Differences Exist among Countries In aggregate terms, the Indian preferential scheme for LDCs may be considered inclusive and relevant for the exports of BCs. About 85 percent of LDC exports can potentially be exported to India at preferential rates (zero duty or at a MOP). Moreover, imports of preference products constitute about 93 percent of India’s total imports from the world. This means that India’s import demand of preference products is considerable, and beneficiary LDCs can take advantage of this. However, the situation varies significantly among BCs: some are relatively better positioned than others to take advantage of the market access opportunities offered by India.
Three factors were considered in this section to assess the potential benefits of the DFTP scheme: the existing productive and export capacities of beneficiary LDCs; the architecture of tariff preferences and exclusion products;
and the import demand of India with respect to products of specific export interest to the
beneficiary country. These indicators, which collectively determine whether a beneficiary LDC will benefit from the DFTP scheme, are summarized in Table 5.
To reiterate, the first indicator on productive and export capacities concerns the export capacity of the LDCs. Countries can either be classified as inadequate (negative) or adequate (positive). The second indicator separates countries into three categories according to whether their top exports are excluded under the DFTP scheme. Category I contains countries that have less than 10 percent of their top exports in the exclusion list. Category II refers to countries that have 10 to 40 percent of their top exports in the exclusion list. Countries in category III have over 40 percent of their top exports excluded from preferential trade.
Countries in Category I are in a favourable position to benefit from the scheme, while those in Category III are least likely to benefit. The last indicator gauges whether there is product complementarity between the LDC’s top export and India’s import demand. This indicator can be either positive, suggesting that product complementarity exists, or negative, indicating a lack of complementarity.
The three indicators, taken together, are helpful in judging whether or not the LDC is likely to benefit from India’s DFTP scheme.
Countries that score positively on all three indicators are likely to benefit from the scheme, because they have high export capacities, have few of their top exports on the exclusion list and thus enjoy preferential trade on most of their top exports, and have product complementarity between their exports and India’s import demand. Conversely, LDCs that have scored negatively on all three indicators are unlikely to benefit from the scheme. In between are countries that score negatively on one or two of the indicators. Among them, we can expect that countries that perform negatively on two indicators are less likely to benefit from the DFTP. By contrast, countries performing negatively on one of the indicators only should be in a better position to enjoy the market access opportunities offered by India.
Based on the indicators, our analysis suggests that Bangladesh, Madagascar, and Myanmar are relatively better positioned than the rest of the group to take advantage of the market access opportunities offered by the DFTP scheme. In fact, these beneficiary LDCs have good productive/export capacity, have less than 10 percent of their export basket in the exclusion list (category I countries), and their export products enjoy high demand in India, suggesting a good degree of product complementarity between India’s import demand and their export baskets.
On the other hand, countries like Burundi and Rwanda have weak export capacity and very concentrated export baskets. In addition, few of their products get preferential treatment under the scheme, as over 40 percent of their top exports are on the DFTP’s exclusion list (category III). Moreover, their exports offer a poor match with India’s import needs.
Because they score negatively on all three indicators, the prospects of benefitting from the scheme are dismal.
Despite their adequate productive and export capacities, Ethiopia and Uganda are less likely to benefit from the Indian preference scheme.
First, India’s demand for their main exports is very modest. Moreover, they are in category III, which means that more than 40 percent of their key exports are excluded from the scheme.
Similarly, countries, such as Afghanistan, Benin, Central African Republic, East Timor, Eritrea, the Gambia, Mali, Malawi, and Samoa also perform negatively on two indicators and are less likely to benefit from the market access opportunities offered by the DFTP.
Finally, countries such as Cambodia, Lao PDR, Lesotho, Mozambique, Senegal, Tanzania, and Zambia, perform negatively on one indicator only (or are classified in category II for the second indicator and perform positively for the other two indicators) and are better placed than the former group of countries to enjoy the benefits of the DFTP.18
Table 5. The Three Factors Considered to Assess the Potential Benefits of the DFTP Scheme Beneficiary Country
Productive and export capacities
Three categories of countries based on tariff structure of
DFTP
Product complementarity between Indian import demand and LDCs exports
Afghanistan Inadequate II Yes
Bangladesh Adequate I Yes
Benin Inadequate II Yes
Burkina Faso Adequate I Yes, but modest export
Burundi Inadequate III No
Cambodia Adequate I No
Central African Republic
Inadequate I Yes, but modest export
Comoros Inadequate n.a. n.a.
East Timor n.a. II Yes, but modest export
Eritrea Inadequate I Yes, but modest export
Ethiopia Adequate III No
Gambia, The Inadequate II Yes, but modest export
Lao PDR Adequate II Yes
Lesotho Inadequate I n.a.
Liberia Inadequate n.a. n.a.
Madagascar Adequate I Yes
Table 5. Continued
Beneficiary Country
Productive and export capacities
Three categories of countries based on tariff structure of
DFTP
Product complementarity between Indian import demand and LDCs exports
Malawi Inadequate III Yes
Mali Inadequate II Yes, but modest export
Mozambique Adequate II Yes
Myanmar Adequate I Yes
Rwanda Inadequate III No
Samoa Inadequate I Yes, but modest export
Senegal Adequate II Yes
Somalia n.a. I No
Sudan n.a. I n.a.
Tanzania Adequate II Yes
Uganda Adequate III No
Yemen Adequate n.a.
-Zambia Adequate III Yes
Source: Authors’ calculation based on the World Bank online database WITS; UNCTAD Stat; World Bank’s DataBank; and Kallummal et al.