apparel:
Destinations: USA, Germany, France, UK Barriers:
Textile products require quality certification for exports. Most importing countries accept the quality certification from ISO and Bureau Veritas. The NTB notification made in the NAMA negotiation are: Excessive technical regulation and standards, and certification requirement Excessive labeling or marking requirements Specific Packaging requirements Pre-shipment inspection requirement Import restriction of fabrics

Non-tariff Barriers and Market Access Issues (Contd.)

Automobiles:
Destinations: USA, South Africa, Sri Lanka, Italy, UK

Barriers: Non tariff barriers applied can be time consuming and burdensome certification requirements, standards and a lack of mutual recognition, additional testing requirements, excise and luxury taxes that add on to the sales prices and negatively effect a company's compatibility.

Types of Non-tariff Barriers for Major Countries

US
Technical Standards Environmental Regulations SPS Measures Anti-Dumping and Countervailing Measures Government Procurement and Domestic Preference Legislation

Types of Non-tariff Barriers for Major Countries

EU Communities
Anti-Dumping Measures Technical Standards SPS Measures Child Labour

Japan
Technical Standards SPS Measures Environmental Regulations

Source: UNCTAD, EU Market Access Database, USTR

Barriers of Exports: Primary Findings from Districts

District Surveyed
Belgaum, Hubli, Bellary, Mangalore, Shimoga

Major Findings
o o o o o o o o o Development of Clusters emphasised Construction of Air Cargo Complex is important in Bellary High Fuel prices hindering exports Containers depot is to be set up mainly for the agri-products Quality of road infrastructure needs to be revamped Karwar port to be developed for export of horticulture Local Levies like toll tax need to be rationalised for the exporters Port congestion at Mangalore affects the exports from the region For financing Agro-products it was suggested for lowering of the demands for collateral, and adjusting the time of repayments.

Barriers of Exports: Primary Findings from Districts (Contd.)

At Bellary Power cuts disrupting the timely delivery of quality products and leads to the cost escalation Lack of variety in design hindering the development of garment industry Lack of market knowledge on the destination countries hindering the export Agro complex should be developed at Mangalore Route to be set up directly from Mangalore to Dubai (and not through Cochin) As the Mangalore port is busy with heavy exportable, the small port should be developed by following the model of Gujarat Inland water transport can be developed as well Service contract for the capital equipment can be done Authority should be there to supply containers for each product in continuous manner For explosives export Mangalore port should be available Wooden carriage should be available as in case of Gujarat to cut cost and to increase capacity The labour costs are to be equalised in Mangalore port Hinterland development should get the prime focus

Thank You