BILATERAL VEGETABLE TRADE BETWEEN CHINA AND INDIA: AN EMPIRICAL ANALYSIS
KAPPA KONDAL1 and Prof. A. NAKULA REDDY2
ABSTRACT
The present paper is attempt to identify the factors influencing vegetable exports from and
imports to India. In order to identify the important factors influencing vegetable trade
between China and India, the multiple regression analysis has been employed. The period of
analysis has been ranged from 2001 to 2012. During the study period, the study reveals that
the growth rate of India’s vegetables exports to China increased. The R2 value is 0.93 with
respect to India’s vegetable exports to China whereas the R2 value is 0.87 with respect to
India’s vegetables imports from China, explained by production and exchange rate. There is
a significant affect of vegetable production and exchange rate on Indian vegetable exports
from and imports to India, at 5% significance level. However, there is need to enhance the
cultivation of vegetable crops area through adopting the modern technology by an innovative
way and initiate measures for the promotion of exports from India.
Keywords: India, China, Bilateral Trade, Vegetable, Production
1
Research Scholar, Rajiv Gandhi National Junior Research Fellow (RGNJRF-UGC)
2
BILATERAL VEGETABLE TRADE BETWEEN CHINA AND INDIA: AN
EMPIRICAL ANALYSIS
INTRODUCTION
China and India are known as fruit and vegetable baskets of the world. They produce wide
varieties of fruits and vegetable crops in the world. India occupies the second rank in fruits
and vegetable products in the world, after China in 2012-13. According to the Food and
Agriculture Organization (FAO) report, increasing fruit and vegetable consumption becomes
a global priority. It is playing its part to make sure agriculture, particularly in the developing
countries and can help meet the demand for healthy foods like fruits and vegetables because
these crops contain more vitamins and diet.
India is the second largest producer of vegetables in the world after China with the
production of 162187 (‘000MT) in 2012-13. It is estimated that requirement of vegetable in
the country would be about two to three times more than present production. The important
vegetables are potatoes, onion, green peas, cauliflower, okra, cabbage, tomatoes, eggplant,
carrots, and green chilies. At present, many technically qualified professionals have adopted
to modern methods of cultivation and mechanised farming in the rural and urban region, for
getting more production and yield. Horticulture exports play a vital role in national and the
international level. In India, slightly the percentage of its exports decreased in national
exports since 2001-12 (Kondal, 2014). And almost all the vegetable items are identified as
having good export potential in the international market. These goods are mainly onion,
potato, green vegetables (okra, bitter gourd, chilly, asparagus, celery bell pepper, sweet corn,
REVIEW OF LITERATURE
Horticultural exports from the developing world have become a major growth sector in
international trade. China became a India’s largest trading pattern and bilateral trade between
two countries touched US$ 65.47 billion. China became a third largest export destination to
India (Goud, 2014). Improvement in the range and quality of exports from China and India
has the potential to create substantial welfare benefits for the world, for China and India
(Betina Dimaranan et al). India does not enjoy even one percent share in the global trade of
horticulture products. The horticultural products comprise of growing and marketing of
vegetables, fruits, flowers and ornamental shrubs. Yet India’s share in the world trade of
horticulture products is mini-scale (Thimmarayappa, 2012). India’s imports small quantities
of agricultural products and they cover nearly one percent of its total bilateral imports
(Mohanty, 2014). Israel has been dominant in the exports of fresh vegetables. India’s
comparative advantage in export of fruits and vegetables seemed to dwindle after economic
reforms. A gradual decline in India’s comparative advantage had been depicted for exports of
fruits and vegetables (Kanaka. s and m. Chinadurai). The IEA Bioenergy report states that the
China is primarily by large imports, where in India the major feature has been a rapid
increase in production and demand for the domestic market. (Vilas Khandare, 2012) states
that imports of agricultural products mainly comprise of vegetables, oil, pulses and wood &
wood products, which is below 77.71% of total agricultural imports in terms of value in
2010-11. Vertical integration is a necessary requirement to global trade. The growth rate of
clear that international trade in fresh horticultural products is increasing in scale (Watts,
1995).
NEED FOR THE STUDY
The international trade is very important for economic development to developing countries.
Mainly the profitable goods are like fruits, vegetable playing an important role in the world.
Horticulture sector is contributing to agriculture Gross Domestic Product (GDP) and over all
GDP, mostly through foreign exchange. The demand for vegetables is increasing in the
world.
In the earlier studies were not cover, which factors are affecting the vegetable exports
and imports between China and India and there is no empirical evidence on bilateral
vegetable trade between China and India. Keeping this view, there is a need to study the
bilateral vegetable trade between the China and India.
OBJECTIVES
1. To analyse the growth and performance of bilateral vegetable trade between China
and India.
2. To identify the important factors influencing vegetable trade between China and
India.
METHODOLOGY
To fulfill the objectives of the study, the secondary source of data were collected from
various sources namely - World Bank Website, Indian Horticulture Database, National
been ranged from 2001 to 2012. In order to study the important factors influencing vegetable
trade between China and India, the multiple regression analysis has been employed.
Multiple Regression Equation: Y= αααα +ββββ1X1+ββββ2X2+...+Ut
Where
Y= Horticulture Vegetable Exports/Imports α = Intercept
β1 and β2are coefficients
X1= Production of Vegetables
X2= Exchange Rate
Ut= Error term
FINDINGS AND ANALYSIS
Table:1 shows the growth rate of vegetables in India in terms of area, production and yield.
The growth rate of area under vegetable was 10.9 percent in the year of 2005 followed by 7
percent in 2006, 6.4 percent in 2011, 5.8 percent in 2012 and lowest recorded -1 percent in
2002 and 2003. The growth rate of vegetables production was 14.6 percent in the year of
2005 followed by 11.7 percent in 2008, 10 percent in 2006, 9.6 percent in 2011 and lowest
recorded -4.3 percent in 2002 and 2003. The growth rate of vegetables productivity was 7.9
percent in the 2007 followed by 4.3 percent in 2003, 3.6 percent in 2010, 3.4 percent in 2004
and lowest recorded -3.5 percent in 2002. However, there was positive correlation between
the growth rate of area under the cultivation of vegetables and its production but not between
growth rate of area under the cultivation of vegetables and its yield and growth rate of
vegetables production and growth rate of vegetables yield.
Table: 2 show the growth rate of India’s vegetable trade with China. During the
period of the study, the growth rate of vegetable exports to China was the highest recorded 89
percent in the 2003 and lowest recorded -12.9 percent in 2008. The growth rate of vegetable
imports from China was the highest recorded 118.9 percent in the 2002 and lowest recorded
highest recorded 126.7 percent in 2003 and lowest -42.6 percent in 2008. Indian vegetables
exports increased up to 2007, after that growth rate declined. The growth rate of export
vegetable product share was the highest recorded 63.2 percent in the 2011 and lowest
recorded -20.2 percent in 2004. The growth rate of import vegetable product share was the
highest recorded 97.1 percent in the 2009 and lowest recorded -57.1 percent in 2004.
However, the rate of fluctuations in exports is lesser than the fluctuations in imports from
China to India for vegetables.
China, India, Iran, Turkey and the USA are the top five countries in the world in
terms of area under the cultivation of vegetables. The China, India and Iran have occupied
1st, 2nd and 5th place respectively in terms of area and production in the world. Turkey and the
USA have occupied the 3rd and 4th respectively in terms of area and 4th and 3rd respectively in
terms of production in the world. Spain has occupied the 1st place in terms of productivity
followed by the USA, Italy, Iran and Egypt. However, the performance of China and India’s
is superior to other countries in terms of area and production but not in terms of productivity.
(Shown in Appendix:1)
In India, West Bengal occupied the 1st position in terms of area followed by Bihar,
Madhya Pradesh, Uttar Pradesh and Andhra Pradesh. In terms of production, West Bengal
state occupied the 1st place followed by Uttar Pradesh, Bihar, Madhya Pradesh and Andhra
Pradesh. Tamil Nadu state occupied the 1st position in terms of productivity of vegetable in
the country followed by Arunachal Pradesh, Kerala, Jammu & Kashmir and Uttar Pradesh.
However, West Bengal, Bihar and Uttar Pradesh are major players in the production of
vegetable crops. The performances of these states are very high in terms of area and
production but not in terms of productivity. Tamil Nadu state is the one of the best cultivators
of vegetable crops in the country. (Shown in Appendix:2)
Mainly, the area under the cultivation of vegetable crops, production, productivity, exchange
rates and other factors are influencing vegetable trade. Due to multicollinearity problem, the
study has considered the important factors like production of vegetables and exchange rate as
independent variables and vegetable exports and imports as dependent variable.
Impact of Vegetable Production and Exchange Rate on India’s Vegetable Exports to
China (Table: 3).
Y= - 2047269.61 +0.788 (X1) + 0.372(X2) + Ut
The impact of production and exchange rate on India’s vegetable exports was investigated by
using linear regression method. The estimated value of coefficients is presented in the
equation. The table:3 shows that, the value of R2, i.e, the coefficient of determination is 0.930
which implies that 93 percent of variation in India’s vegetable exports is explained by
production and exchange rate. The coefficient of vegetable production is positive and
significant at 5 percent of level of probability. The coefficient 0.788 implies that 1 unit
change in vegetables production, the India’s vegetable exports change by 0.788 units. This is
the expected result as increases in production of vegetable, shall result in increases in its
exports to China, which leads to rise in accumulation of foreign currency.
The coefficient of exchange rate is positive and significant at 5 percent level of
probability. The coefficient 0.372 indicates that 1 unit increase in exchange rate, leads to
0.372 units increase in India’s vegetable exports to China.
Impact of Vegetable Production and Exchange Rate on India’s Vegetable Imports from
China (Table: 4).
The impact of production and exchange rate on India’s vegetable imports was investigated by
using linear regression method. The estimated value of coefficients is presented in the
equation. The table: 4 shows that, the value of R2, i.e, the coefficient of determination is
0.878 which implies that 87.8 percent of variation in India’s vegetable imports is explained
by production and exchange rate. The coefficient of production is positive and significant at 5
percent level of probability. The coefficient value of 0.742 implies that 1 unit change in
production, the India’s vegetable imports increases by 0.742 units. This is the unexpected
result as an increase in vegetable production must result in decrease in vegetable imports
from China, which reduces the foreign income and puts burden on balance of payments.
The coefficient of exchange rate is positive and significant at 5 percent level of
probability. The coefficient 0.396 indicates that 1 unit increases in exchange rate, leads 0.396
units increase in India’s vegetable imports from China.
CONCLUSION AND SUGGESTIONS:
The extent of vegetables processing varies from one country to another country.
Vegetable have lot of demand in international market. Its consumption is also relatively high
in the world because of vegetables contain nutritions and vitamins. Now-a-days, the
vegetable sector is growing at a faster rate. During the study period, it is revealed that the
growth rate of India’s vegetables exports to China has increased. There is a positive relation
between the growth rate of vegetables area and growth rate of vegetables production in India.
The R2 value is 0.93 with respect to India’s vegetable exports to China whereas the R2 value
is .87 with respect to India’s vegetables imports from china, explained by production and
exchange rate. There is a significant effect of vegetable production and exchange rate on
Indian vegetable exports from and imports to India, at 5% significance level. In context of
China, Bangladesh, Sri Lanka and Pakistan which have been the traditional outlets for our
onion, potato and other vegetables. However, there is a need to enhance the cultivation of
vegetable crops area through adopting the modern technology by an innovative way and
initiate measures for the promotion of exports from India.
REFERENCES
1. Aaditya Mattoo et al. (2007). From Competition at Home to Competing Abroad- A case
study of Indian Horticulture. New Delhi: Oxford Univeristy Press.
2. Food and Agriculture Organisation.
3. Goud, R. S. (2014). Growing China Influence in Indo-Pacific Oceans. India Ocean Digest,
34 (1).
4. Food and Agriculture Organization Report.
5. Fruits and Vegetables Sector: An Overview. (2014, July 12). Hyderabad, Telangana, India.
6. Humphery, C. D. (2000). Governance and Trade in Fresh vegetables: The Impact of UK
supermarkets on the African Horticulture Industry. The Journal of Development Studies , 37
(2), 147-176.
7. Indian Horticulture Board.
8. Indian Horticulture Database-2013.
9. Justin N. Hall, S. M. (2009). Global Variabilityin fruit and Vegetable Consumption.
American Journal of Preventive Medicine, 36 (5), 402-409.
10. Kondal, K. (2014). Perfomance of Horticulture Sector in India. International Journal of
11. Kondal, K. (2014). Growth rate of Area, Production and Productivity of Onion Crop in
Andhra Pradesh. Indian Journal of Applied Research, 4 (3), 4-6.
12. Kondal, K. (2014). Trade Pattern of India Horticulture Sector: An Analysis. Golden
Research Thought, 3 (9), 1-5.
13. Siraj, M. (2011). A comparative analysis of their integration into the global economy.
Real World Economics Review, 57, 60-70.
14. Mohanty, S. (2014, September 10). Retrieved September 10, 2014, from Reserve Bank
of India: http://www.rbi.org.in/scripts/PublicationsView.aspx?id=15010#441
15. Nalini Ranjan Kumar, A. R. (2008). Export of Cucumber and Gherkin from India:
Performance, Destinations,Competitiveness and Determinites. Agriculture Economics
Research Review, 21 (January to June), 13-138.
16. Nidhi Bagaria, S. S. (2014). A Study of Variation in Comparitive Advantage in Trade
Between China and India. The International Journal of Humanities and Social Studies, 2 (1).
17. Singh, R. (2014, September 10). Retrieved September 10, 2014, from aginnovation.org:
.(http://aginnovation.org/wpcontent/themes/theme/images/Opportunities%20for%20Export%
20of%20Fruits%20and%20Vegetable%20Based%20Products%20%28summary%29.pdf).
18. singh, R. J. (2009). Trade Pattern in SAARC Countries: Emerging Trends and Issues.
Reserve Bank Occasional Paper, 30 (3).
19. S.S Wadkar, J. T. (2005). Performance of Cashew Exports from India. Agricultural
Marketing, XLVIII (1), 23-27.
20. Thimmarayappa, A. L. (2012). Codex of hygienic Parctices for Sustainable Rural
Exporting Horticulture Produce. Indian Streams Research Journal, 2 (6).
22. Vilas Khandare, D. M. (2012). Indian Agriculture: Growth Performance and Trade
Pattern. International Journal of Humanities and Applied Science, 1 (5), 138-141.
23. Worldbank.com
Table: 1
Growth Rate of Vegetables in India (Figure in %)
Year Area Production Yield
Growth Rates of India’s Vegetable Trade with China (Figure in %)
CAGR 40.4 26.9 10.7 9.1 -6.1
Source: World Bank Website
Note: ♦India’s vegetables exports and imports of production share out of all products.
Table: 3
Impact of Vegetable Production and Exchange Rate on India’s Vegetable Exports to China
Note: * at 5% significance level.
Dependent variable: India’s Vegetable Exports to China
Table: 4
Impact of Vegetable Production and Exchange Rate on India’s Vegetable Imports from China
Note: * at 5% significance level
Dependent variable: India’s Vegetable Imports from China
Appendix:1
Vegetable Cultivation in Top Five Countries in the World
Year States Area (in 000 Hect) Rank
Year States Productivity (MT/HA) Rank
Iran 26.8 4
Vegetable Cultivation in top Five States in India
Year States Productivity (MT/HA) Rank
Arunachal Pradesh 24.7 2
Jammu & Kashmir 22.1 4
Kerala 23.6 3
Tamil Nadu 28 1
2012-13
Uttar Pradesh 21.4 5
