Intra-Industry Trade and Trade Complementarity: Evidence from India-Sri Lanka Bilateral Trade
Journal of International Economics, Volume 6, Issue 2, July-December 2015, pp.38-70
Posted: 2 Oct 2017
Date Written: 2015
The present study investigates the intra-industry trade between India and Sri Lanka over the period of 1975 to 2013. GL index is used to calculate intra-industry trade at 1, 2 and 3 digit level of SITC. The study also calculated the trade complementarity index, and revealed comparative index. The extent of intra-industry trade is high in sectors like crude materials, machinery and transport equipment, chemical elements and compounds and rubber manufactures. More over the growth of Intra-industry trade between India and Sri Lanka shows that Sri Lanka’s industrial base is changing from low value addition to high value addition products, especially since the free trade agreement was put into effect in 2000. The study also reveals mismatch between Indian imports and Sri Lanka exports. India has exhibited comparative advantage in transportation, chemicals, metals, food products and minerals products while Sri Lanka has comparative advantage in vegetable, textile and clothing, plastic and rubber products. The study also suggests that both countries shows diverse revealed comparative profile having more opportunities to trade with each other.
Keywords: Grubel Lloyd index, trade complementarity index, Free trade
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