The Unassuming Economist

From Saurabh Mishra: 

Structural transformation depends not only on how much countries export but also on what they export and with whom they trade. In my new IMF working paper with Rahul Anand and Kalpana Kochhar, we break new grounds in analyzing India’s exports by the technological content, quality, sophistication, and complexity of India’s export basket. The paper can be found here. Here are few key pieces of evidence from our paper:

Technological content of India’s exports

The evolution of Indian exports has not followed a “textbook” pattern. The pattern of evolution points to a dichotomy in the Indian economy – a well integrated, technologically advanced services sector and a relatively lagging manufacturing sector. The share of service exports in total exports has grown to over 32 percent in 2013 from 28 percent in 2000. On the other hand, the share of manufacturing exports in total export has declined to 67 percent from nearly 80 percent during 1990-2013.

The growth in service exports has been more rapid, resulting in the share of services exports in total exports to increase rapidly over the last decade. This can be explained by technological changes. Many services do not require face-to-face interaction, and can be stored and traded digitally. These services are called modern services. Modern services are the fastest growing sector of the global economy. This is particularly evident in India, where modern services exports account for nearly 70 percent of the total commercial services exports (compared to around 35 percent in EMs) (see Figure 1).

Within manufacturing exports, there is a clear shift away from traditional exports, such as textiles, gems, and leather products, towards high-tech and medium-tech manufacturing products. The relative share of high-tech manufacturing exports has been increasing (however lower when compared to China or other EMs); Resource based production and low-tech manufacturing dominate the goods export basket (Figure 2).

Manufactured machinery accounts for almost 10 percent, while textile and garments account for more than 15 percent of India’s merchandise exports. In resource-based products – refined petroleum oil, cotton, jewelry of precious metals, and rice – constitute majority of export. In low-tech manufacturing exports – jewelry, textile and apparel based exports constitute the majority of India’s exports. In medium-tech manufacturing – the automotive industry dominates the basket, with machinery, various motor vehicle intermediary inputs for cars, bikes, construction, mining equipment and cosmetics making up the major portion. In the high technology export basket – veterinary and pharmaceutical products, television, telecommunication transistors, aircraft components, X-ray equipment and electronic R&D in electro-medical, power and automotive industry are key elements of the export basket. The main contribution of our work is to comprehensively document Indian exports, which has not been done over the past decade.

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1. Lower unionization associated with increased inequality: IMF F&D

The Peterson Institute for International Economics (PIIE) hosted a conference on “Spillovers of Unconventional Monetary Policy” on October 15. Experts from a wide range of official and private institutions shared their perspectives on the global spillovers of recent policies from the Federal Reserve and other major central banks.

The first panel, “Theory and Evidence of Spillovers,” included presentations by Steven Kamin, (Federal Reserve System); Prakash Loungani (IMF); and Michael Klein (Tufts University).

The second panel on “Policy Implications of Spillovers” featured analyses by Joseph E. Gagnon (PIIE) and Reuven Glick (Federal Reserve Bank of San Francisco). Tae Soo Kang (John Hopkins School of Advanced International Studies), discussed their views from his perspective.

The conference concluded with a high-level panel featuring Olivier Blanchard (PIIE); Jose De Gregorio (University of Chile); and Guillermo Mondino (Citi).

Though this week’s FOMC statement is still being parsed, market participants generally expect the Federal Reserve to raise policy interest rates this September. In contrast, the European Central Bank has significantly eased monetary policies over the past year and is expected to maintain accommodative policies for a substantial period of time. Should emerging markets fear the consequences of the so-called Fed liftoff and the likely increase in U.S. long-term bond yields?

Analysis in the IMF’s latest Spillover Report suggests the answer is “no”.

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