Smaller states and Trade

• According to Economic Survey, Smaller States such as Uttarakhand, Himachal Pradesh and Goa trade more, while the net exporters are the manufacturing powerhouses of Tamil Nadu, Gujarat, and Maharashtra.

Main highlights:

• Internal trade between States, of the first-ever estimates for interstate trade flows, is that cross-border exchanges between and within firms amount to at least 54% of GDP (in 2015), implying that India’s interstate trade is 1.7 times larger than its international trade of 32% of GDP.
• Haryana and Uttar Pradesh appear to be manufacturing powerhouses because of their proximity to the national capital region, according to the Survey.
• All political borders impede the flow of people, language (Hindi specifically) does not seem to be a demonstrable barrier to the flow of goods.
• India’s aggregate interstate trade (54% of GDP) is not as high as that of the U.S. (78% of GDP) or China (74% of GDP), but substantially greater than provincial trade within Canada and greater than trade between Europe Union countries.
• The costs of moving (within India) are about twice as great for people as they are for goods.
• However, it said there is a potential dampener on the finding that trade in goods is high within India.
• India traded so much because of the consequence of the current system of indirect taxes which perversely favours interstate trade over intra-state trade.

By: Vishal