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THE FUTURE OF TRADE RELATIONS BETWEEN INDIA, CHINA AND RUSSIA

ABSTRACT
OF THE THESIS SUBMITTED TO

THE UNIVERSITY OF PUNE
FOR THE DEGREE OF DOCTOR OF PHILOSOPHY IN MARKETING UNDER THE FACULTY OF COMMERCE

BY

Lt Col (Retd) VACHASPATI MISHRA, M.B.A.

UNDER GUIDANCE OF

PROF. DILIP M. SARWATE, Ph.D., C.M.C.

RESEARCH CENTRE
BRIHAN MAHARASHTRA COLLEGE OF COMMERCE

PUNE, 411004, INDIA 29th March 2009

vast talented human power and an extremely free democratic socio-political system has not been able to bring to her gigantic and growing population a respectable level of economic welfare.” 1. plentiful mineral resources. A privilege to have Russian Professors in India when their friendship was at its peak. despite the rich cultural heritage. The search for topic was guided by the following factors:1.2 Exposure to Russian Language. expansive and varied geographical terrain. a notional advancement in awareness of Russian language.2 Topic Selected. China and Russia. Equipment and People. exposure to certain collaborations with Russians on various occasions and emergence of non-Soviet Russia facing difficult days under the western influence made this researcher believe that a further collaboration of Russia and India could be of advantage to both these countries in the long run. 1. 1. The first and foremost intention is to see the rise in net economic welfare of the people of India and countries friendly to her. The following questions arise:- . 1.3 Research Questions and Statement of Problems.1 Introduction Search for the Topic.1.1 Concern for Growth of Indian Economy. CHINA AND RUSSIA 1 1.2 ABSTRACT THE FUTURE OF TRADE RELATIONS BETWEEN INDIA. India.3 Emergence of China as a Leading Economy in the World. China’s geographical proximity both with Russia and India.1. and her emergence as a formidable world economy appeared significant enough to be included as part of the study towards exploring possibility of its formal collaboration with Russia and India. Above considerations and positive signals from the worthy guide induced this researcher to select the topic as “The Future of Trade Relations between India.1.

the following Research objectives were set:2.2 Are the products and services generated in these countries extensively and efficiently marketed to others within this region making use of their comparative advantage? 1.3. study the developments and assess the likely future course.3.3. China and Russia generate synergy? What measure could facilitate movement in that direction? 1.3 Is there a growing trend in joint ventures and direct investments by business houses or small entrepreneurs within these countries.3 1. joint ventures and investments between these countries? 1. vis-à-vis rest of the world.1 Considering the currently inequitable level of socio-economic status enjoyed by the people in India. which could be further promoted? 1. explore reasons for major variations and attempt to foresee the future trend.3. study the trend.3. is it possible to bring them benefits through regional cooperation within these countries? 1. China and Russia. China and India? 2 Objectives of Research.1 To collect and analyze India’s import and export data with Russia and China for last ten years. .7 What would be the level of interference of other countries and what measures would be necessary to prevent their interference in attempts towards bringing better economic cooperation between Russia.2 To study the joint ventures set up between the governments and business organizations in these three countries.3. business houses and entrepreneurs of these countries in doing business within the region? What measure could be taken to overcome them? 1.3.5 What would be the trend of trade.4 What are the challenges faced by traders.6 Is it feasible that economies of India. 2. In order to bring a focus to the research in this vast domain.

2. political.1 To assess the future of trading relationship within these countries. This research project is essentially of exploratory nature involving the study of factors relevant to improving marketing environment.3 The business opportunities will lead to improvement of volume of trade and cause emergence of joint ventures between the three countries and also the setting up of Multi National Corporations operating within these countries. 3. advertisement literature and reports available on electronic media through official websites of International organizations and countries under study. 3.4 2. A holistic perception was considered to be essential before identifying logical suggestions and making recommendations for futuristic courses of action. Review of Literature. 4.4 3 3. Nature of Research and Methodology. 3. social and technological profiles of each country and to assess their comparative advantage through a suitable model. China and India with necessary efforts made by various agencies. magazines. 5.3 To develop economic.2 There is a likelihood of emergence of a Free Trade between Russia. An extensive study of all facets of business environment of Russia. China and India was undertaken covering all available books. The intention is to identify the forces and aspects which could bring harmony and synergy as also the ones which could cause distancing or fragmentation. Its outcome is presented in chapters 2 to 5 as follows:- .4 The cooperation amongst the three countries will result in generation of synergy resulting in improved quality of life in each of these countries. Statement of Hypotheses: China and Russia are likely to move away from the present socialistic pattern of controlled economies and take to capitalism in a significant way within next 10 years (from 2005 to 2015). Introduction to the Research Project including planed methodology and presentations are covered in Chapter 1 of the Thesis.

The data on joint ventures and small businesses was collected from relevant books. Chapter 5: Inter-acting Global and Regional Factors.3 5. newspaper reports and Internet publications included in official websites. magazines. Proprietors. A sample size of 100 persons exposed to the problems was fixed for obtaining their opinions and the same was accomplished. Managers of Marketing and Logistics having exposure with China and Russia including those competing with these countries in other world markets were selected as samples for obtaining their views. strategists and business leaders were collected from books.5 5. The format of questionnaire used for collection of placed at Appendix B.4 6. The trade data in complied form are placed at Appendix A. In additions. Managing Directors. magazines. Separate questionnaire for traders/ businessmen and officials/ strategists/diplomats were prepared and sent to business.1 5. officials and experts connected with the objective of this study. Chapter 4: A Profile of the Republic of India. Business Owners. the officials in various organizations. Collection of Primary Data.2 5. 7. Chapter 2: A Profile of the Russian Federation. Numerous new sources of information for collecting primary data were obtained from such publications. the details of which are given in the Bibliography attached with this thesis. Chapter 3: A Profile of the Peoples Republic of China. Ten years’ data on Indian exports and imports with Russia and China was collected from four successive annual publications of the Centre for Monitoring of Indian Economy. A databank of all Exporters and Importers was procured from MCCIA Pune was collected and the same was enlarged by securing additional data from the contacts made as well as from the advertisements made by the exporters/importers from various websites visited during the . Detailed and repeated telephonic/ telephonic interviews and emails were exchanged for communications and recording their answers. 7.1 Sample Frame and Size. thinkers and consulates and experts dealing with these countries were also selected. newspapers and the Internet. Collection of Secondary Data. Mumbai as they publish only seven financial years’ data in each of the annual publications. thinkers. Opinions of statesmen. Senior Directors. Vice Presidents of dealing departments.

A condensed Chronology of events is given in Appendix C. Assessment of Country Profiles. Analysis and Interpretation. analysis and interpretation. Painstaking efforts were made to take appointment of the businessmen or officials holding significant positions in business. consulting and government organizations like Forums and functions of IMCI. 7. It was initially intended to consider samples located in Pune/ Mumbai area. The views of several experts published in media or obtained through previous interviews of other experts were quoted back to them and they were asked to share their revised opinions. It was decided that only purposive samples should be tapped. 9. MCCI or Management Institutions or earlier indirect references were utilized to secure appointment and interviews. if any. It was identified that Indian exports both to China and Russia were very insignificant in comparison to its trade with other . Various economic parameters and latest factors for assessing Global Competency Ranking worked out and published by Global Economic Forum (a progression of Michael Porter’s Model to assess Competency of Nations) was utilized to identify collaborative opportunities between countries under this research. Trade Data Obtained from Russian.3 Style of Interviews and Use of Delphi Technique. An analysis of pattern of change of trade volumes was carried out towards interpretation of compiled and analyzed data.2 Sampling Technique. However due to paucity of suitable samples it was expanded to cover entire country.6 procurement of secondary data. 9.4 Coverage Area. 7. Only the final opinions were considered for collation. 7. Both direct questions as well as open ended sessions were conducted during the interviews with a view to initiating the samples to the topic and in order to obtain their views.1 Findings. China and Russia. Patterns of Trade between India. 8. One hundred members were identified according their willingness to volunteer their opinions. Chinese and Indian government websites were analyzed through Pie Charts prepared by the Researcher and are placed in respective country studies as an indication to the commodities exported and imported by those countries as well as identifying the intensity of trade with their respective trade partners.

01 North America.949. 51625. East Asian 112. 6.78 China. 2. Countries.002. Countries. 22. especially from Russia.381.7 countries.198.561. The composition of India’s Imports and exports to various regions shown in Figures 1 and 2 illustrate the point.115.40 Asia.917.802.06 ASEAN. 27.674.73 Latin America. 2.08 Others.43 1.2 Reasons for this extremely low volume of trade were the major concern for further exploration which was carried out during the interviews conducted with experts in the field and the outcome is brought out in further Analysis.112.58 East Asia & Oceania.15 Excel Sheet Chart based on data obtained from DGFT website and compiled for the purpose by Researcher . 71. Other North South Countries.639.70 1.64 Europe. 8.469.94 17. 23. 9.03 West Asia & North Africa (WANA).71 Africa. Figure 1: Composition of India’s Imports from Various Regions of the World for 2007-08 in US Million Dollars Other CIS Central Asian Region's RUSSIA . 14.

86 Africa.409. Balance of Payment Situation and Trend Analysis. 5.97 South Asia .372.08 CARs Countries.8 Figure 2: Composition of India’s Exports to Various Regions of the World for 2007-08 in US Million Dollars RUSSIA .92 CHINA P RP . 555. taking about ten commodities in one chart for clarity.04 East Asia Latin America. 10.834. .256.30 Others.68 West Asia & North Africa. The Total volumes of Annual trade (exports and Imports combined) were compiled and a chart with indication of trends was made which is at Figure 5.384. 232.54 & Oceania. 940. 30. 565.3 Patterns of India’s Trade with Russia and China.25 North America.988. 1.2 Other CIS Countries.660.01 ASEAN. 37.615.95 Rest NE Asia. 11.546.3 Europe. 15. 21.80 Excel Sheet Chart based on data obtained from DGFT website and compiled for the purpose by Researcher 9. Total yearly volumes of exports and Imports have also been worked for India’s trade with China and Russia and ploted as Bar Charts which are at Figures 3 and 4 respectively.621. 16. 9. All the top commodities traded by India with China and Russia comprising bulk of trade were separately analyzed by preparing Line Charts against Time Series of 10 years.

Data) .E.) Figure 4: Volume of Trade between China and India (1998-2008) in Million US Dollars 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-2000 1998-99 0 10000 20000 30000 India to China China to India (Excel sheet Chart by Researcher.M. based on Computed Total Trade from C. Data.M.I.00 2500.I.00 1000.00 India to Russia 500.00 2000.E. based on Computed Total Trade from C.9 Figure 3: Volumes of Trade between Russia and India (1998-2008) in Million US Dollars 2007-08 2006-07 2005-06 2004-05 2003-04 2002-03 2001-02 2000-01 1999-2000 1998-99 0.00 Million US Dollars (Excel sheet Chart by Researcher.00 1500.

M. famous for his models for assessing Competency of Nations) and Schwab Klaus (Coordinator at WEF). WEF led by Michael Porter (Professor at Harvard and an eminent strategist. It is evident that volumes of trade with China have been growing whereas the trade with Russia could have been much better. Data) 9.E. 9. The trend of volumes of India’s trade over 10 years for China shows a curvilinear (Exponential) pattern whereas the volumes of trade with Russia shows a linear pattern at a very low gradient compared to the trade with China.I.10 Figure 5: Trend Analysis of India’s Total Trade with China and Russia (1998-2008) in Million US Dollars 40000 35000 Total Trade with China Total Trade with Russia Expon.5 Global Competency Index by World Economic Forum (WEF).4 Interpretation. (Total Trade with China) Linear (Total Trade with Russia) 30000 Million US Dollars 25000 20000 15000 10000 5000 0 Financial Years (Excel sheet Chart by Researcher. has been . based on Computed Total Trade from C.

macroeconomic stability. technological readiness. China and Russia in these characteristics have been extracted from their report for 2008-2009. higher education and training. goods market efficiency. Figure 6: Global Competency Indices for India. infrastructure. market size and business sophistication and innovation. financial market sophistication. health and primary education. Russia and China (Based on World Economic Forum Report 2008-09) 7 6 Index 5 4 3 2 1 0 Russia China India Global Competency Index by WEF 2008-09 Characteristics (Excel Chart by Researcher based on Indices extracted from the Report) . The Chart is at Fig 6. These rankings have been placed on a line chart to identify the areas in which a nation is most advance compared to the others. labor market efficiency.11 ranking various countries according to the Global Competitiveness Index (GCI) worked out on 12 factors like institutions. Their rankings for India.

Analysis and Interpretation from Businessmen.45 6 .37 41 57.37 85.00 0 8.2 Problems being faced by India in Trading with China and Russia Problems a. Higher Custom Duties g.58 21 0. Language Barrier c. Executives and and Officials. An extract of some of those opinions is as follows:9. Price Competitiveness e.6. Entry Barriers b.39 53.73 47 66.52 9.03 27 29. Logistics Problems With China Numbers Percentage 52 73.44 33.15 67 94.6.70 32.1 Observed Trends in Volumes of India’s Trade with China and Russia Country China Russia Increasing 67 61 Stagnant 4 10 Decreasing 0 0 Percentage observing Increase 94.62 With Russia Numbers Percentage 42 59.6 Findings. tabulated analyzed for each question included in the questionnaire and the same are included in Chapter 6. Delay in Receiving Payments f.00 0 16.58 21 0.94 17 38.20 28 24 26 39.24 63 88.75 36 23 38 50.92 9. The opinions collected from primary sources were compiled.54 16 30.3 Expectations on The Future Potential for Exports Prospects Excellent Good Average Declining Cannot say With China Numbers Percentage 22.80 36.99 22 29.12 9.6.90 12 With Russia Numbers Percentage 23.

01 54. Tajikistan. There should be better banking facilities to solve payment problems e.93 11 27. c. With Russia a. the markets in CIS Uzbekistan. Indian products must be price competitive to face the competition with Chinese goods and to be able to penetrate Chines market. d.83 92.5 Prospects for Joint Ventures between Organizations in India With Country China Russia Good Numbers % 37.6.20 52.11 53 74. India must export value added goods instead of raw material d. India must resolve the border problem with China b. Instead of going to Russia.65 24 33.6.11 69. Kazhakstan etc are found to be more lucrative.90 . India must improve the quality of its goods to compete with European goods in the Russian markets. b. India must wake up and improve its ports Numbers 51 66 Percentage of 71 71.. India should find a shorter route to be able to ship goods to Russia in shorter time to compete with other countries in Russian market.96 47 37 66.62 17 65.93 9.80 37 49 39 52. Indians must learn Chinese language and negotiating skill to deal with the Chinese.52 19 Poor Numbers 1 2 % 3. c.45 6.59 8 Cannot say Numbers % 58.4 What needs to be done to increase the Exports/Imports with these Nations Action to be taken With China a.13 9. Kyrgyzstan.

11 Usefulness of the Research: 11. that was beyond the means of this researcher. Considering and analyzing all the Primary and secondary Data it is concluded that the hypotheses made before conduct of the research are justified.2 To Governments. The educational institutions will benefit from this study as it can serve as a platform for planning and conduct of future studies in trade and entrepreneurship in these countries.3 To Educational Institutions.1 To the Industry. It was extremely difficult to obtain primary data due to low priority given by business men for research. However.2 Low priority given by Traders and Businessmen for Research. 12. persistence was quite rewarding. Budget was the biggest constraint in undertaking this study. especially the logistics constraints. 11.1 Limitations Budget. The governments of these countries will be able to formulate and modify their policies in the interest of their economies and people.14 10 Interpretation and Conclusion. Various sectors of economy will benefit from the outcome of this research by using the data available herein and to decide on further expansion of their businesses in these areas. However. 12 12. This thesis can work as a stimulus and offer a thinking platform for more innovative ideas for expansion of their businesses or initiate green-field projects within these countries. Both the faculty and students groups can use the information and conclusions made through this study to enrich their information base. . 11. It should have been ideal to visit and observe the trading and business operations of the entrepreneurs in these areas.