Assignment on

Intra Trade of the

Commodities in India

Submitted by:-

ANSHU CHHABRA

SECTION -E

A1802010189
Intra-industry trade refers to the exchange of products belonging
to the same industry. The term is usually applied to international trade,
where the same kinds of goods and services are both imported and
exported.

The Nature and Significance of Intra-industry Trade

Intra-industry trade represents international trade within industries rather than
between industries. Such trade is more beneficial than inter-industry trade because
it stimulates innovation and exploits economies of scale.

International trade is traditionally thought to consist of each country exporting the

goods most suited to its factor endowment, technology, and climate while
importing the goods least suited for its national characteristics. Such trade is called
inter-industry trade because countries export and import the products of different
industries. But the top exports and imports of most industrial countries are actually
similar items, such as passenger cars, electrical generators, or valves and
transistors. Indeed, passenger cars are the number one export and import of Great
Britain, Germany, and France. In the real world, international trade is largely trade
within broad industrial classifications. Intra-industry trade occurs when a country
exports and imports goods in the same industry. Intra-industry trade has been a hot
topic among trade economists for several decades, but it has received scant
attention among economists in general.(1) This article gives an overview of intra-
industry trade for the generalist. In the debate over NAFTA, for example,
commentators focused much attention on America's inter-industry trade with
Mexico but none on the far more important intra-industry trade.

Determinants of intra industry trade

1 There are variations of intra –industry trade intensity for any given industry
depending on country specific characteristics of the trading partners.
2 Given trading partners , there are variations of intra – industry trade industry
intensity across industries depending on commodity specific demand and supply
characteristics.

The Commodities that are common to both the exports and

imports are as given below:

1) Pearls, precious and semiprecious stones, worked or unworked(as

Imports) / Gems &Jewellery (as Exports)

Exports They are classified as the Manufactured Goods (Handicrafts

incl.carpets hand-made)

Exports

Qty. (Thousand tonne) Rs. cr

1960-61 na 1
1970-71 na 45
1980-81 na 618
1990-91 na 5247
2000-01 na 33734
2006-07 na 72295
2007-08 na 79228
2007(April-Dec) na 58997
2008(April-Dec) na 65374
REASONS

As India makes rapid progress in the retail arena, the jewellery market is
undergoing a gradual metamorphosis from a 'storehouse of value' to a
fashion accessory bazaar. Plain gold has now given way to diamonds,
platinum and coloured gemstones.

The two major segments of the sector in India are gold jewellery and
diamonds. Gold jewellery forms around 80% of the Indian jewellery market,
with the balance comprising fabricated studded jewellery that includes
diamond as well as gemstone studded jewellery. Gold jewellery and
coloured gem segments account for about 15% and 5%, respectively of
India's gems and jewellery export in value terms.

The largest cutting and polishing centre of diamonds in the world both in
terms of quantity and value, the Indian gems and jewellery sector
contributed to about 15% of India's total merchandise exports during 2005-
06. And in 2006-07, it accounted for 13.7% of the country's total
merchandise exports.

In terms of carat, India's share in this sector is about 80% of the world
market. India produces 60% of the world's polished diamond market by
value, 82% by carats and 95% by number of pieces.

According to the Gems and Jewellery Export Promotion Council (GJEPC),

the total exports of the industry for the fiscal year 2006-07 were US$
17,101.77 million as against US$16,646.04 million in 2005-06, showing a
growth rate of 2.74% over the previous fiscal year. The current fiscal
witnessed an impressive growth of 10.86% in April 2007 over the
corresponding period in 2006. Exports in April 2007 amounted to US$
1236.12 as against US$ 1115.07 in April 2006.

In this category, exports from domestic tariff area and SEZs together at US$
 9.77 billion during 2006-07 have shown a growth of 3.37%, while exports
from bonded warehouses at US$ 1.12 billion have registered a decline of
52.42% compared to the corresponding period of the previous year.

Export of gold jewellery in 2006-07 has shown a growth of close to 35% at

US$ 5.2 billion over US$ 3.87 billion in 2005-06. Export of coloured
gemstones at US$ 246.48 million logged a growth of 6.08% during 2006-07
as compared to US$ 232.35 million in 2005-06.

The major destinations for exports have been the US, UAE, Hong Kong,
Belgium and Israel. In fact, the US, UAE and Hong Kong together
accounted for over 70% of the total exports in the previous fiscal year.

The Indian gems and jewellery sector contributed to about 15% of India's
total merchandise exports during 2005-06. And in 2006-07, it accounted for
13.7% of the country's total merchandise exports

Imports

Qty. (Thousand tonne) Rs. cr

1960-61 …… 1
1970-71 ……. 25
1980-81 ……. 417
1990-91 ……. 3738
2000-01 …... 22101
2006-07 ……... 33881
2007-08 ……... 32114
2007(April-Dec) …… 28839
2008(April-Dec) …. … 48097
The “Index Numbers of Foreign Trade” shows that
Unit Value of Index has consistently been increasing for both the Exports and
Imports since the 2000-01 period till 2008-09.
Volume Index shows the consistent increase too.
Bibliography

The content of the assignment has been taken from the following web pages:

 http://indiabudget.nic.in/es2009-10/tables.htm
 http://www.ibef.org/industry/gemsjewellery.aspx
 http://www.commodityonline.com/news/India-raw-cotton-export-ban-
makes-less-impact-on-prices-27564-3-1.html
 http://indiabudget.nic.in/es2009-10/chapt2010/tab76.pdf
 http://consumergoods.indiabizclub.com/info/types__/gems_and_jewellery