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AN EMPIRICAL ANALYSIS OF INDIA-UK BILATERAL TRADE

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 1
An Empirical Analysis of
India-UK Bilateral Trade
Š Sandeep Kaur Bhatia, Mandeep Bhardwaj and Parmjeet Kaur

Introduction

H
istorically, India and UK have strong trade relations since the UK has its
colonial empowerment over Asian and African countries. India has trade
links with British Empire under its colonization period where India fulfilled
the two-tier need of British as one supply of raw material and second become a
market for their manufactured products. Thus, ties between the UK and India have
been very close. But a shared past is not enough to keep a relationship going. With
time, the structure of trade between both the nations has also changed in abundant
(www.britishcouncil.org 2013). Thereby, even after India’s independence, both
countries have taken a step to polish their established relations by continuously
exploring its new bilateral trade potential. In 2004, an important decision was
undertaken to upgrade their bilateral relationship through Strategic Partnership
which has laid the foundations for Enhanced Partnership for the future, with a high
level of economic and technological cooperation along with close management on
many regional and global issues.
Under ‘Strategic Partnership’ various programs were initiated in 2004 as India-
UK Economic and Financial Dialogue (EFD) (2005), India-UK Joint Economic
and Trade Committee (JETCO) (2005), India-EU Broad-Based Bilateral Trade and
Investment Agreement (BTIA) (2007), UK-India Education and Research Initiative
(UKIERI, 2005), India-UK Financial Partnership (IUKFP) (2014) (India’s Ministry
of External Affairs, 2016). All these programs are working in a way to strengthen
the relationship between India and the UK. Essential steps and measures have been
taken by India in order to make its relation strong with EU. Initiative of India-EU
 4 BREXIT AND INDIA: Analysing the Implications

FTA in 2007 is an effort to strengthen economic relations. Though, it has not been
signed yet but it is clear that India’s interest to have full access to EU is also due to its
strong and cordial relations with the UK which will enable them to have easy access.
At present, both sides of government would eager to conclude the negotiation
process as soon as possible. Thereby, interest of Indian trade market over access to
global market has put one more opportunity in the form of Brexit. With adoption of
liberal reforms in 1991, there has been a continuous increase in its trade. According
to WTO (2015), India has a contribution of 24.8% of GDP in total world trade,
and it has acquired the 19th and 13th position among world’s exporter and importer
respectively. Thus, with its liberal and attractive trade atmosphere, India is being
the world’s fastest-growing country in the world and third-largest Asian growing
country (IMF, 2016). While in a situation of bilateral trade between India and UK,
the UK is currently at 5th position in terms of India’s export destination, but it
fails to make its place in top 10 import source country of India. Since 2005 India’s
trade with the UK has been declining and have a little share of 2.7% in each other’s
trade basket. This paper attempts to have an overview of trends and patterns of
bilateral trade of India-UK for the period of 2000-2015. While various trade indices
have been used to assess the trade patterns to project the scope of India-UK trade
relation in future. Keeping in view the importance of India’s trade and its historical
relation with the UK, the present study has been structured to analyze the trends,
prospects and future scope for their trade relations. The primary objectives of the
present study are; to analyze the trends and composition of India-UK bilateral trade
for the period of 2000-2015 and to examine the trade competitiveness of India-UK
with various indices during the study period.

Database and Methodology

The study, in essence, covers the period of 15 years, i.e., 2000 to 2015. While
focusing on the accessibility of data in use, secondary data has been collected from
various sources: Data for computing indices like Revealed Comparative Advantage,
Grubel –Lloyd Index, and Trade Complementarity Index, etc. have been collected
from UN COMTRADE database, 2016 at four points of time, i.e., 2000, 2005, 2010,
2015. Data for Export Propensity Index and Import Penetration Index has been
calculated by taking GDP of India and UK for 2000-2015 from World Development
Indicators.

Trends in India-UK Bilateral Trade (2001-2015)

On India’s front, Table 1 depicts that exports and imports of India with the UK have
been fluctuating. It has reached a level of US $ 2207.96 million to US $ 8891.20
million, i.e., by 11.61%, whereas India’s Imports from the UK has changed from
US $ 3160.48 million to US $ 5375.63 million, at a rate of 5.91%. The positive fact
which emerges from the Table 1 is that out of the total trade, the export share is
dominating over imports share which has a positive impact on India’s trade balance.
On the other hand, UK trade trends show that exports of UK to India have increased
from US $ 3798.59 million to US $ 5978.36 million, i.e., export has grown by 5.98%.
While its import has reached a level of US $ 9325.95 million from US $ 2883.57
million for the same period and showed a growth rate of 9.85%.
 An Empirical Analysis of India-UK Bilateral Trade 5

Table 1: India-UK Bilateral Trade

(US $ Million)
India UK
Year Exports Imports Total Trade Exports Imports Total Trade
2000 2207.96 3160.48 5368.44 3798.59 2883.57 6682.17
2001 2196.63 2758.52 4955.15 2957.00 2960.63 5917.62
2002 2409.06 2643.05 5052.11 2860.22 3115.61 5975.83
2003 2769.37 2980.32 5749.70 3895.04 3746.71 7641.76
2004 3409.43 3290.82 6700.25 4305.70 4709.53 9015.24
2005 4958.86 4300.44 9259.30 5369.97 5689.40 11059.37
2006 5383.83 4030.81 9414.64 5013.55 6362.08 11375.63
2007 6286.91 4794.54 11081.45 5942.94 8226.23 14169.17
2008 6597.52 6216.83 12814.35 7781.27 8661.93 16443.20
2009 6528.85 4053.59 10582.45 4611.89 7585.63 12197.52
2010 6436.41 5166.82 11603.23 6212.14 9415.86 15628.00
2011 8879.11 7453.93 16333.04 8800.37 10805.06 19605.43
2012 8100.18 6636.11 14736.29 7239.69 9275.82 16515.51
2013 10559.41 6430.79 16990.19 8005.56 9669.24 17674.80
2014 9665.34 4791.11 14456.45 6411.58 10721.47 17133.05
2015 8891.20 5375.63 14266.83 5978.36 9325.95 15304.31
CAGR 11.61 5.91 8.94 5.98 9.85 8.05
Source: UN Comtrade 2015.

Thus, the overall view of trends have shown a similar picture where the bilateral
trade between both nations has fluctuated. Another fact is that although the bilateral
trade of UK is more than that of India’s total trade and, but the share of India’s
export dominates the share of Indian imports in the UK. Thus, on an average, for
the whole study period, the trade is in favour of India.
The exports of India to the UK has been increasing continuously, and it surpasses
the export from the UK to India in 2007. Nevertheless, on both the front, the
imports remain more or less same. However, the imports from the UK to India is
continuously increasing which has a positive impact on India’s trade balance.
Trade Intensity Index
The changing trends in India-UK bilateral trade relations can also be identified with
the help of trade intensity between both countries. Trade intensity index highlights
the relative importance of evidently low levels of trade (in absolute terms) between
countries. An index showing value above/below one indicates that bilateral trade
flows between countries is greater/smaller than would be expected by the partner’s
share of world trade; vice-versa is also true (Mao and Ji, 2008).
Table 2: Trade Intensity Index of India and the UK
India with UK UK with India
Year TII EII III TII EII III
2000 0.98 0.89 1.46 1.96 1.72 1.07
2005 1.05 0.97 1.03 1.27 1.27 1.05
2010 0.77 0.69 0.80 0.81 0.94 0.99
2015 0.83 0.78 0.81 0.75 0.89 0.80
Source: UN Comtrade 2015.
Note: EII- Export Intensity Index & III- Import Intensity Index.
 6 BREXIT AND INDIA: Analysing the Implications

Fig. 1: Trade Intensity Index of India and the UK

Table 2 shows the fluctuating trends in the trade intensity of India and UK in each
other’s market, during the study period. The value of TII of India remains below
1, except 2005 (1.05 %), over which it remains less than one as in 2010 it is 0.77 %
and rises to 0.83 % in 2015. However, in the economic term, on an average India’s
bilateral relation has not been explored to its potential level as its value is less than
one as also shown in figure 1.
On the other hand, the value of trade intensity for UK’s exports to India shows the
continuously downward trend during 2000 to 2015. As in 2000, TII of UK is 1.96 %
which set at 0.75 % in 2015, shows a continued decline. While the important fact
rises is that in 2000 it is 1.96 % which shows a very intense relation with India.
Because, India’s trade is mainly with the UK in Europe, but as India has diversified
its exports to other countries in Europe. From 2005, there is a decrease in trade
between India and UK (Shafi, 2011). The reason behind declining trade trend
during 2005 to 2015 is global financial crisis which adversely affected merchandise
exports of both India & UK.

Export and Import Intensity

Export and import intensity indices show the ratio of the share of country i’s trade with
country j’s relative to the share of world trade destined for country j. The value of export
and import trade indices above/below than one deduces as a sign of larger/smaller than
expected trade flows between two countries engaged in trade (Zhou et al., 2006).
Table 2 shows that India’s EII is less than one and fluctuating over the time period
from 2000 to 2015 which indicates that the export level of India to the UK is less
than that of UK in the world market share. Also, the Import Intensity Index (III) of
India with the UK has been declining over the same period which interprets that
the import level of India with the UK is less than UK’s import share in the world
market. On the other hand, UK Export Intensity Index (EII) shows declining trend
as the value continuously fall from 1.72 % to 0.89 % state that the UK exports to
India is greater than India to the world till 2005. It started declining after 2005
and become 0.89 % which implies UK’s exports to India is less to India than that
of India’s share in world market; while UK’s Import Intensity Index (III) shows the
simultaneous fall along with the Export Intensity Index (EII) which means that the
UK’s imports from India are declining than that of India’s share in world market.
Further comparing, India’s Export Intensity Index (EII) with UK’s Export Intensity
Index (EII), it shows that India’s Export Intensity Index (EII) is smaller than UK’s
 An Empirical Analysis of India-UK Bilateral Trade 7

Export Intensity Index (EII) till 2005 which further reveals that the dependence of
India on UK exports is much stronger than that of the UK on India’s export market.
While UK’s Import Intensity Index (III) is greater than India’s Import Intensity
Index (III), showing that the dependence of UK on Indian market is much less than
that of India’s dependence on the UK.

Composition of Trade
Table 3 shows that the percentage shares of India’s top 20 exports to the UK at
four points of time, i.e., 2000, 2005, 2010, and 2015. Since 2000, there has found
much more changes in the composition of India’s exports to the UK. If the whole
study scrutinizes then the export structure of the year 2000 is known for the export
of mainly primary products as of Art. of jewelry and pts share (8.92), Articles of
apparel of leather (7.16), Furnishing articles, nes, of cotton (excl. knit) (5.38). Thus,
a mainly export basket of India was filled with exports of Gems, Jewellery, Dry
Fruits, and from manufacturing side export of Cotton clothes and leather made
products.
Table 3: India’s Top 20 Exports Commodities to the UK
2000 2005 2010 2015
Product Share Product Share Product Share Product Share
Code Code Code Code
711319 8.92 271000 34.87 271000 11.74 300490 13.26
420310 7.16 711319 6.85 870322 11.60 711319 10.49
30613 6.80 610910 6.15 300490 9.27 640391 6.40
710239 6.69 620630 5.76 711319 8.68 610910 5.64
640610 6.53 300490 4.83 880330 6.65 100630 5.55
620520 6.44 620452 4.70 620630 5.99 611120 5.54
640351 6.23 640351 3.53 610910 5.47 880330 5.48
100630 6.15 710239 3.13 640351 4.73 870322 4.85
840890 6.04 30613 3.07 620442 4.46 640351 4.68
630492 5.38 870321 2.95 620520 3.72 710239 4.49
90240 4.66 100630 2.89 420221 3.26 420221 3.92
80130 3.94 630492 2.85 640391 3.18 870899 3.72
830241 3.93 420221 2.82 730900 3.17 620520 3.68
610910 3.88 620520 2.64 710239 3.03 30613 3.57
852490 3.38 630790 2.47 611120 2.93 620443 3.28
630790 3.13 90240 2.29 870321 2.68 251622 3.24
620630 2.92 840890 2.26 630492 2.47 621143 3.12
420221 2.75 870899 2.16 30613 2.41 870321 3.10
640391 2.70 970190 1.93 90240 2.35 840890 3.10
520811 2.38 294200 1.84 294200 2.21 620442 2.87
Source: UN Comtrade 2015.

The year 2005 shows India’s exports basket which has a mixed variety of products
apart from primary based products. In this year India, has tried to explore its
comparative advantage in newly manufactured products which have diversified its
export composition give boost to economy by coming out of the chain of purely
agriculture-based products, though the share of Gems and Jewellery is more than
 8 BREXIT AND INDIA: Analysing the Implications

half out of top 20 products but the entry of new products as Petroleum oils, etc.
(excl. crude); preparation (34.87), Other medicaments of mixed or unmixed products
(4.83), Automobiles with reciprocating piston engine di (2.95), Motor vehicle parts
nes (2.16) and Other organic compounds, nes (1.84) gave a new direction to the
composition of Indo-UK trade.
However, 2010 has not shown the exploration of any new entry, and there is also the
falling share of Petroleum products (11.74), which might be due to global financial
crisis. However, the highlighting fact is that top 3 products are from manufacturing
sector which shows the changing trend of India’s export to the UK although the rest
export products shuffle in between itself as if Art. of jewellery and pts thereof of/o
prec mtl (8.68). A medicine product (13.26) puts a new entry on top one in export
basket of India in 2015 and the Table 3 further shows the increasing share of Art.
of jewellery and pts thereof of/o prec mtl (10.94), Automobiles with reciprocating
piston engine di (3.10) while the other export basket constitutes mainly of cotton
made products, leather products, Frozen shrimps and prawns, diamonds and
recently an increasing share of pharmaceutical products. Thus the Table 3 shows
that India’s export basket has shown a change from exports of Gems and Stones and
pure Agriculture based products to Pharmaceutical and manufactured products
in the time span of 2000-2015. It shows that India has developed its comparative
advantage in new fields by exploring and optimizing its unutilized resources in
context with UK export and started sharing a crown of exporter of manufactured
and semi-manufactured products with other developed countries by coming out of
the shell of the agriculture-dominated economy.
Table 4 represents the percentage share of top 20 imports of India from the UK,
during the study period 2000-2015. Gems and stones in the form of Diamond, Gold,
and Silver continue to be the top imports product during 2000-2010. However, in
between these commodities like Iron and Steel had taken its position either in top
3 or 4. Other products which were mainly existed in import composition of Indian
imports are Machines & Mechanical appliances nes (0.92), Printed books increased
share (0.71), and Parts of Diesel has shown an upward trend (0.46). So, it is clear
from the Table 4 that till 2010 imported products are more or less similar. However,
the totally different import composition of India in 2015 has been brought into
the picture when top one imported product Diamond with unwrought (40.30) has
the highest share followed by other unwrought forms (10.05), Aluminium waste
and scrap (5.92). The share of Whisky has increased and so on products which are
not imported as before. Thus, it can be said that the Indian imports from the UK
are highly concentrated till 2010 around Diamond, Gold, Silver, Aluminium Scrap
and Waste, Printed Books, Waste and Scrap of Different Products, Parts of Diesel
and Semi-Diesel Engines, Potassium, etc. which change into Unwrought, Other
Categories of Products, and Spacecraft, etc. So, a picture emerged out of this is that
overall there are handful of sectors as stone/glass, manufactured sector and a few
metals which are concentrated in bilateral trade between India and UK.

Revealed Comparative Advantage

Revealed Comparative Advantage (RCA) of the country explains the relative export
performance of individual export categories. If the RCA index for a particular
 An Empirical Analysis of India-UK Bilateral Trade 9

industry is greater than 1, it implies that the country has a revealed comparative
advantage in the exports of that industry and vice-versa (Balassas 1965). Table 5 shows
the RCA of India at four points of time 2000, 2005, 2010, and 2015. This is computed
by taking top twenty exports of India to the UK. So, it has been understood from
the Table 3 that export basket of India has undergone a drastic change as from
the export of primary products to the export of manufactured products or in
technical words, India’s comparative advantage has changed from primary sector
to manufacturing sector.
During the year 2000, there was the highest RCA of India with UK in Footwear
with rubber soles and leather upper (85.05), followed by Furnishing articles, nes
of cotton (excl knit) (45.05), Other organic compounds, nes (36.05). Thus, the
year 2000 demonstrated the dominance of primary based manufactured products.
Similarly, during 2005 India’s greater comparative advantage shifted to Furnishing
articles, nes, of cotton (excl. knit) (112.55), Women’s or girls’ blouses, shirts, etc.
of cotton (59.32), Skirts and divided skirts of cotton (59.10), Handbags with outer
surface of leather, or comp (31.69), which characterized the year 2005 with the
dominance of still primary based manufactured products in its higher attaining
comparative advantage. While the year 2010 shows a higher advantage in producing
and exporting, Furnishing articles, nes, of cotton (excl. knit) (134.78), Footwear
with leather soles and uppers, covering (124.15), Automobiles with reciprocating
piston engine di (10.18) and respective so on.
Table 4: India’s Top 20 Imports Commodities from the UK
2000 2005 2010 2015
Product Share Product Share Product Share Product Share
Code Code Code Code
710231 46.12 710231 58.90 710231 38.70 710691 40.30
710812 27.41 720449 8.51 720449 13.36 710812 10.05
710691 8.95 710691 6.25 710812 11.25 720449 9.73
710813 5.66 710813 6.06 760200 3.71 760200 5.92
720449 2.18 710692 3.97 890590 3.29 220830 4.05
710692 1.90 480252 1.95 710691 3.06 841112 2.91
740400 0.92 760200 1.55 480252 2.77 740400 2.88
870919 0.72 880330 1.40 880330 2.74 490199 2.82
490199 0.71 710812 1.35 780200 2.54 880260 2.73
852490 0.65 470790 1.17 840710 2.11 720421 2.68
880330 0.63 310420 1.16 470790 2.10 220890 2.58
852520 0.54 490199 1.00 740400 2.08 470790 2.03
848180 0.47 880240 1.00 870850 2.05 880330 1.77
710610 0.47 740400 0.97 710692 1.72 710692 1.64
721890 0.46 847989 0.97 220830 1.62 880390 1.57
840999 0.46 852490 0.96 490199 1.56 300490 1.37
310420 0.46 840999 0.80 870324 1.42 840890 1.28
852990 0.45 848180 0.72 840999 1.40 870899 1.27
870899 0.43 720824 0.66 220890 1.26 841199 1.23
847290 0.41 852990 0.65 400239 1.26 847989 1.19
Source: WITS Trade Database 2015.
 10 BREXIT AND INDIA: Analysing the Implications

Table 5: Revealed Comparative Advantage of India with the UK

Product 2000 Product 2005 Product 2010 Product 2015

Code Code Code Code
711319 4.09 271000 0.50 271000 0.94 300490 2.64
420310 9.81 711319 5.06 870322 10.18 711319 5.50
30613 13.08 610910 6.05 300490 1.96 640391 29.19
710239 59.32 620630 20.50 711319 9.13 610910 10.30
640610 1.26 300490 0.16 880330 8.93 100630 14.96
620520 59.10 620452 7.08 620630 51.56 611120 55.33
640351 98.80 640351 85.05 610910 11.73 880330 3.87
100630 2.56 710239 1.06 640351 124.15 870322 3.28
840890 – 30613 – 620442 70.00 640351 95.12
630492 16.31 870321 15.05 620520 20.49 710239 2.60
90240 14.31 100630 11.05 420221 25.79 420221 15.80
80130 112.55 630492 45.05 640391 22.93 870899 1.94
830241 31.69 420221 22.05 730900 47.99 620520 15.60
610910 1.39 620520 35.05 710239 2.23 30613 –
852490 22.22 630790 1.05 611120 35.56 620443 23.37
630790 – 90240 – 870321 13.14 251622 922.08
620630 14.30 840890 7.08 630492 134.78 621143 40.85
420221 1.03 870899 0.05 30613 – 870321 7.81
640391 146.93 970190 1.05 90240 – 840890 13.07
520811 38.67 294200 36.05 294200 42.45 620442 47.38
Source: WITS Trade Database 2015.
Note: (-) stands for unavailability of data for calculation of RCA of the product.

Thus, during 2010, India has explored its new comparative advantage in Automobile,
a step out of its primary based manufacturing product’s rigid wall. However, the
year 2015 shows the new inspection of products in achieving higher comparative
advantages as Sandstone, merely cut into a square or rectangu (922.08), followed by
Footwear with leather soles and uppers, covering (95.12), Babies’ garments, etc, of
cotton, knitted or cr (55.33), Dresses of cotton (47.38), etc. But while concluding,
it must be noticed that although the trade composition of India’s trade has been
undergoing a change from primary based products to fully or semi secondary based
products, still its revealed comparative advantages mainly lie in primary based
products. On the other hand, Table 6 shows that the UK’s comparative advantage
in 2000 lies in Silver in unwrought forms (134.29) followed by Diamonds non-
industrial unworked or simply sawn (109.84), Ferrous waste and scrap, iron or steel,
nes (20.47), Parts of gas turbines nes (6.97) and respective others. Thus, the year
2000 characterized as export specialization in Gems, Space, and Metals. Similarly,
2005 has shown revealed comparative advantages in Diamonds unsorted whether
or not worked (327.44), Waste and scrap, of tinned iron or steel (66.67) and Ferrous
 An Empirical Analysis of India-UK Bilateral Trade 11

waste and scrap, iron or steel, nes (30.41) and so on. Further in 2010, Lead waste
and scrap (384.79), Diamonds non-industrial un-worked or simply sawn (92.20)
and Silver in unwrought forms (79.63) shows higher RCA with India and lastly
the period of 2015 shows their comparative advantages in Silver in unwrought
forms (0.29). Thus, overall state is very much dissimilar to that of India’s situation
as India’s has diversified its export basket but still its RCA lies in primary based
manufacturing products. However, UK brings diversification in its export basket
along with altering its RCA in newly invented products of its export composition.
Table 6: Revealed Comparative Advantage of the UK with India

Product 2000 Product 2005 Product 2010 Product 2015

Code Code Code Code
710231 109.84 710231 87.82 710231 92.20 710691 0.29
710812 44.64 710210 327.44 710691 79.63 841112 0.04
270900 1.76 710691 158.54 720449 31.59 880330 0.01
710691 134.29 720449 30.41 841112 27.40 760200 0.03
710813 28.29 710812 6.66 760200 27.87 220830 0.03
901420 40.97 760200 19.07 740400 10.46 841191 0.01
841191 4.35 740400 13.35 720429 57.24 720449 0.02
720449 20.47 480252 8.51 780200 384.79 720429 0.14
841112 4.71 490700 39.64 220830 16.93 740400 0.01
841199 6.97 220830 14.25 480252 10.49 880250 0.04
843149 5.73 841191 3.52 841191 5.46 720421 0.03
852520 0.57 490199 4.78 841182 15.47 300490 –
740400 10.73 710239 1.05 870324 1.06 880240 –
870899 0.61 720441 23.28 711011 9.40 711011 0.02
490199 3.35 840999 1.83 490199 8.09 490199 0.01
840999 2.90 720430 66.67 841199 5.33 720430 0.13
284390 16.74 840991 1.71 870899 1.00 841182 0.01
721890 18.58 750210 4.13 840890 7.11 840820 –
530919 41.26 470790 27.01 970300 26.91 711021 0.01
854390 6.99 470730 25.42 711021 19.09 840999 –
Source: UN Comtrade 2015.
Note: (–) stands for unavailability of data for calculation of RCA of the product.

Trade Complementarity Index (TCI)

“TCI measures the degree to which the export pattern of one country matches
the import pattern of its trading partner. A high degree of complementarity
indicates more favourable prospects for a successful trade arrangement. If the trade
complementarity index has a relatively small value, the development potential of
bilateral trade will be limited” (Zhou & Wu, 2006).
 12 BREXIT AND INDIA: Analysing the Implications

Table 7: India-UK Bilateral Trade Complementarity Index (Per cent)

Year India UK
2000 96.94 98.71
2005 91.20 95.96
2010 91.94 94.31
2015 97.68 92.47
Source: UN Comtrade 2015.

Fig. 2: Trade Complementarity Index of India and the UK

Note: 0= No Overlap, 100 = Perfect match between exports and imports.

Table 7 reflects the results of TCI for India and UK at four points of time i.e. 2000,
2005, 2010, and 2015. The trade complementarity for India’s exports to the UK has
been increasing and reached to 97.68 % in 2015 after a continuous decline in two
consecutive years, i.e., 91.20 % and 91.94 % in 2005 and 2010 respectively. Thus,
Table shows there is enhancing compatibility in bilateral trade. However, UK
TCI has been decreasing continuously. Overall, the level of complementarities in
bilateral trade is above the normal which indicates that there is a fuller utilization of
their potential but with declining trend. Further, with declining complementarity,
there is also falling trade intensity index between both nations which is the main
cause of concern and requires some effective and suitable steps to undertake for
controlling the continuous falling trend.

Intra-Industry Trade Index (G-L Index)

“Intra-Industry trade (IIT) arises in a country when in the same period, there is
similar exports and imports of goods and services taken from the same sector. IIT
allows the country to take advantage of the large market. Grubel-Lloyd index is
mostly used to measure IIT. The value of IIT lies between 0 and 1 where 0 value
shows there are no exports and imports of a particular commodity group, i.e., no
IIT in that particular good. On the other hand, one shows that there are similar
export and import of a particular good” (Sahoo et al., 2009).
Table 8 represents the different computable values of IIT of India and UK for the
period of 2000 to 2015. Markedly, India’s IIT value reflects more fluctuations than
UK’s IIT index with India. During 2000- 2004, India’s IIT value has risen to 0.98%
from 0.82 % while during 2005 to 2015, IIT value lies between 0.93% to 0.75% shows
 An Empirical Analysis of India-UK Bilateral Trade 13

the downward trend situation. However, the UK’s IIT index shows that the value has
declined steeply over the whole period except in the period 2005 and 2006. Where
it has increased and become steady at 0.97 % and then during the study period
from 2011-13 it has shown upward, and stable trend of 0.90 % thereby fell till 2015
to 0.78%. However, the observed facts about IIT indices are that IIT values show
fluctuations during the study period and in the later years, the values move in the
same downward direction. Thus, the reason behind is the changing export basket of
both countries by exploring potential in new goods as shown in Table 6 and Table 7 and
also due to the strict regulatory framework of EU towards non-members countries.
Thus, by examining EII and III in the Table 2, it is clear that the gap between EII and
III is narrowing down along with the declining values of indices separately which
effects the intra industry trade in two ways, firstly the narrowing positions improve
the intra industry trade pattern. Secondly, the declining value of EII and III weakens
and limits the intra-industry trade pattern.
Table 8: India and UK Bilateral Grubel-Lloyd Index (Per cent)

Year IIT India IIT UK With Year IIT India IIT UK With
With UK India With UK India
2000 0.82 0.86 2008 0.97 0.95
2001 0.89 1.00 2009 0.77 0.76
2002 0.95 0.96 2010 0.89 0.80
2003 0.96 0.98 2011 0.91 0.90
2004 0.98 0.93 2012 0.90 0.90
2005 0.93 0.97 2013 0.76 0.91
2006 0.86 0.97 2014 0.66 0.89
2007 0.87 0.84 2015 0.75 0.78
Source: UN Comtrade 2015.

Fig. 3: India and UK Intra-Industry Trade

Note: 0 = Perfect Inter-Industry Trade, 1= Perfect Intra-Industry Trade.

Export Similarity Index (ESI)

ESI is used to measure the similarity between exports of two countries to a third
market. The index is based on the share of each product in each country’s total
exports and is calculated as the sum of the minimum value for each product
(Eskisehir, 2009). The value of ESI ranges from 0 to 1 or in percentage from 0 to
100, where 0 means no trade overlap while 100 means perfect overlap. The results
 14 BREXIT AND INDIA: Analysing the Implications

of Table 9 reflect that ESI of India has been increasing in percentage but far less
than 100 which implies that the export basket of India is dissimilar with the export
basket of UK. However, the trends show that after 2000 ESI has shot up six-fold
times, i.e., 6.63 % in 2005 from 0.87 % in 2000 and then to 8.49 % in 2010 but then
declined to 7.21 % (see Table 9). Thus, it shows that there is a potential gain from
inter-industry trade if both countries engaged in regional agreement. UK ESI was
fluctuating between 0 to 5 % during the study period though it is a good indicator
that UK export doesn’t match with India’s export structure in the third market and
have a great potential of getting trade specialization or attaining a comparative
advantage in inter-industry trade.
Table 9: Export Similarity Index of India and the UK

Year India UK
2000 0.87 0.60
2005 6.63 1.11
2010 8.49 1.04
2015 7.21 4.71
Source: UN Comtrade 2015.

But the main reason behind the increasing value of ESI of India till 2010 may be the
change structure of Indian export basket from being export of primary products to
manufacturing and services sector which keep it close to the UK export structure
though it cannot be perfect overlap due to the restraint and comparative advantage
of both countries in highly diversified products.

Fig. 4: Export Similarity Index of India and the UK (Per cent)

Note: 0 = No Overlap, 1 = Perfect Overlap.

Herfindahl-Hirschman Index
This index is the measure of the degree of market concentration. It has been
standardized to obtain values ranging from 0 to 1. Table 10 depicts that the
concentration index for exports of India and UK in 2000, 2005, 2010, and 2015.
The value of HHI of India was less than 0.50 indicates that exports of India is
geographically diversified and after every half decade its export has changed.
This shows that there is no concentration of market in few hands and with every
passing year India is exploring new products for its exports basket, and another
interpretation of it is also that India has not been dependent on few products for
 An Empirical Analysis of India-UK Bilateral Trade 15

income while trading with the UK which will keep her safe during the adverse
scenario.
Table 10: India and UK Herfindahl-Hirschman Index (Per cent)

Year India UK
2000 0.13 0.46
2005 0.14 0.36
2010 0.07 0.24
2015 0.08 0.31

Fig. 5: Herfindahl–Hirschman Index of India and the UK (Per cent)

Source: UN Comtrade, 2015.

Note: 0 = No Concentration and 1= Full Concentration.

Figure 5 shows export market concentration index in which the structure of only
UK shows a concentration of market with the percentage of nearly 50 %. While
the Indian export market concentration is more or less 15 %, with each passing
year which is declining. Thus the concentration of Indian exports to the UK is not
in just a few hand, but it is diversifying and continuously adding new products to
its export basket as shown in Table 4. While the HHI of UK is near to 0.50 in 2000
meaning, there is a concentration of exports in few commodities, although with
passing decade HHI value falling continuously but it is nearly threefold higher than
India’s HHI corresponding to each year which is not a sign of good and healthy
scenario for the UK’s export to India. Thus, another fact which comes out from
the analysis of complementarity index and export similarity index is that both have
compatibility in their bilateral trade while different behaviour in the third country
shows the good sign of enhancing the trade between them.

Import Dependency Index (IDI) and Export Propensity Index (EPI)

Import penetration is the dependency of one country on imports to fulfil the
demand requirements of their country. The value of IDI lies between 0 and 100.
Where zero means self-sufficiency and 100 means whole demand of country
is fulfilled by imports. Export propensity index shows how much export of the
country total production exported to the world or respective country. It also
ranges between 0 to 100 where 0 implies as no export while 100 shows the whole
production is exported.
 16 BREXIT AND INDIA: Analysing the Implications

Table 11: Export Propensity and Import Dependency Index of India and UK with the
World (Per cent)
Year EPIIW IDIIW EPIUW IDIUW
2000 8.89 10.87 18.97 22.92
2001 8.88 10.12 18.19 22.21
2002 9.56 10.81 22.14 22.14
2003 9.60 11.47 16.06 18.57
2004 10.52 13.29 15.45 20.56
2005 12.03 16.10 16.24 20.69
2006 12.77 17.71 17.72 22.40
2007 11.78 16.67 15.29 21.28
2008 14.86 23.25 17.26 23.38
2009 12.95 18.31 15.54 22.02
2010 12.90 19.04 17.56 24.05
2011 16.60 23.39 19.93 25.67
2012 15.87 24.15 18.29 24.28
2013 18.07 23.39 20.21 23.29
2014 15.55 21.03 17.09 18.10
2015 12.75 17.76 16.36 20.89
Source: UN Comtrade 2015.
Note: I– India, U- UK and W= World EPIiw= Export Propensity Index of India with the World,
EPIuw= Export Propensity Index of UK with the World, IDIiw= Import Dependency Index of
India with the World, IDIuw= Import Dependency Index of UK with the World.

Table 12: Export Propensity and Import Dependency Index of India-UK

Year EPIIU IDIIU EPIUI IDIUI
2000 0.46 0.66 0.24 0.19
2001 0.44 0.56 0.19 0.19
2002 0.46 0.50 0.17 0.19
2003 0.45 0.48 0.20 0.19
2004 0.47 0.46 0.19 0.16
2005 0.59 0.52 0.22 0.24
2006 0.57 0.42 0.19 0.21
2007 0.51 0.39 0.20 0.28
2008 0.54 0.51 0.28 0.31
2009 0.48 0.30 0.20 0.33
2010 0.38 0.30 0.26 0.39
2011 0.49 0.41 0.34 0.42
2012 0.44 0.36 0.28 0.33
2013 0.57 0.35 0.30 0.36
2014 0.47 0.23 0.21 0.27
2015 0.43 0.26 0.21 0.33
Source: UN Comtrade 2015.
Note: I– India, U- UK and W= World .
EPIIU= Export Propensity Index of India with the UK, EPIUI= Export Propensity Index of UK with
India, IDIIU=Import Dependency Index of India with the UK, IDIUI= Import Dependency Index
of UK with India.

Table 11 and Table 12 shows that the value of Export Propensity Index of India with
UK (EPIIU) is fluctuating nearly 0.50 per cent which means that India exported to
the UK at a large amount and exported more out of total production. While Export
 An Empirical Analysis of India-UK Bilateral Trade 17

Propensity Index of UK with India (EPIUI) is revolving around 0.30% which means
that UK’s exports to India are less than India’s exports to the UK. Further, Table 12
depicts that Export Propensity Index of India with UK (EPIIU) is increasing till 2006
i.e., 0.46 % in 2000 to 0.57 % in 2006 then the value shows the steadily fluctuating
trend and set at 0.43 in 2015. On the other hand, India’s Import Dependency Index
of India with UK (IDIIU) shows the downward trends which imply that India’s
import dependency has decreased from UK’s imports. While its exports have been
increasing which balancing India’s trade balance with the UK. Import Dependency
Index of UK with India (IDIUI) has been increasing continuously. This shows that UK
dependency on Indian imports are growing, indicating that India’s export market is
flourishing in the UK market.

Vertical Intra Industry Trade

“Vertical intra-industry trade (VIIT) is the exchange of commodities characterized
by different qualities. VIIT is considered to be particularly relevant to trade among
unequal trading partners with different income levels” (Ekanayake, 2009).
Table 13: Vertical Intra Industry Trade between India and UK (Per cent)
Year India UK
2000 5.36 0.00
2005 1.27 7.39
2010 6.37 8.99
2015 5.08 9.53
Source: UN Comtrade 2015.

Fig. 6: Vertical Intra-Industry Trade between India and the UK (Per cent)

The results of Table 13 show that the composition of India top 20 exports is
particularly vertical in nature and shows a mixed trend of fluctuations during the
study period. The starting period of the study indicates that there is no contribution
of VIIT in the countries. However, the share of VIIT in India’s IIT does not show
consistency with time as in 2000 it is 5.36 %, which declined to 5.08 % because
of new composition in export basket of India as shown in Table 3. While the
UK’s share of VIIT has been jumped to 9.53 % in 2015 from 0 in 2000 to 2015.
Along with it, the Table and Figure have also shown that share of VIIT in UK’s
IIT shows a steady increasing trend indicating that there is an increasing trade
of manufactured products as the composition of India’s export is inclined more
towards manufactured products along with its imports. Thus, both countries
should incorporate their efforts more in research and development to enhance
 18 BREXIT AND INDIA: Analysing the Implications

their intra-industry trade flows in VIIT. Another main finding of this index is that
horizontal type intra-industry trade has not been found in top 20 products of
India and UK both which shows that there is an existence of perfect competition
and not a concentration of market in few commodities because in the case of
horizontal IIT, the typical ingredients of imperfectly competitive market structures
play the dominant role; While, in the case of vertical IIT, the dynamics of product
differentiation (by quality) operate according to a Heckscher-Ohlin model based
on comparative advantages deriving from resource endowments and factor
proportions (Ekanayake, 2009).

Conclusion
The UK has strong trade relations with India since latter’s Independence. However,
from 1947 to 2015, there is a change in the trade structure of the trade between
India and the UK. Thereby, considering the volume of bilateral trade between India
and the UK, it seems that the volume of trade between India and UK is fluctuating.
As the trade has grown from US $ million 5368.44 to US $ 14266.83 million till 2015
at the compound annual growth rate of 8.94 from India and that of UK has grown
by 8.5 %. While analysing the composition of Indo-UK bilateral trade, it has been
found that since 2000, there has been changing the landscape of India’s trade with
the UK. As from the exports of primary based products as gems, jewelry, dry fruits,
and from manufacturing side export of cotton clothes and leather made products
to pharmaceutical and manufactured products as Automobiles with reciprocating
piston engine di and medicine acquiring top position in an export basket in the time
span of 2000-2015. Whereas Indian imports from the UK are highly concentrated
till 2010 around the diamond, gold, silver, aluminium scrap and waste, printed
books, waste, and scrap of different products, parts of diesel and semi-diesel
engines, potassium, etc., has changed into unwrought, other categories products
and spacecraft, etc. Similarly, RCA of India and UK has shown that in the year 2000
there is a higher comparative advantage in primary based products. As in T-shirts
and cotton articles, handbags, footwear and other articles of apparel of leathers and
same results come out from 2005. While in the year 2010 and 2015, there is the
addition of new products as of petroleum products, automobiles, pharmaceuticals
and organic products, but its comparative advantage lies in the primary based
manufactured products as in furnishing articles of cotton, footwear leather products
and also growing comparative advantage in automobiles, etc. Thus, while analysing
together composition and comparative advantage of India, it seems that there are
different results to that composition of trade as India though has diversified its
export basket but still its RCA lies in primary based manufacturing products. On
the other hand, UK’s RCA has shown that along with bringing diversification in its
export basket, it seems to enhance and to alter its RCA in newly invented products.
While the Export Similarity Index (ESI) of India and UK has shown that there is
a dissimilarity in their trade pattern of both countries in the third country as for
India FKI has risen from 0.87% to 7.21% during the study period of 2000-2015,
which has both positive and negative sign. As on the one hand, it shows that
India has been diversifying its export basket while on the contrary, its export is
matching with UK’s export in the third country meaning thereby that it cannot get
benefit from the free trade agreement. But the complementarity index has shown
 An Empirical Analysis of India-UK Bilateral Trade 19

that trade pattern of both nations is highly complemented to each other, in which
complementarity value of India with the UK is increasing and reached the value to
97.68 % from 96.94 % with minor fall in between the study period of 2000-2015.
While on UK’s front the complementarity value has been declining continuously
and settled at 92.47% from 98.71 % which is the cause of concern. But as the values
of trade intensity between both countries are falling steadily, it is evident that
its complementarity also declines. But both the similarity and complementarity
indices, together show that there is an increase in the in inter-industry trade
between both nations. However, results of intra-industry trade indicates that
the trade between both countries is high of homogenous products which lead to
the large share of intra-industry trade in their total bilateral trade. Among them
the most significant part of intra-industry trade between both nations for top 20
products in the period of 2000-2015 is vertical intra-industry trade which signifies
that there is no existence of monopoly and less concentration of market in few
hands as also shown in Herfindahl-Hirschman Market Concentration Index which
is the good sign of success of any trade agreement. Intensity, complementarities, its
contribution towards intra industry development, vertical intra-industry and other
indices highlighted that both nations are utilizing its trade potential but the trend
of last year shows declining trend in their trade volume which is the cause of the
concern as both nations have their strong relation since British empire. Further,
the paper also puts light on the issue that India-UK trade relationship has reached
the stage of the precondition of take-off, but for the proper take-off, both nations
have to tie up their relations more intensely so that trade can be boosted. Finally,
the existing practice has shown that bilateral free trade agreement (FTA’s) offers a
high weight to prove that India-UK has a long way to go together and earn benefit
from its already reached growth status. Therefore, India and the UK should explore
the possibility of signing a free trade agreement sooner. Thus, the present study has
provided all answers; it seems to be in favour of India’s pocket if both countries join
Free Trade Agreement.

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 An Empirical Analysis of India-UK Bilateral Trade 21

Appendix-A
Trade Intensity Index (TII)
Trade Intensity Index measures the intensity of trade relationship between any
two countries, keeping the relative importance of trade relation of the respective
countries with the world. The following formula is used initially by K. Kojima (1964)
to compute the trade intensity:

(X ij / X it )
=
Tij
(X wj / X wt )
Where
Tij = Trade Intensity index of country i and country j
Xij = Country i’s exports to country j
Xwj = World exports to country j
Xit = Country i’s total trade
Xwt = Total world exports

The value lies between 0 and ∞. Zero indicates that no trade exists between two
countries while on the other hand 1 indicates that there is an intense trade relation
between two trading countries.

Export Intensity Index (EII) & Import Intensity Index (III)

Brown (1949) and Kojima (1964) developed Export Intensity Index (XII) and Import
Intensity Index (MII).

XIIj =
(X ij / X iw )
( M jw /( M w − M iw ) )
Where,
XIIj = Country i’s export intensity index
Xij = Country i’s exports to country j
Xiw = Country i’s total exports to the world
Mjw = Country j’s total imports from world
Mw = World total imports
Miw = Country i’s total imports from the world

(M ij / M iw )
IIIj =
(X jw /( X w − X iw ) )
Where,
Mij = Country i’s imports from country j
Miw = Country i’s imports from world
Xjw = Country j’s exports to world
Xw = World total exports
 22 BREXIT AND INDIA: Analysing the Implications

Where i and j represent country India and UK.

Both indices lie between 0 and ∞. However, both the trade indices are associated
with the IIT index between two countries. As, if the trade gap between III and XII
yearly is widening, then, the level of intra-industry trade between the two countries
become worse and there is much need of enhancing and improving it (Zhou et al.,
2006).

Revealed Comparative Advantage (RCA)

RCA measures the competitiveness of the product in the country’s export basket
while comparing it with share of the product to the world market (Raj et al., 2014).
Balassa’s revealed comparative advantage index (RCA) is calculated as:

RCAij =
(X ij / X it )
X wj / X wt
Where,
Xij = Value of country i th exports of commodity j
Xit = Country i th total exports
Xwj = World’s exports of commodity j
Xwt = World’s total exports
Revealed comparative advantage (RCA) ranges from o to + ∞. A value greater than
unity signify country has a comparative advantage in the production of that good or
vice- versa (Seyman et al., 2004).
Trade Complementarity Index (TCI)
Trade complementarity index measures to what extent the export demanded by
partner countries matches the import pattern of other trading partner. “The first
TCI was proposed by Kojima and corrected by Drys Dale in 1967” (Ji et al., 2014).
Following is the formula, given by United Nations Economic and Social Commission
for Asia and Pacific (UNESCAP, 2016).
TCIik =  – ™ (_Mik – Xij _ » )

Where,
TCIik = trade Complementarity Index between Country j and k
Mik = Share of good i in all imports of country k
Xij = Share of good i in global exports of country j.

The value of Trade complementarity index lies between 0 and 1, where 0 signifies
there is no overlapping trade pattern between trading countries, while 1 means
there is a perfect match in the trade pattern of trading partners.

Intra-Industry Trade (IIT)

Intra-Industry Trade signifies that at one single point of time, a country exports and
imports the similar type of products from its partner counties.
 An Empirical Analysis of India-UK Bilateral Trade 23

It is based on the Grubel-Lloyd (G-L) formula; G-L Index for bilateral trade is used
to find out the intra-industry trade between India and the UK. It is modified form
used by Sahoo (2009). The formula is:
GLi = –^_Xkij–Mjik _ » (Xkij + Mjik)}
Where,
Xkij = Exports of commodities of industry j from India to UK
Mjik = Imports of commodities of industry j to India from UK
“The value of IIT shows that 0 means there is inter industry trade while 1 implies
there is a perfect intra industry trade” (Sahoo et al., 2009).

Export Similarity Index

The Export Similarity Index, developed by Finger and Kreinin (1979). This index
is used to measure the range of similarity in the export profiles of two trading
countries. “It is defined as the sum over export categories of the smaller sect
oral export shares, comparing the export share of the country with that of other
countries in the region.”
The formula for the export similarity index is:
ESIij,k = >™ k= Min (X kiw » Xiw , X kjw » Xjw )]×100
Where,
X = Export & M = Import
X k
iw
= Amount of export to the target market of products k of country i
Xiw = Total value of export to the target market of country i
Xkjw = Amount of export to the target market of products k of country j
Xjw = Total value of export to the target market of country j.
“The index value ranges between 0 and 1. A value of zero indicates no overlap in
the export profiles (i.e., the country is not a competitor with other countries in the
region) and a value of one indicates perfect overlap. The more similar the export
profiles are, then the more likely that there is a limited potential for gains from inter-
industry trade with a regional trading arrangement. This index does not consider
gains from intra-industry trade” (Ekmen, et al., 2009).

Market Concentration Index

“The Herfindahl-Hirschman market concentration index has originated its name
from the two economists who build up to it independently. Albert O. Hirschman
proposed the index in 1945, while Orris C. Herfindahl presented it in (1950). “The
HHI accounts for the number of firms in a market, as well as concentration, by
incorporating the relative size (that is, market share) of all firms in a market.” It is
calculated by squaring the market shares of all firms in a market and then summing
the squares, as follows (Naldi et al., 2014):
n
HHI = ∑s
i =1
2
i
 24 BREXIT AND INDIA: Analysing the Implications

Where,
++I = +er¿ndahl+irschman Index
S i
2
= Share of ith ¿rm in market
“The HHI is obviously a positive figure. The range of HHI lies between 0 to 1. If
we have a monopoly, where a single company takes all the market, we have n = 1
and Si = 1, it implies we have HHI =1. But in the opposite case, where the market
is uniformly distributed between the company (perfect competition) does not lead
to HHI = 0 but have a minimum value” (Naldi et al., 2014). Thus, the HHI index is
used to measure the concentration ratio of firms in India and UK so as to thrive at
the conclusion whether the market is diversified or not which ultimately limits the
trade between trading country as one is not optimally utilizing its potential level.

Import Penetration Index

The import penetration rate shows to what degree domestic demand (the difference
between GDP and net exports) is satisfied by imports. 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.
Correspondingly, it is the ratio of total imports to domestic demand as a percentage.
It can be computed by using the below formula:

⎡ ⎤
IPI = ⎢ ∑ GDP − ∑ X ds + ∑ M sd ⎥ × 100
⎣ s s s ⎦
IPI = Import Penetration Index
Msd = Import of country d from s country
Xds = Export of country d to s country
GDPd = Gross domestic production of d country

“The computed value of IPI lies between 0 to 100. Zero implies no trade and 100
percent implies that the whole domestic demand is satisfied only by import from
the partner country. However, a lower index implies complete self-sufficiency
which is not appropriate in terms of policy target from an efficiency perspective”
(APTIAD, 2008).

Export Propensity Index

The index shows the overall degree of reliance of domestic producers on foreign
markets. It may provide a better indicator of vulnerability to certain types of external
shocks (e.g., falls in export prices or changes in exchange rates).
It is calculated by dividing the bilateral export of country with the GDP of the
country. The formula for EPI is:
⎛ ⎞
EPI = ⎜⎝ ∑ X ds / GDPd ⎟⎠ × 100
s
 An Empirical Analysis of India-UK Bilateral Trade 25

Where,
EPI = Export Propensity Index
Xds = Total bilateral exports of country d with country s
GDPd = Gross domestic product of country d
The calculated value of EPI lies between 0 to100 in percentage form. Zero means no
export while 100 per cent means the whole production is exported.

Vertical Intra-Industry Trade

A horizontal intra-industry trade founded by Helpman and Krugman (1985) which
shows that there is a trade of relatively close substitute products within the same
industry. Whereas, vertical intra-industry trade originated from Caves (1981),
implies the trade of differentiated products within the same industry (Botric, 2012).
The various methodology used by different experts for analyzing whether the trade
is VIIT or HIIT are Abd-el Rahman (1991), Greenaway, Hine, and Milner (1994,
1995) and Fontagne and Freudenberg (1997).
Among them, the methodology used by Fontagne and Freudenberg (1997) is used
to find the type of intra-industry trade between India and UK.
Step 1: Identify whether the trade of commodity j is a one-way trade or intra-
industry trade in nature by using a certain range of overlapping value of Export (X)
& Import (M).
Trade overlap = [Min (Xabj, Mbaj) » Max (Xabj, Mbaj )] ” 0.1
Where,
Xabj = Country a export from b in j product
Mbaj = Country b import from a in j product
If the above eq. holds true then it is one-way trade otherwise, it is two-way trades.
Step 2: The Intra-industry trade of commodity j is horizontal or vertical is measured
by using a certain range of relative unit prices of X and M goods.
1 » 1.2 ” Pxaj » (Pmaj ” 1.2)
Where,
P xaj = unit value of j commodity exported to b country
P maj = unit value of j commodity imported to the b country by a country
If there is a small range of price differentials, then it is HIIT. If the gap of unit-price
is outside the range, then it is VIIT.
Step 3: Finally share of the n-type trade pattern i.e. the threshold based index for
the aggregated commodity category is calculated as follows:
S ni = ™j (X naj + Mnaj) » (™j(Xaj + Maj)
Where,
X naj = Type of production in j product exported
M naj = Type of production in j product imported
Maj = Total import of a country from b country
 Top 20 Products of Indian Exports
26

2000 2005 2010 2015

Product Description Code Product Description Code Product Description Code Product Description Code
Art. of jewellery and pts 711319 Petroleum oils, etc., (excl. 271000 Petroleum oils, etc., (excl.
271000 Other medicaments 300490
thereof of/o prec mtl crude); preparation crude); preparation of mixed or unmixed
products,
Articles of apparel of 420310 Art. of jewellery and pts 711319 Automobiles with 870322 Art. of jewellery and pts 711319
leather thereof of/o prec mtl reciprocating piston engine thereof of/o prec mtl
di
Frozen shrimps and 30613 T-shirts, singlets and other 610910 Other medicaments 300490 Footwear with rubber... 640391
prawns vests, of cotton, of mixed or unmixed soles and leather upper
products,
Diamonds non- 710239 Women’s or girls’ blouses, 620630 Art. of jewellery and pts 711319 T-shirts, singlets and 610910
industrial nes excluding shirts, etc., of cott thereof of/o prec mtl other vests, of cotton,
mounted o
Uppers and parts thereof 640610 Other medicaments 300490 Aircraft parts nes 880330 Semi-milled or wholly 100630
(excl. stiffeners) of mixed or unmixed milled rice
products,
Men’s or boys’ shirts of 620520 Skirts and divided skirts of 620452 Women’s or girls’ blouses, 620630 Babies’ garments, etc, of 611120
cotton cotton shirts, etc., of cott cotton, knitted or cr
Footwear with leather 640351 Footwear with leather 640351 T-shirts, singlets and other 610910 Aircraft parts nes 880330
soles and uppers, soles and uppers, coverin vests, of cotton,
coverin
Semi-milled or wholly 100630 Diamonds non-industrial 710239 Footwear with leather soles 640351 Automobiles with 870322
milled rice nes excluding mounted o and uppers, coverin reciprocating piston
engine di
Engines, diesel nes 840890 Frozen shrimps and 30613 Dresses of cotton 620442 Footwear with leather 640351
prawns soles and uppers,
coverin
BREXIT AND INDIA: Analysing the Implications

Contd...
Furnishing articles, nes, 630492 Automobiles with 870321 Men’s or boys’ shirts of 620520 Diamonds non- 710239
of cotton (excl. knit reciprocating piston cotton industrial nes excluding
engine di mounted o
Black tea (fermented) 90240 Semi-milled or wholly 100630 Handbags with outer 420221 Handbags with outer 420221
and partly fermented milled rice surface of leather, or comp surface of leather, or
tea, comp
Cashew nuts, fresh or 80130 Furnishing articles, nes, of 630492 Footwear with rubber... 640391 Motor vehicle parts nes 870899
dried cotton (excl. knit soles and leather upper
Mountings, fittings and 830241 Handbags with outer 420221 Reservoirs, tanks, vats & 730900 Men’s or boys’ shirts of 620520
similar articles of bas surface of leather, or comp sim ctnr, cap >300L, cotton
T-shirts, singlets and 610910 Men’s or boys’ shirts of 183339 Diamonds non-industrial 710239 Frozen shrimps and 30613
other vests, of cotton, cotton nes excluding mounted o prawns
Recorded media for 852490 Made up articles (incl. 630790 Babies’ garments, etc, of 611120 Dresses of synthetic 620443
sound or other similarly dress patterns), nes cotton, knitted or cr fibres
rec
An Empirical Analysis of India-UK Bilateral Trade

Made up articles (incl. 630790 Black tea (fermented) and 90240 Automobiles with 870321 Sandstone, merely 251622
dress patterns), nes partly fermented tea, reciprocating piston engine cut into a square or
di rectangu
Women’s or girls’ 620630 Engines, diesel nes 840890 Furnishing articles, nes, of 630492 Women’s or girls’ 621143
blouses, shirts, etc, of cotton (excl. knit garments of man-made
cott fibres,
Handbags with outer 420221 Motor vehicle parts nes 870899 Frozen shrimps and prawns 30613 Automobiles with 870321
surface of leather, or reciprocating piston
comp engine di
Footwear with rubber... 640391 Collages and similar 970190 Black tea (fermented) and 90240 Engines, diesel nes 840890
soles and leather upper decorative plaques partly fermented tea,
Unbleached plain cotton 520811 Other organic compounds, 294200 Other organic compounds, 294200 Dresses of cotton 620442
weave, with >=85% cotto nes nes
27
 Top 20 Products of Indian Imports
28

2000 2005 2010 2015

Product Description Code Product Description Code Product Description Code Product Description Code
Diamonds non- 710231 Diamonds non-industrial 710231 Diamonds non- 710231 Silver in unwrought forms 710691
industrial unworked or unworked or simply sawn industrial unworked or
simply sawn simply sawn
Gold in unwrought 710812 Ferrous waste and scrap, 720449 Ferrous waste and scrap, 720449 Gold in unwrought forms 710812
forms non-monetary iron or steel, nes iron or steel, nes non-monetary
Silver in unwrought 710691 Silver in unwrought 710691 Gold in unwrought 710812 Ferrous waste or scrap, nes 720449
forms forms forms non-monetary
Gold in oth semi- 710813 Gold in oth semi- 710813 Waste and scrap, 760200 Aluminium waste and scrap. 760200
manufactured forms, manufactured forms,non- aluminium
non-monetar monetar
Ferrous waste and 720449 Silver in oth semi- 710692 Floating docks and 890590 - Whiskies 220830
scrap, iron or steel, nes manufactured forms vessels which perform
(silver p specia
Silver in oth semi- 710692 Paper... (excl. mechanical 480252 Silver in unwrought 710691 Turbo-jet engines of a thrust 841112
manufactured forms fibres), weighing >= forms > 25 KN
(silver p
Waste and scrap, copper 740400 Waste and scrap, 760200 Paper... (excl. 480252 Copper waste and scrap. 740400
or copper alloy aluminium mechanical fibres),
weighing >=
Work trucks not 870919 Aircraft parts nes 880330 Aircraft parts nes 880330 Printed reading books, 490199
electrically powered except dictionaries etc.

Printed books, 490199 Gold in unwrought forms 710812 Lead waste and scrap 780200 - Spacecraft (including 880260
brochures, leaflets and non-monetary satellites) and suborbital and
similar spacecraft launch vehicles
BREXIT AND INDIA: Analysing the Implications

Contd...
Recorded media for 852490 Waste and scrap of paper 470790 Aircraft engines, spark- 840710 Waste or scrap, of stainless 720421
sound or other similarly or paperboard, nes ignition reciprocating steel
rec
Aircraft parts nes 880330 Potassium chloride 310420 Waste and scrap of 470790 Alcoholic liqueurs nes 220890
paper or paperboard,
nes
Transmission apparatus, 852520 Printed books, brochures, 490199 Waste and scrap, copper 740400 Waste, scrap of paper, board, 470790
for radioteleph incorpo leaflets and similar or copper alloy nes (including unsorted)
Taps, cocks, valves and 848180 Aircraft nes of an 880240 Drive axles with 870850 Aircraft parts nes 880330
similar appliances, nes unladen weight exceeding differential for motor
15, vehicle
Silver powder 710610 Waste and scrap, copper 740400 Silver in oth semi- 710692 Silver semi-manufactured 710692
or copper alloy manufactured forms including gold/platinum
(silver p plate
Semi-finished products, 721890 Machines & mechanical 847989 Whiskeys 220830 Parts of balloons, dirigibles, 880390
stainless steel appliances nes having ind spacecraft
An Empirical Analysis of India-UK Bilateral Trade

Parts for diesel and 840999 Recorded media for 852490 Printed books, 490199 Medicaments nes, in dosage 300490
semi-diesel engines sound or other similarly brochures, leaflets and
rec similar
Potassium chloride 310420 Parts for diesel and semi- 840999 Automobiles with 870324 Engines, diesel except motor 840890
diesel engines reciprocating piston vehicle/marine
engine di
Parts suitable for use 852990 Taps, cocks, valves and 848180 Parts for diesel and 840999 Motor vehicle parts nes 870899
solely or princ with the similar appliances, nes semi-diesel engines
Motor vehicle parts nes 870899 Flat rlld prod, i/nas, in 720824 Other spirituous 220890 Parts of gas turbine engines 841199
coil, hr,=>600mm w, l beverages, nes except turbo-jet/prop
Office machines, nes 847290 Parts suitable for use 852990 Halo-isobutene- 400239 Machines and mechanical 847989
solely or princ with the isoprene rubber appliances nes
29
Revealed Comparative Advantage of the UK
30

Product 2000 Product 2005 Product 2010 Product 2015

Code Code Code Code
710231 Diamonds non-industrial 710231 Diamonds non-industrial 710231 Diamonds non- 710691 Silver in unwrought
unworked or simply sawn unworked or simply sawn industrial unworked or forms
simply sawn
710812 Gold in unwrought forms 710210 Diamonds unsorted 710691 Silver in unwrought 841112 Turbo-jets of a thrust
non-monetary whether or not worked forms exceeding 25 KN
270900 Petroleum oils and oils 710691 Silver in unwrought 720449 Ferrous waste and scrap, 880330 Aircraft parts nes
obtained from bituminou forms iron or steel, nes
710691 Silver in unwrought forms 720449 Ferrous waste and scrap, 841112 Turbo-jets of a thrust 760200 Waste and scrap,
iron or steel, nes exceeding 25 KN aluminium
710813 Gold in oth semi- 710812 Gold in unwrought forms 760200 Waste and scrap, 220830 Whiskeys
manufactured forms,non- non-monetary aluminium
monetar
901420 Instruments&appl for 760200 Waste and scrap, 740400 Waste and scrap, copper 841191 Parts of turbo-jets or
aeronautical or space navi aluminium or copper alloy turbo-propellers
841191 Parts of turbo-jets or 740400 Waste and scrap, copper 720429 Waste and scrap, of 720449 Ferrous waste and
turbo-propellers or copper alloy alloy steel, other than scrap, iron or steel,
sta nes
720449 Ferrous waste and scrap, 480252 Paper... (excl. mechanical 780200 Lead waste and scrap 720429 Waste and scrap, of
iron or steel, nes fibres), weighing >= alloy steel, other than
sta
841112 Turbo-jets of a thrust 490700 New stamps; stamp- 220830 Whiskeys 740400 Waste and scrap,
exceeding 25 KN impressed paper; copper or copper alloy
banknotes; c
BREXIT AND INDIA: Analysing the Implications

Contd...
841199 Parts of gas turbines nes 220830 Whiskeys 480252 Paper... (excl. 880250 Spacecraft (including
mechanical fibres), satellites) and
weighing >= spacecraf
843149 Parts of cranes, work- 841191 Parts of turbo-jets or 841191 Parts of turbo-jets or 720421 Waste and scrap,
trucks, shovels, and othe turbo-propellers turbo-propellers stainless steel

852520 Transmission apparatus, 490199 Printed books, 841182 Gas turbines nes of a 300490 Other medicaments
for radioteleph incorpo brochures, leaflets and power exceeding 5000 of mixed or unmixed
similar KW products,
740400 Waste and scrap, copper 710239 Diamonds non-industrial 870324 Automobiles with 880240 Aircraft nes of an
or copper alloy nes excluding mounted o reciprocating piston unladen weight
engine di exceeding 15,
870899 Motor vehicle parts nes 720441 Ferrous waste and scrap,i 711011 Platinum unwrought or 711011 Platinum unwrought
or s,from the mechani in powder form or in powder form
490199 Printed books, brochures, 840999 Parts for diesel and semi- 490199 Printed books, 490199 Printed books,
leaflets and similar diesel engines brochures, leaflets and brochures, leaflets and
An Empirical Analysis of India-UK Bilateral Trade

similar similar
840999 Parts for diesel and semi- 720430 Waste and scrap, of 841199 Parts of gas turbines nes 720430 Waste and scrap, of
diesel engines tinned iron or steel tinned iron or steel
284390 Other compounds, nes, 840991 Parts for spark-ignition 870899 Motor vehicle parts nes 841182 Gas turbines nes of a
and amalgams of precious type engines nes power exceeding 5000
KW
721890 Semi-finished products, 750210 Nickel unwrought, not 840890 Engines, diesel nes 840820 Engines, diesel, for the
stainless steel alloyed vehicles of Chapter 87
530919 Woven fabrics of flax, 470790 Waste and scrap of paper 970300 Original sculptures and 711021 Palladium unwrought
with >=85% flax, printed or paperboard, nes statuary, in any materi or in powder form
854390 Parts of electrical 470730 Waste and scrap of paper 711021 Palladium unwrought or 840999 Parts for diesel and
machines & apparatus or paperboard made mai in powder form semi-diesel engines
31

having
Revealed Comparative Advantage of India
32

Product 2000 Product 2005 Product 2010 Product 2015

Code Code Code Code
711319 Art. of jewellery and 271000 Petroleum oils, etc, (excl. 271000 Petroleum oils, etc, (excl. 300490 Other medicaments
pts thereof of/o prec crude); preparation crude); preparation of mixed or unmixed
mtl products,
420310 Articles of apparel of 711319 Art. of jewellery and pts 870322 Automobiles with 711319 Art. of jewellery and pts
leather thereof of/o prec mtl reciprocating piston thereof of/o prec mtl
engine di
30613 Frozen shrimps and 610910 T-shirts, singlets and other 300490 Other medicaments 640391 Footwear with rubber...
prawns vests, of cotton, of mixed or unmixed soles and leather upper
products,
710239 Diamonds non- 620630 Women’s or girls’ blouses, 711319 Art. of jewellery and pts 610910 T-shirts, singlets and
industrial nes shirts, etc, of cott thereof of/o prec mtl other vests, of cotton,
excluding mounted o
640610 Uppers and parts 300490 Other medicaments 880330 Aircraft parts nes 100630 Semi-milled or wholly
thereof (excl. of mixed or unmixed milled rice
stiffeners) products,
620520 Men’s or boys’ shirts 620452 Skirts and divided skirts of 620630 Women’s or girls’ blouses, 611120 Babies’ garments, etc,
of cotton cotton shirts, etc, of cott of cotton, knitted or cr
640351 Footwear with 640351 Footwear with leather 610910 T-shirts, singlets and 880330 Aircraft parts nes
leather soles and soles and uppers, coverin other vests, of cotton,
uppers, coverin
100630 Semi-milled or 710239 Diamonds non-industrial 640351 Footwear with leather 870322 Automobiles with
wholly milled rice nes excluding mounted o soles and uppers, coverin reciprocating piston
engine di
840890 Engines, diesel nes 30613 Frozen shrimps and 620442 Dresses of cotton 640351 Footwear with leather
prawns soles and uppers,
coverin
BREXIT AND INDIA: Analysing the Implications

Contd...
View publication stats
630492 Furnishing articles, 870321 Automobiles with 620520 Men’s or boys’ shirts of 710239 Diamonds non-
nes, of cotton (excl. reciprocating piston cotton industrial nes excluding
knit engine di mounted o
90240 Black tea (fermented) 100630 Semi-milled or wholly 420221 Handbags with outer 420221 Handbags with outer
and partly fermented milled rice surface of leather, or comp surface of leather, or
tea, comp
80130 Cashew nuts, fresh 630492 Furnishing articles, nes, of 640391 Footwear with rubber... 870899 Motor vehicle parts nes
or dried cotton (excl. knit soles and leather upper
830241 Mountings, fittings 420221 Handbags with outer 730900 Reservoirs, tanks, vats & 620520 Men’s or boys’ shirts of
and similar articles surface of leather, or comp sim ctnr, cap >300L, cotton
of bas
610910 T-shirts, singlets and 183339 Men’s or boys’ shirts of 710239 Diamonds non-industrial 30613 Frozen shrimps and
other vests, of cotton, cotton nes excluding mounted o prawns
852490 Recorded media 630790 Made up articles (incl. 611120 Babies’ garments, etc, of 620443 Dresses of synthetic
for sound or other dress patterns), nes cotton, knitted or cr fibres
similarly rec
630790 Made up articles 90240 Black tea (fermented) and 870321 Automobiles with 251622 Sandstone, merely
An Empirical Analysis of India-UK Bilateral Trade

(incl. dress patterns), partly fermented tea, reciprocating piston cut into a square or
nes engine di rectangu
620630 Women’s or girls’ 840890 Engines, diesel nes 630492 Furnishing articles, nes, of 621143 Women’s or girls’
blouses, shirts, etc, cotton (excl. knit garments of man-made
of cott fibres,
420221 Handbags with outer 870899 Motor vehicle parts nes 30613 Frozen shrimps and 870321 Automobiles with
surface of leather, or prawns reciprocating piston
comp engine di
640391 Footwear with 970190 Collages and similar 90240 Black tea (fermented) and 840890 Engines, diesel nes
rubber... soles and decorative plaques partly fermented tea,
leather upper
520811 Unbleached plain 294200 Other organic compounds, 294200 Other organic 620442 Dresses of cotton
cotton weave, with nes compounds, nes
33

>=85% cotto