International trade opportunity assessment in insecticides, rodenticides, fungicides, herbicides &

similar (ITC HS 3808) with special reference CIS countries (Breakaway countries erstwhile
USSR).

Abstract

The trade between India and CIS countries such as Russia and Ukraine is expected to touch $ 30
billion by 2020 reported by FIEO. Recent Chabahar port deal provided better opportunities for
Indian exporter to enter into CIS countries and Eastern countries. Literature suggested Indian
exporter will get the benefit of transportation cost reduction up to 40 % which gives them
competitive edge in global market place. Study investigated the trade opportunity in insecticides,
rodenticides, fungicides, herbicides & similar (ITC HS 3808) with the CIS countries (Breakaway
countries erstwhile USSR). Study focused on market identification and competitor analysis.

Keyword: Revealed Comparative advantage, Trade intensity, Import penetration, Trade

dependence
Introduction

India is major producer of pesticides after USA, China and Japan. Indian crop protection industry
is capital intensive and highly regulated in India. Pesticides industry in India is segmented into
six categories including insecticides, herbicides, fungicides, bio-pesticides, plant growth
regulators and rodenticides. These are the chemical products and come under HS Code 3808.
India is one of the countries which had bilateral trade from the world. Pesticides market in India
has been largely dominated by chemical pesticides while bio-pesticides are lower in comparison
to chemical pesticides. However, the bio-pesticides market in India has a huge potential for
growth in the coming years primarily owing to government support and increasing awareness
about the use of non-toxic, environment friendly pesticides in the country.
Figure 1% Share of 3808 with world (Calculated from Export import Data bank, MOC, GOI)

Share of ITC HS 3808 in international market is increasing. India is one of the major suppliers of
ITC HS 3808 in international market. Export potential ITC HS 3808 of India around 1.1 bn and
actual export is nearly to half of the potential. (Map E. P., n.d.) India is having export potential
of 500 to 600 million in international market. Literature suggested Vietnam, China, Bangladesh,
Thailand and Ukraine are potential market for Indian product ITC HS 3808.

Industry faced tough competition from traditional competitor China and Japan. Technology and
low cost production would be the competitive advantage for Japan and China. Even Japan had
geographical advantage over China and India with respect to Transportation cost for CIS
countries.

Figure 2India's exports to CIS of ITC HS 3808 Source: Trademap, DGCI & COMTRADE

India’s supply of OTC HS 3808 increased which shows supportive trade policy and global
environment.

Research Problem:
To assess trading opportunity in CIS countries for ITC HS 3808.

Research Objectives:

 To know the comparative advantage of ITC HS 3808 in the CIS market

 To measure the competitiveness of the CIS market

Research Methodology

Study calculated Sectoral contribution (SHI), Market concentration Index, compound annual
Growth rate, revealed comparative advantage, Trade dependence index, Import penetration
index, Trade intensity index , Competitor TII, Pricing analysis and tariff analysis for the period
of 2008 to 2017. CIS countries are Azerbaijan, Armenia, Belarus, Kazakhstan, Kyrgyzstan,
Moldova, Russia, Tajikistan, Turkmenistan, Uzbekistan and Ukraine. (CISSTAT, 2018)

Economic indice:

Hirschman Herfindahl Index

It is the sum of squared shares of each product in total export. A country with a perfectly
diversified export portfolio will have an index close to zero, whereas a country which exports
only one export will have a value of 1 (least diversified).

Revealed Comparative Advantage Index

Comparative advantage underlies economists’ explanations for the observed pattern of inter-
industry trade. In theoretical models, comparative advantage is expressed in terms of relative
prices evaluated in the absence of trade. Since these are not observed, in practice we measure
comparative advantage indirectly. Revealed comparative advantage indices (RCA) use the trade
pattern to identify the sectors in which an economy has a comparative advantage, by comparing
the country of interests’ trade profile with the world average..

Trade Intensity Index

We can think of the trade intensity index as a uniform export share. In other words, the statistic
tells us whether or not a region exports more (as a percentage) to a given destination than the
world does on average. It is interpreted in much the same way as an export share. It does not
suffer from any ‘size’ bias, so we can compare the statistic across regions, and over time when
exports are growing rapidly.

trade dependence index

The trade dependence index (also often called the openness index) is a measure of the
importance of international trade in the overall economy. It can give an indication of the degree
to which an economy is open to trade (subject to some serious limitations).

Import penetration

The import penetration rate shows to what degree domestic demand (the difference between
GDP and net exports) is satisfied by imports. Calculated at the sectoral level it is termed the self-
sufficiency ratio. The index may be used as the basis of specific policy objectives targeting self-
sufficiency. It may provide an indication of the degree of vulnerability to certain types of
external shocks.

Analysis of India as Supplier

 Sectoral contribution

Figure 3Sectoral Contribution of India Source :Trademap, DGCI & COMTRADE

Sectoral contribution at 2 digit and 4 digit level is increasing since 2008. Contribution from ITC
HS 38 showed strong presence in global market. Contribution of India increased and reached to
0.5 which shows potentiality and competitive advantage over others in global market.

 Market Concentration Index

2016 onwards India’s HH index reached to zero with CIS countries proves Indian economy
opens towards trade with CIS countries.

Figure 4India's HH index with CIS countries Source: Authors own calculation

 Compound annual Growth rate (CAGR)

Figure 5India's AGR & CGR with CIS countries Source Authors own calculation

Annual growth rate of exports does not give the clear image of the economy as the figure is
sometimes very low and sometimes very high so in order to get the clear cut picture CAGR of
ITC HS 3808 exports is calculated which showed slow and steady growth.

 Revealed Comparative Advantage

Figure 6India’s RCA with World (ITC HS 3808)Figure 7Leading supplier’s RCA in CIS countries (ITC HS 3808)
Source: Authors own calculations
India showed revealed comparative advantage over global leading supplier of ITC HS 3808 in
the CIS. India and France had higher RCA in CIS countries but France reported one similar
product while Germany also reported two similar products in aggregated data. India has highest
RCA in CIS country.
Analysis of CIS countries as Potential Market
 Trade Dependence Index

Figure 8TDI -CIS COUNTRIES Authors own Calculations

Trade dependence index measures the importance of international trade in the overall economy.
CIS countries dependence index is average 0.5 to 1.5 for all the countries except Azerbaijan.
This shows dependence of CIS countries on International Trade. Azerbaijan shown highest trade
dependence index.

 Import Penetration Index

Import penetration rate shows to what degree domestic demand (the difference between GDP
and net exports) is satisfied by imports. IPI index were steady and stable. Average 20% of
overall demand is satisfied by Indian Trade.

Figure 9IPI- CIS COUNTRIES Authors’ own calculations

 Trade Intensity Index

Trade intensity index is a uniform export share. In other words, the statistic tells us whether or
not a India’s exports more (as a percentage) to a given destination than the world does on
average.
Figure 10India's TII With CIS Countries Authors own calculation

Values greater than one is always considered as intense trade in to economy. India had good TII
index with Russia and considerable with other CIS countries. Other CIS countries are importing
more from global market. Kazakhstan TII index expected to grow in future.

Figure 11TII with Kazakhstan

 Competitor TII
China dominated CIS market with maximum TII index due to geographical advantage. China’s
TII index among the competitor was higher always except in Russia where India proves her
presence with good TII.
Figure 12CHINA'TII WITH CIS COUNTRIES Authors own calculation

 Comparison of Tariff

Figure 13Average tariff (estimated) Source Trade map and Mac cap

The average tariff imposed by CIS countries were almost on an average of 3 to 4 %. India faced
high tariff rate in most of the CIS countries except Belarus. Russia, Moldova and Azerbaijan
where India had comparative advantage in terms of tariff. These countries can be a future
destination in terms of tariff rate is concerned.
 Price Comparison
China enjoyed absolute advantage in Unit price of ITC HS 3808 over India and other suppliers.
China’s Unit price in CIS countries was lowest than India’s unit price. Price affected by
transportation cost.
  India China Difference
Russia 6453 3405 3048
Armenia 6469 4843 1626
Azerbaijan 5929 5491 438
Belarus 4975 2147 2828
Kazakhstan 5650 3844 1806
Kyrgyzstan 3810 5313 -1503
Moldova 4714 5772 -1058
Tajikistan 1950 2245 -295
Turkmenistan 7000 1000 6000
Ukraine   3585 -3585
Uzbekistan 5500 7018 -1518
Table 1Unit value (USD/Tons) Source Trade Map and MAC CAP

Findings:
Analysis of India as Supplier

 ITC HS 3808 as a sector contributed significantly.

 India’s openness with CIS countries grown rapidly during last three years.
 AGR of India’s was not satisfactory but the compound growth was steady and stable.
 India’s RCA (Close to 3) is tremendous. India does have huge potential.
 India’s RCA in CIS countries were phenomenal but India could not take the benefit of
that RCA advantage in CIS countries.

Analysis of CIS countries as Potential Market

 CIS countries were highly dependent on International Trade.
 Domestic demand highly satisfied through import.
 India’s exports to CIS country were not intense.
 China Dominated CIS market.
 India does have tariff advantage in some of CIS countries such as Russia, Belarus,
Armenia Moldova and Uzbekistan.
  China dominated CIS market in terms of Unit price per tons.
Conclusion
Russia would be traditional market for India’s product. Demand of the Indian product is high in
CIS countries but price competitiveness created hurdle for Indian supplier in CIS market. India
did have certain tariff advantage with few of CIS countries. Recent INSTC will help Indian
supplier to reduce their cost and make price comparative in the CIS market.

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