Anvesak Journal Vol (45), No (2).
Jan-June, 2015
BILATERAL VEGETABLE TRADE BETWEEN CHINA AND INDIA: AN EMPIRICAL ANALYSIS KAPPA KONDAL1 and Prof. A. NAKULA REDDY2 ABSTRACT The present paper is attempt to identify the factors influencing vegetable exports from and imports to India. In order to identify the important factors influencing vegetable trade between China and India, the multiple regression analysis has been employed. The period of analysis has been ranged from 2001 to 2012. During the study period, the study reveals that the growth rate of India’s vegetables exports to China increased. The R2 value is 0.93 with respect to India’s vegetable exports to China whereas the R2 value is 0.87 with respect to India’s vegetables imports from China, explained by production and exchange rate. There is a significant affect of vegetable production and exchange rate on Indian vegetable exports from and imports to India, at 5% significance level. However, there is need to enhance the cultivation of vegetable crops area through adopting the modern technology by an innovative way and initiate measures for the promotion of exports from India.
Keywords: India, China, Bilateral Trade, Vegetable, Production
1
Research Scholar, Rajiv Gandhi National Junior Research Fellow (RGNJRF-UGC) Professor, both are from the Dept. of Economics, Osmania University, Hyderabad-500 007. Telangana State, India. Email Id:
[email protected] 2
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Anvesak Journal Vol (45), No (2).
Jan-June, 2015
BILATERAL VEGETABLE TRADE BETWEEN CHINA AND INDIA: AN EMPIRICAL ANALYSIS INTRODUCTION China and India are known as fruit and vegetable baskets of the world. They produce wide varieties of fruits and vegetable crops in the world. India occupies the second rank in fruits and vegetable products in the world, after China in 2012-13. According to the Food and Agriculture Organization (FAO) report, increasing fruit and vegetable consumption becomes a global priority. It is playing its part to make sure agriculture, particularly in the developing countries and can help meet the demand for healthy foods like fruits and vegetables because these crops contain more vitamins and diet. India is the second largest producer of vegetables in the world after China with the production of 162187 (‘000MT) in 2012-13. It is estimated that requirement of vegetable in the country would be about two to three times more than present production. The important vegetables are potatoes, onion, green peas, cauliflower, okra, cabbage, tomatoes, eggplant, carrots, and green chilies. At present, many technically qualified professionals have adopted to modern methods of cultivation and mechanised farming in the rural and urban region, for getting more production and yield. Horticulture exports play a vital role in national and the international level. In India, slightly the percentage of its exports decreased in national exports since 2001-12 (Kondal, 2014). And almost all the vegetable items are identified as having good export potential in the international market. These goods are mainly onion, potato, green vegetables (okra, bitter gourd, chilly, asparagus, celery bell pepper, sweet corn, green and lima beans), organically grown vegetables and hybrid seeds.
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Anvesak Journal Vol (45), No (2).
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REVIEW OF LITERATURE Horticultural exports from the developing world have become a major growth sector in international trade. China became a India’s largest trading pattern and bilateral trade between two countries touched US$ 65.47 billion. China became a third largest export destination to India (Goud, 2014). Improvement in the range and quality of exports from China and India has the potential to create substantial welfare benefits for the world, for China and India (Betina Dimaranan et al). India does not enjoy even one percent share in the global trade of horticulture products. The horticultural products comprise of growing and marketing of vegetables, fruits, flowers and ornamental shrubs. Yet India’s share in the world trade of horticulture products is mini-scale (Thimmarayappa, 2012). India’s imports small quantities of agricultural products and they cover nearly one percent of its total bilateral imports (Mohanty, 2014). Israel has been dominant in the exports of fresh vegetables. India’s comparative advantage in export of fruits and vegetables seemed to dwindle after economic reforms. A gradual decline in India’s comparative advantage had been depicted for exports of fruits and vegetables (Kanaka. s and m. Chinadurai). The IEA Bioenergy report states that the China is primarily by large imports, where in India the major feature has been a rapid increase in production and demand for the domestic market. (Vilas Khandare, 2012) states that imports of agricultural products mainly comprise of vegetables, oil, pulses and wood & wood products, which is below 77.71% of total agricultural imports in terms of value in 2010-11. Vertical integration is a necessary requirement to global trade. The growth rate of Indian horticulture exports rapidly increased from 2001-02 to 2008-09 (Kondal, 2014). It is
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Anvesak Journal Vol (45), No (2).
Jan-June, 2015
clear that international trade in fresh horticultural products is increasing in scale (Watts, 1995).
NEED FOR THE STUDY
The international trade is very important for economic development to developing countries. Mainly the profitable goods are like fruits, vegetable playing an important role in the world. Horticulture sector is contributing to agriculture Gross Domestic Product (GDP) and over all GDP, mostly through foreign exchange. The demand for vegetables is increasing in the world. In the earlier studies were not cover, which factors are affecting the vegetable exports and imports between China and India and there is no empirical evidence on bilateral vegetable trade between China and India. Keeping this view, there is a need to study the bilateral vegetable trade between the China and India. OBJECTIVES 1. To analyse the growth and performance of bilateral vegetable trade between China and India. 2. To identify the important factors influencing vegetable trade between China and India. METHODOLOGY To fulfill the objectives of the study, the secondary source of data were collected from various sources namely - World Bank Website, Indian Horticulture Database, National Horticulture Board, Reserve Bank of India, books and journals etc. The period of analysis has This article has been published in ANVESAK Journal. Sardar Patel Institute of Economic and Social Research, Ahmedabad-380 054, India. Website.spiesr.ac.in
Anvesak Journal Vol (45), No (2).
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been ranged from 2001 to 2012. In order to study the important factors influencing vegetable trade between China and India, the multiple regression analysis has been employed. Multiple Regression Equation: Y= α +β β1X1+β β2X2+.....+Ut Where Y= Horticulture Vegetable Exports/Imports α = Intercept β1 and β2 are coefficients X1= Production of Vegetables X2= Exchange Rate Ut= Error term FINDINGS AND ANALYSIS Table:1 shows the growth rate of vegetables in India in terms of area, production and yield. The growth rate of area under vegetable was 10.9 percent in the year of 2005 followed by 7 percent in 2006, 6.4 percent in 2011, 5.8 percent in 2012 and lowest recorded -1 percent in 2002 and 2003. The growth rate of vegetables production was 14.6 percent in the year of 2005 followed by 11.7 percent in 2008, 10 percent in 2006, 9.6 percent in 2011 and lowest recorded -4.3 percent in 2002 and 2003. The growth rate of vegetables productivity was 7.9 percent in the 2007 followed by 4.3 percent in 2003, 3.6 percent in 2010, 3.4 percent in 2004 and lowest recorded -3.5 percent in 2002. However, there was positive correlation between the growth rate of area under the cultivation of vegetables and its production but not between growth rate of area under the cultivation of vegetables and its yield and growth rate of vegetables production and growth rate of vegetables yield. Table: 2 show the growth rate of India’s vegetable trade with China. During the period of the study, the growth rate of vegetable exports to China was the highest recorded 89 percent in the 2003 and lowest recorded -12.9 percent in 2008. The growth rate of vegetable imports from China was the highest recorded 118.9 percent in the 2002 and lowest recorded 28.1 percent in 2004. The growth rate of vegetable exports as percent of imports was the This article has been published in ANVESAK Journal. Sardar Patel Institute of Economic and Social Research, Ahmedabad-380 054, India. Website.spiesr.ac.in
Anvesak Journal Vol (45), No (2).
Jan-June, 2015
highest recorded 126.7 percent in 2003 and lowest -42.6 percent in 2008. Indian vegetables exports increased up to 2007, after that growth rate declined. The growth rate of export vegetable product share was the highest recorded 63.2 percent in the 2011 and lowest recorded -20.2 percent in 2004. The growth rate of import vegetable product share was the highest recorded 97.1 percent in the 2009 and lowest recorded -57.1 percent in 2004. However, the rate of fluctuations in exports is lesser than the fluctuations in imports from China to India for vegetables. China, India, Iran, Turkey and the USA are the top five countries in the world in terms of area under the cultivation of vegetables. The China, India and Iran have occupied 1st, 2nd and 5th place respectively in terms of area and production in the world. Turkey and the USA have occupied the 3rd and 4th respectively in terms of area and 4th and 3rd respectively in terms of production in the world. Spain has occupied the 1st place in terms of productivity followed by the USA, Italy, Iran and Egypt. However, the performance of China and India’s is superior to other countries in terms of area and production but not in terms of productivity. (Shown in Appendix:1) In India, West Bengal occupied the 1st position in terms of area followed by Bihar, Madhya Pradesh, Uttar Pradesh and Andhra Pradesh. In terms of production, West Bengal state occupied the 1st place followed by Uttar Pradesh, Bihar, Madhya Pradesh and Andhra Pradesh. Tamil Nadu state occupied the 1st position in terms of productivity of vegetable in the country followed by Arunachal Pradesh, Kerala, Jammu & Kashmir and Uttar Pradesh. However, West Bengal, Bihar and Uttar Pradesh are major players in the production of vegetable crops. The performances of these states are very high in terms of area and production but not in terms of productivity. Tamil Nadu state is the one of the best cultivators of vegetable crops in the country. (Shown in Appendix:2) EMPIRICAL ANALYSIS OF INDIA’S VEGETABLES TRADE WITH CHINA This article has been published in ANVESAK Journal. Sardar Patel Institute of Economic and Social Research, Ahmedabad-380 054, India. Website.spiesr.ac.in
Anvesak Journal Vol (45), No (2).
Jan-June, 2015
Mainly, the area under the cultivation of vegetable crops, production, productivity, exchange rates and other factors are influencing vegetable trade. Due to multicollinearity problem, the study has considered the important factors like production of vegetables and exchange rate as independent variables and vegetable exports and imports as dependent variable. Impact of Vegetable Production and Exchange Rate on India’s Vegetable Exports to China (Table: 3). Y= - 2047269.61 +0.788 (X1) + 0.372(X2) + Ut The impact of production and exchange rate on India’s vegetable exports was investigated by using linear regression method. The estimated value of coefficients is presented in the equation. The table:3 shows that, the value of R2, i.e, the coefficient of determination is 0.930 which implies that 93 percent of variation in India’s vegetable exports is explained by production and exchange rate. The coefficient of vegetable production is positive and significant at 5 percent of level of probability. The coefficient 0.788 implies that 1 unit change in vegetables production, the India’s vegetable exports change by 0.788 units. This is the expected result as increases in production of vegetable, shall result in increases in its exports to China, which leads to rise in accumulation of foreign currency. The coefficient of exchange rate is positive and significant at 5 percent level of probability. The coefficient 0.372 indicates that 1 unit increase in exchange rate, leads to 0.372 units increase in India’s vegetable exports to China. Impact of Vegetable Production and Exchange Rate on India’s Vegetable Imports from China (Table: 4). Y= - 1060643.98 +0.742(X1) +0 .396(X2)+Ut
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Anvesak Journal Vol (45), No (2).
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The impact of production and exchange rate on India’s vegetable imports was investigated by using linear regression method. The estimated value of coefficients is presented in the equation. The table: 4 shows that, the value of R2, i.e, the coefficient of determination is 0.878 which implies that 87.8 percent of variation in India’s vegetable imports is explained by production and exchange rate. The coefficient of production is positive and significant at 5 percent level of probability. The coefficient value of 0.742 implies that 1 unit change in production, the India’s vegetable imports increases by 0.742 units. This is the unexpected result as an increase in vegetable production must result in decrease in vegetable imports from China, which reduces the foreign income and puts burden on balance of payments. The coefficient of exchange rate is positive and significant at 5 percent level of probability. The coefficient 0.396 indicates that 1 unit increases in exchange rate, leads 0.396 units increase in India’s vegetable imports from China. CONCLUSION AND SUGGESTIONS: The extent of vegetables processing varies from one country to another country. Vegetable have lot of demand in international market. Its consumption is also relatively high in the world because of vegetables contain nutritions and vitamins. Now-a-days, the vegetable sector is growing at a faster rate. During the study period, it is revealed that the growth rate of India’s vegetables exports to China has increased. There is a positive relation between the growth rate of vegetables area and growth rate of vegetables production in India. The R2 value is 0.93 with respect to India’s vegetable exports to China whereas the R2 value is .87 with respect to India’s vegetables imports from china, explained by production and exchange rate. There is a significant effect of vegetable production and exchange rate on Indian vegetable exports from and imports to India, at 5% significance level. In context of vegetable exports, India should have to concentrate on the neighbouring countries such as This article has been published in ANVESAK Journal. Sardar Patel Institute of Economic and Social Research, Ahmedabad-380 054, India. Website.spiesr.ac.in
Anvesak Journal Vol (45), No (2).
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China, Bangladesh, Sri Lanka and Pakistan which have been the traditional outlets for our onion, potato and other vegetables. However, there is a need to enhance the cultivation of vegetable crops area through adopting the modern technology by an innovative way and initiate measures for the promotion of exports from India.
REFERENCES 1. Aaditya Mattoo et al. (2007). From Competition at Home to Competing Abroad- A case study of Indian Horticulture. New Delhi: Oxford Univeristy Press. 2. Food and Agriculture Organisation. 3. Goud, R. S. (2014). Growing China Influence in Indo-Pacific Oceans. India Ocean Digest , 34 (1). 4. Food and Agriculture Organization Report. 5. Fruits and Vegetables Sector: An Overview. (2014, July 12). Hyderabad, Telangana, India. 6. Humphery, C. D. (2000). Governance and Trade in Fresh vegetables: The Impact of UK supermarkets on the African Horticulture Industry. The Journal of Development Studies , 37 (2), 147-176. 7. Indian Horticulture Board. 8. Indian Horticulture Database-2013. 9. Justin N. Hall, S. M. (2009). Global Variabilityin fruit and Vegetable Consumption. American Journal of Preventive Medicine , 36 (5), 402-409. 10. Kondal, K. (2014). Perfomance of Horticulture Sector in India. International Journal of Scientific Research , 3 (5), 1-3.
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11. Kondal, K. (2014). Growth rate of Area, Production and Productivity of Onion Crop in Andhra Pradesh. Indian Journal of Applied Research , 4 (3), 4-6. 12. Kondal, K. (2014). Trade Pattern of India Horticulture Sector: An Analysis. Golden Research Thought, 3 (9), 1-5. 13. Siraj, M. (2011). A comparative analysis of their integration into the global economy. Real World Economics Review , 57, 60-70. 14. Mohanty, S. (2014, September 10). Retrieved September 10, 2014, from Reserve Bank of India: http://www.rbi.org.in/scripts/PublicationsView.aspx?id=15010#441 15. Nalini Ranjan Kumar, A. R. (2008). Export of Cucumber and Gherkin from India: Performance, Destinations,Competitiveness and Determinites. Agriculture Economics Research Review , 21 (January to June), 13-138. 16. Nidhi Bagaria, S. S. (2014). A Study of Variation in Comparitive Advantage in Trade Between China and India. The International Journal of Humanities and Social Studies , 2 (1). 17. Singh, R. (2014, September 10). Retrieved September 10, 2014, from aginnovation.org: .(http://aginnovation.org/wpcontent/themes/theme/images/Opportunities%20for%20Export% 20of%20Fruits%20and%20Vegetable%20Based%20Products%20%28summary%29.pdf). 18. singh, R. J. (2009). Trade Pattern in SAARC Countries: Emerging Trends and Issues. Reserve Bank Occasional Paper , 30 (3). 19. S.S Wadkar, J. T. (2005). Performance of Cashew Exports from India. Agricultural Marketing , XLVIII (1), 23-27. 20. Thimmarayappa, A. L. (2012). Codex of hygienic Parctices for Sustainable Rural Exporting Horticulture Produce. Indian Streams Research Journal , 2 (6). 21. Vegetable Statistics. Techinical Bulleten 51. Indian Institute of Vegetable Research.
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Anvesak Journal Vol (45), No (2).
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22. Vilas Khandare, D. M. (2012). Indian Agriculture: Growth Performance and Trade Pattern. International Journal of Humanities and Applied Science , 1 (5), 138-141. 23. Worldbank.com Table: 1 Growth Rate of Vegetables in India (Figure in %) Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Area -1.0 -1.0 -0.2 10.9 7.0 5.1 3.5 1.7 0.1 6.4 5.8
Production -4.3 -4.3 4.1 14.6 10.0 3.2 11.7 0.5 3.6 9.6 6.7
Yield -3.5 4.3 3.4 2.7 -1.3 7.9 -1.2 3.1 3.6 0.6 1.1
(Source: Indian Horticulture Database-2013)
Table: 2
Year 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Growth Rates of India’s Vegetable Trade with China (Figure in %) India’s Exports India’s Imports Production Share Production Share India's exports India's imports Exports as % to China from China of Imports with China♦ with China ♦ 41.6 89 27.3 45.6 10 70 -12.9 56 62.3 56.7 30.3
118.9 -16.6 -28.1 21.6 35.3 18.1 51.6 90.3 -6.1 116.6 -8.4
-35.3 126.7 76.9 19.7 -18.7 44.0 -42.6 -18.0 72.8 -27.6 42.3
-14.8 13 -20.2 -16.9 0.7 40.3 -17.9 51.3 -3.3 63.2 47.9
65 -39.4 -57.1 -28.3 -11.6 -23.7 17.2 97.1 -31.3 63 -6.7
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Anvesak Journal Vol (45), No (2). CAGR
Jan-June, 2015
40.4
26.9
9.1
10.7
-6.1
Source: World Bank Website Note: ♦India’s vegetables exports and imports of production share out of all products.
Table: 3 Impact of Vegetable Production and Exchange Rate on India’s Vegetable Exports to China
R2
Adjusted R2
F Value
DurbinWatson
VIF Producti on
P values
Exchange rate
0.930 0.914 59.4 1.63 1.09 1.09 Note: * at 5% significance level. Dependent variable: India’s Vegetable Exports to China
t-statistic
Producti on
Exchang e rate
Constant
Productio n
Exchange rate
.000*
.003*
-6.311
8.520
4.022
Table: 4 Impact of Vegetable Production and Exchange Rate on India’s Vegetable Imports from China
R2
Adjusted R2
0.878 0.851
F Value
32.29
DurbinWatson
2.52
VIF
P values
Produc tion
Exchang e rate
Producti on
Exchange rate
1.09
1.09
.000*
.010*
t values Constant
4.799
Producti on
Exchange rate
6.084
3.246
Note: * at 5% significance level Dependent variable: India’s Vegetable Imports from China
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Anvesak Journal Vol (45), No (2).
Jan-June, 2015
Appendix:1 Vegetable Cultivation in Top Five Countries in the World Year States Area (in 000 Hect) Rank China 24560900 1 India 9205186 2 2012Iran 876830 5 13 Turkey 1111702 3 USA 1104640 4 Year States Production (in 000 MT) Rank China 573935000 1 India 162186567 2 2012Iran 23485675 5 13 Turkey 27818918 4 USA 35947720 3 Year States Productivity (MT/HA) Rank Iran 26.8 4 Italy 27.3 3 2012Egypt 25.7 5 13 Spain 39 1 USA 32.5 2 (Source: Indian Horticulture Databse-2013)
Appendix:2 Vegetable Cultivation in top Five States in India Year
2012-13
Year
2012-13
States Andhra Pradesh Bihar Madhya Pradesh Uttar Pradesh West Bengal States Andhra Pradesh Bihar Madhya Pradesh Uttar Pradesh
Area (in 000 Hect) 686.1 912.66 861.8 686 1347.96 Production (in 000 MT) 12104.7 16325.7 12574 19572
West Bengal
25466.81
Rank 5 2 3 4 1 Rank 5 3 4 2 1
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Anvesak Journal Vol (45), No (2). Year
2012-13
Jan-June, 2015 States Arunachal Pradesh Jammu & Kashmir Kerala Tamil Nadu Uttar Pradesh
Productivity (MT/HA) 24.7 22.1 23.6 28 21.4
Rank 2 4 3 1 5
(Source: Indian Horticulture Databse-2013)
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