Presentation RM Work Shop

8/8/2019 Presentation RM Work Shop

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By: Nishant JoshiDr.R.K.Sharma

Amrita ThakreCA.Sachidanand Pachori

REVEALED COMPARATIVE ADVANTAGE OF INDIAN SOYBEAN

MEAL EXPORTS



Justa Recall atwhat iscomparative Advantagey In economics, the law of comparative advantage refers to the ability of a party (an

individual, a firm, or a country) to produce a particular good or service at a lower

opportunity cost than another party. It is the ability to produce a product with the

highest relative efficiency given all the other products that could be produced

y The concept is attributed to David Ricardo who explained it in his 1817 book On the

Principles of Political Economy and Taxation in an example involving England and

Portugal.In Portugal it is possible to produce both wine and cloth with less labor than it would take to produce the same quantities in England. However the relative

costs of producing those two goods are different in the two countries. In England it

is very hard to produce wine, and only moderately difficult to produce cloth. In

Portugal both are easy to produce. Therefore while it is cheaper to produce cloth in

Portugal than England, it is cheaper still for Portugal to produce excess wine, and

trade that for English cloth. Conversely England benefits from this trade because itscost for producing cloth has not changed but it can now get wine at a lower price,

closer to the cost of cloth. The conclusion drawn is that each country can gain by

specializing in the good where it has comparative advantage, and trading that good

for the other.



Objective and Hypothesis ` The objective of the research paper is to study the Revealed

Comparative Advantage of Soymeal exports from India visa visUSA and Brazil

` Hypothesis:

` Ho 1: I ndia has no comparative advantage of exports compared to USA.

` Ha 1: I ndia has comparative advantage of exports compared toUSA.

`

` Ho 2 I ndia has no comparative advantage of exports compared to Brazil.

` Ha 2: I ndia has comparative advantage of exports compared toBrazil.



Research Methodology

` To assess competitiveness of a country the Revealed Comparative Advantage Index (RCAI) proposedby BALASSA (1965) is usef ul. The RCAI shows if a country is competitive in producing and exportinga specific good. The RCAI can be estimated by the equation:

`

` RCA ij = (X ij/X wj)/(X i/X w)

` Being:` X ij = ith countrys export of commodit y j

` Xw j = World exports of commodit y j

` X i = Total exports of country i

` Xw = Total world exports.

` If:

` RCAI < 1 India does not have a revealed comparative advantage;

` RCAI > 1 India has a revealed comparative advantage; and

` RCAI = 1 India has neither revealed comparative advantage, nor disadvantage.

` According to RCAI, a country would have a revealed comparative advantage and be competitive if the RCAI is higher than 1.0.

` We have not taken china as it is has shown tendency of becoming net importer of soymeal many times in the taken time span.



Data

y Table 1

y Export of soy bean Meal from select countriesbetween 2004 to 2009 in Million US$



Table 2: Total Exports fromselectcountriesbet ween 2004 to 2009 inMillionUS$



in MillionUS$



Table 4: Total world exports in MillionUS$



Results









Conclusion` The empirical analysis is evidence of the fact that India is at a comparable advantageover USA in the exports of soybean meal. Still USA exports more as compared to India.The reason for this could be the lower farm production of soybean as compared toUSA. It can be suggested that government should take serious steps to promote morefarm production of soybean. It seems that the current schemes are not effective. In 2008world market for soybean meal exports were US$ 18728.73 million out of which we

are able to only tap roughly 9% even though we are having comparative advantage over the market leader. Another interpretation of the result could be that the demand of our product is present in the world market. The government should formulate specialstrategies to take full advantage of this demand. Research in the area of non-genetically modified soybean crop should be increased in the direction of developmentof special quality seeds that have higher productivity. Soybean is a rain dependent crophence measures for water storage and better irrigation techniques should be promoted.` Brazil today has both comparative advantageand market share because of the simple fact that it¶s second to USA and Argentina in production of soybean. If our production and market presence increases we shall beable to match or even push Brazil a step below us.



y Thanks.

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Presentation RM Work Shop