Intra Industry Trade of India With Special Reference to Few Selected Sectors

Abstract

Intra-Industry Trade (IIT) is the simultaneous export and import of products within the same industry, i.e., export and import of different varieties of a product takes place. This type of trade pattern is in contrast to the existing theory of international trade Factor Endowment newlineTheory which emphasizes inter-industry trade specialization of a country. newlineThe phenomenon of intra-industry trade, although discovered in 1950s, but soon it became very popular because it was able to explain the trade pattern of countries (specially developed) which traditional theories were unable to explain. Traditional theories were emphasized the supply side as a function of international trade, i.e., a country should produce and export those commodities which it can efficiently produce and hence the theories supports the inter-industry specialization of countries. If a country is endowed with capital, then it should produce and export capital-intensive commodities and import the laborintensive newlinecommodities, and vice-versa. But the theories were unable to explain why a country newlineis both exporting and importing different variety of a product at the same time. newlineThis pattern of trade behavior was analyzed and termed as intra-industry trade and it was explained that supply is not the sole criteria for determining the behavior of international trade and in-fact demand plays an important role . The rationale for emphasizing demand as a determinant of international trade is that since as a country grows economically, purchasing newlinepower of consumer increases and then they demand for different varieties of a product which leads to increase in intra-industry trade. newlineThe theory of intra-industry trade is mainly studied for developed countries and little work has been done for developing country. Apart from these few works have been done to explore the nature, pattern and determinants of intra-industry trade of India. Therefore the present study is based on exploring different dimensions of intra-industry trade of India. newline