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Open regionalism and trade cooperation between the world's two largest developing countries, China and India, can foster outward-oriented development and intra-regional trade based on comparative advantage and available factor endowments. In view of the recent wave of worldwide subregional and bilateral trade cooperation, and the recent suspension of Doha negotiations by the World Trade Organization, the opportunity costs of not moving towards greater trade integration between China and India could be increasing. From the global perspective, India and China today represent two unique new players in the international market, presenting a combination of high GDP, a low but increasing per capita income, significant level of poverty and yet huge growth rates and growth potential. This raises several questions about their becoming the major drivers of international economic growth. It is only in the recent past that political initiatives of confidence building measures began to shape their areas of mutual cooperation.
This paper develops a comparative assessment between the two countries and identifies the extent to which the two emerging powers should be considered as partners and/or competitors. Despite numerous internal challenges and non-economic issues of concern, an accretive and profitable economic alliance between the two countries is supported quantitatively and qualitatively. India and China share a complementary interdependence by engaging in a bilateral trade relation. This paper evaluates the structure of comparative advantage for India and China and the change in the economic scenario over a 17-year period from 1995 to 2011. Comparative advantage between the two countries has been calculated by using Revealed Comparative Advantage (RCA) and Revealed Import Dependence (RID) index. Data as per the SITC classification 1 has been used to compute the index of RCA and RID.
Key Words: India, China, Economic Performance, Trade, RCA and RID
1. Introduction
The world economy has changed rapidly both in horizontal and vertical spectrum. These changes in the world economy have established clearly that no nation can isolate itself completely from the rest of the world and survive for long (Agarwal, 2002). Both India and China are large economies with vast pool of employable labour and abundance of natural resource endowments. The rapid economic growth of India and China has been associated with a much more rapid growth in their trade. "Economic growth...