ANALYSIS OF TERMS OF TRADE OF

INDIA WITH NAFTA COUNTRIES

Prepared for and under the guidance of
Dr. R. P. Pradhan
(Department of Humanities and Social Sciences)
Prepared By
Prem Gupta 2017A7PS0063G
Somil Gupta 2017A7PS0142G

In partial fulfilment of the requirement of the course

GS F234: DEVELOPMENT ECONOMICS

 INTRODUCTION

The North American Free Trade Agreement (NAFTA) is a

comprehensive trade agreement that sets the rules of trade and
investment between Canada, the United States, and Mexico. Since
the agreement entered into force on January 1, 1994, NAFTA has
systematically eliminated most tariff and non-tariff barriers to free
trade and investment between the three NAFTA countries.

NAFTA is a formal agreement that establishes clear rules for

commercial activity between Canada, the United States, and Mexico.
NAFTA is overseen by a number of institutions that ensure the proper
interpretation and smooth implementation of the Agreement’s
provision. It removed taxes on products traded between the United
States, Canada, and Mexico. It also protects copyrights, patents, and
trademarks between those three countries. It was updated with the
North American Agreement on Environmental Cooperation, which
helped set more environmental regulations and helped reduce
pollution. It was also updated with the North American Agreement for
Labour Cooperation, which helped people fight for better work
conditions.
 RAW DATA AND CALCULATIONS
TABLE 1 - TOTAL IMPORT AND EXPORT VALUES OF INDIA WITH NAFTA
COUNTRIES (in Billion US $)
INDIA - CANADA INDIA - USA INDIA - MEXICO
YEAR EXPORT IMPORT EXPORT IMPORT EXPORT IMPORT
1990 0.179 0.271 3.125 2.186 0.028 0.033
1991 0.191 0.254 3.111 1.999 0.040 0.036
1992 0.213 0.427 3.705 1.914 0.039 0.003
1993 0.252 0.250 4.438 2.432 0.053 0.055
1994 0.306 0.248 5.165 2.615 0.137 0.071
1995 0.355 0.357 5.514 3.485 0.112 0.061
1996 0.402 0.297 5.912 3.272 0.120 0.046
1997 0.551 0.351 7.826 3.610 0.218 0.087
1998 0.551 0.351 7.826 3.610 0.218 0.087
1999 0.645 0.282 8.634 3.707 0.210 0.020
2000 0.769 0.388 10.204 2.590 0.271 0.076
2001 0.672 0.467 9.258 2.924 0.356 0.196
2002 0.761 0.519 18.080 4.146 0.415 0.343
2003 0.916 0.594 12.399 4.574 0.512 0.511
2004 1.093 0.723 14.850 5.582 0.783 0.465
2005 1.331 0.876 17.888 7.462 0.862 0.588
2006 1.521 1.222 20.709 10.194 1.014 0.500
2007 1.658 1.801 22.494 12.832 1.088 0.975
2008 1.893 2.133 24.068 24.415 1.214 1.645
2009 1.584 2.084 19.834 14.013 1.022 0.845
2010 1.852 1.848 27.482 16.892 1.605 0.840
2011 1.798 2.278 31.329 21.995 1.335 2.081
2012 1.994 2.537 35.521 23.579 1.593 3.418
2013 2.237 2.978 38.118 22.022 2.148 4.169
2014 2.161 3.728 38.100 19.690 2.917 3.315
2015 2.075 3.816 38.061 19.689 2.764 2.534
2016 1.965 3.621 39.925 19.375 3.369 2.230
2017 2.954 4.046 50.989 25.411 4.372 3.442
Total Trade
Before NAFTA 0.835 1.201 14.380 8.532 0.160 0.126
Total Trade
After NAFTA 31.738 37.297 505.022 275.067 28.521 28.475

Source: https://atlas.media.mit.edu/en/visualize/line/sitc/show/ind/all/all/1990.2017/

Trade Before NAFTA:

Trade After NAFTA:
 TABLE 2 - INDIA EXPORT VALUE AND VOLUME INDEX (2000=100)
Export value Export Volume Import value Import Volume
YEAR index index index index
1990 42.401 35.042 45.765 32.458
1991 41.829 35.751 39.687 31.749
1992 46.314 39.585 45.763 38.457
1993 50.901 45.448 44.230 44.676
1994 59.043 51.792 52.099 54.269
1995 72.276 66.922 67.362 67.362
1996 78.116 75.841 73.641 70.809
1997 82.607 70.604 80.415 78.072
1998 78.899 73.738 83.419 91.669
1999 84.161 83.327 91.181 94.980
2000 100 100 100 100
2001 102.316 108.501 97.805 101.458
2002 116.212 126.527 109.693 105.851
2003 139.131 133.934 140.826 130.416
2004 180.863 155.489 193.653 152.627
2005 235.058 189.037 277.294 195.833
2006 287.423 211.288 346.273 218.151
2007 354.321 242.069 445.180 248.197
2008 459.725 283.210 623.085 313.239
2009 389.126 266.353 499.200 324.656
2010 534.108 334.792 679.761 398.275
2011 714.748 384.898 901.467 436.868
2012 700.408 377.932 950.439 461.987
2013 742.928 409.893 903.282 460.718
2014 761.442 430.587 898.454 476.680
2015 631.072 422.151 762.508 538.894
2016 623.285 443.677 701.063 529.301
2017 705.197 462.506 867.582 588.229

Source: https://data.worldbank.org/country/india
 TABLE 4 -GROSS BARTER TOT OF INDIA WITH NAFTA
COUNTRIES
TABLE 3 - NET BARTER ToT Of INDIA INDIA-CANADA INDIA-USA INDIA-MEXICO
YEAR INDIA Year
1990 85.816 1990 151.151 69.961 116.356
1991 93.600 1991 132.696 64.263 89.465
1992 98.319 1992 200.572 51.667 6.476
1993 113.131 1993 99.117 54.804 102.404
1994 118.750 1994 81.175 50.628 51.338
1995 108.000 1995 100.601 63.190 54.849
1996 99.038 1996 74.003 55.351 38.312
1997 113.592 1997 63.615 46.123 39.911
1998 117.582 1998 63.615 46.123 39.911
1999 105.208 1999 43.697 42.941 9.381
2000 100.000 2000 50.416 25.383 28.017
2001 97.822 2001 69.444 31.589 54.992
2002 88.631 2002 68.247 22.930 82.598
2003 96.201 2003 64.870 36.889 99.821
2004 91.677 2004 66.179 37.589 59.299
2005 87.816 2005 65.816 41.717 68.195
2006 85.701 2006 80.354 49.224 49.336
2007 81.605 2007 108.632 57.046 89.641
2008 81.605 2008 112.677 101.440 135.507
2009 95.013 2009 131.528 70.651 82.633
2010 93.472 2010 99.777 61.464 52.339
2011 89.993 2011 126.638 70.205 155.847
2012 90.083 2012 127.227 66.380 214.491
2013 92.446 2013 133.162 57.771 194.103
2014 93.822 2014 172.485 51.680 113.636
2015 105.650 2015 183.869 51.729 91.692
2016 106.063 2016 184.331 48.529 66.212
2017 103.378 2017 136.969 49.837 78.728

Export Price Index

Net Barter Terms of Trade(N) = × 100
Import Price Index
Import Quantity in a Year
Gross Barter Terms of Trade(G) = × 100
Export Quantity in a Year
 TABLE 5 - Xz VALUES OF NAFTA COUNTRIES w.r.t INDIA
Canada USA Mexico India
YEAR Xz Xz Xz Xz
1990 3.514 3.982 3.087 1
1991 3.526 4.14 3.247 1
1992 3.566 4.165 3.166 1
1993 3.369 4 2.918 1
1994 3.121 3.689 2.61 1
1995 3.066 3.56 2.309 1
1996 2.997 3.585 2.259 1
1997 3.057 3.596 2.252 1
1998 3.087 3.65 2.35 1
1999 3.163 3.631 2.251 1
2000 3.414 3.749 2.541 1
2001 3.398 3.766 2.583 1
2002 3.266 3.637 2.472 1
2003 3.152 3.535 2.384 1
2004 3.043 3.449 2.376 1
2005 2.84 3.142 2.184 1
2006 2.621 2.939 2.139 1
2007 2.497 2.826 2.108 1
2008 2.472 2.748 2.05 1
2009 2.23 2.747 1.849 1
2010 2.107 2.625 1.67 1
2011 2.084 2.582 1.635 1
2012 2.006 2.564 1.576 1
2013 2.005 2.586 1.577 1
2014 1.998 2.557 1.543 1

Source:
https://fred.stlouisfed.org/search?st=Total+Factor+Productivity+Level+
at+Current+Purchasing+Power+Parities
 TABLE 6 - Double Factorial Terms of Trade
INDIA-CANADA INDIA-USA INDIA-MEXICO
Year
1990 301.556 341.718 264.913
1991 330.034 387.504 303.919
1992 350.607 409.500 311.279
1993 381.139 452.525 330.117
1994 370.619 438.069 309.937
1995 331.128 384.480 249.372
1996 296.818 355.053 223.728
1997 347.251 408.478 255.810
1998 362.977 429.176 276.319
1999 332.774 382.011 236.824
2000 341.400 374.900 254.100
2001 332.398 368.396 252.673
2002 289.469 322.351 219.096
2003 303.226 340.071 229.343
2004 278.972 316.193 217.824
2005 249.397 275.917 191.790
2006 224.622 251.874 183.314
2007 203.768 230.617 172.024
2008 201.728 224.251 167.291
2009 211.878 261.000 175.678
2010 196.945 245.364 156.098
2011 187.545 232.361 147.138
2012 180.707 230.973 141.971
2013 185.355 239.066 145.788
2014 187.457 239.904 144.768

Double Factorial Terms of Trade(D) = N x Xz

Eg. For USA in 2001: D = 97.82 x 3.76 = 368.39
 TABLE 7 - Income TOT OF INDIA WITH NAFTA COUNTRIES
INDIA-CANADA INDIA-USA INDIA-MEXICO
Year
1990 15.358 268.192 2.445
1991 17.924 291.200 3.718
1992 20.917 364.299 3.815
1993 28.532 502.099 6.037
1994 36.292 613.323 16.315
1995 38.356 595.549 12.043
1996 39.769 585.500 11.932
1997 62.592 888.968 24.818
1998 64.791 920.195 25.690
1999 67.832 908.322 22.090
2000 76.879 1020.369 27.054
2001 65.744 905.605 34.855
2002 67.465 1602.437 36.810
2003 88.143 1192.760 49.242
2004 100.214 1361.430 71.826
2005 116.851 1570.883 75.663
2006 130.384 1774.804 86.895
2007 135.310 1835.657 88.786
2008 154.497 1964.087 99.058
2009 150.528 1884.500 97.130
2010 173.085 2568.825 150.061
2011 161.850 2819.377 120.170
2012 179.622 3199.829 143.546
2013 206.777 3523.910 198.578
2014 202.782 3574.647 273.699
2015 219.263 4021.153 292.032
2016 208.364 4234.591 357.291
2017 305.341 5271.151 452.019

Income Terms of Trade(I) = N X Export Quantity

Eg. For CANADA in 2000: I = 100 x 0.7687 = 76.87 $ Billions
 GRAPHS AND ANALYSIS
GROSS BARTER TERMS OF TRADE:

GRAPH 1 - INDIA'S Gross Barter ToT with NAFTA Countries

250
Gross Barter ToT of India with NAFTA Countries

200

150

100

50

0
1992

2009
1990
1991

1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008

2010
2011
2012
2013
2014
2015
2016
2017
Years

INDIA-CANADA INDIA-USA INDIA-MEXICO

 The fluctuations in the graph are mainly because of the fact that this
is trade between a developed and a developing country.
 Mexico: Until 2005, due to globalization India had increased its
exports and G had steadily fallen, but from 2006, talks to improve
trade relations helped to increase Mexico’s import to India which
increased G and trade has been improving ever since.
 Canada: Value of G is steady from 1993-2013 as both nations import
and export similar quantities of goods.
 USA: Value of G for USA has always been lower than 100, as USA has
always imported more from India than exported.
 NET BARTER TERMS OF TRADE:

GRAPH 2 - INDIA'S NET BARTER(N) ToT

140

120
Net Barter ToT of India

100

80

60

40

20

Year

INDIA Linear (INDIA)

 India has had a deteriorating value of N with the world as seen in the
graph, fluctuating around 80%.
 This is mainly due to reduced exports and high imports of Petroleum
and crude oil, precious stones, gold etc.
 The marginal export growth is curtailed by high import growth, the
export growth is not increasing.
 INCOME TERMS OF TRADE:

GRAPH 3 - INDIA'S Income ToT(I) with NAFTA Countries

6000
India's Income ToT with NAFTA Countries

5000

4000

3000

2000

1000

Year

INDIA-CANADA INDIA-USA INDIA-MEXICO

 As far as NAFTA is concerned, it was more of a trade between India

and USA than other NAFTA members.
 Indian trade with Canada and Mexico is still developing and hasn’t
flourished much. So, the I value remains low.
 A rise in Income terms of trade means a country is importing more
goods in return of the goods it is exporting.
 Indian imports from USA has been on an increase from 1990 and
became more robust after NAFTA in 1994 and thus its Income terms
of trade has been on an increase overall.
 DOUBLE FACTORIAL TERMS OF TRADE:
GRAPH 4 - INDIA's BILATERAL D-ToT with NAFTA Countries
500
India's Bilateral D-ToT with NAFTA Countries

450
400
350
300
250
200
150
100
50
0

Year
INDIA-CANADA INDIA-USA INDIA-MEXICO

 The double factorial terms of trade take into account productivity

changes both in the domestic export sector and the foreign export
sector producing the country’s imports.
 Mexico has not been able to improve its productivity due to weak
labour productivity as the workers work on much lower incomes than
their American counterparts.
 A rise in the index of double factorial terms of trade of a country
means that the productive efficiency of the factors producing exports
has increased relatively to the factors producing imports in the other
country.
 MAJOR COMMODITIES TRADED
GRAPH 5 - INDIA TO USA EXPORT PRODUCT SHARE (in US$ Thousand)

30000000

25000000

20000000

15000000

10000000

5000000

Stone and Glass Textiles and Clothing Raw materials Vegetable

Source:
https://wits.worldbank.org/CountryProfile/en/Country/IND/StartYear/1990/EndYear/2017/TradeFlow/Export/Indicator/XPRT-TRD-
VL/Partner/USA/Product/all-groups#

Due to its reserves of precious stones and a skilled class of craftsmen to work on these stones, India is a major exporter of precious
stones to the USA. India also exports large number of Textile and Clothing to the United States as well as Raw Materials.
 GRAPH 6 - INDIA TO CANADA EXPORT PRODUCT SHARE (in US$ Thousand)

1400000

1200000

1000000

800000

600000

400000

200000

Textiles and Clothing Intermediate goods Vegetable Hides and Skins

Source:
https://wits.worldbank.org/CountryProfile/en/Country/IND/StartYear/1990/EndYear/2017/TradeFlow/Export/Indicator/XPRT-TRD-
VL/Partner/CAN/Product/all-groups

India mostly exports Textile and Clothing to Canada followed by Intermediate and Vegetable goods.
 GRAPH 7 - INDIA TO Mexico EXPORT PRODUCT SHARE (in US$ Thousand)

3000000

2500000

2000000

1500000

1000000

500000

Transportation Textiles and Clothing Chemicals Vegetable

Source:
https://wits.worldbank.org/CountryProfile/en/Country/IND/StartYear/1990/EndYear/2017/TradeFlow/Export/Indicator/XPRT-TRD-
VL/Partner/MEX/Product/all-groups#

India’s export to Mexico mostly consist of Machinery like Automobiles. India also exports chemicals and Health related
products to Mexico.
 GRAPH 8 - INDIA-USA IMPORT PRODUCT SHARE (in US$ Thousand)
25000000

20000000

15000000

10000000

5000000

Capital goods Chemicals Mach and Elec Raw materials

SOURCE:
https://wits.worldbank.org/CountryProfile/en/Country/IND/StartYear/1990/EndYear/2017/TradeFlow/Import/Indicator/MPRT-TRD-
VL/Partner/USA/Product/all-groups#

USA being a developed country with well-established industries is a major producer and exporter of machinery to the
whole world. Also, it exports other products like aircraft, electronics, inorganic salts and acids, mining materials, etc.
 GRAPH 9 - INDIA-CANADA IMPORT PRODUCT SHARE (in US$ Thousand)
3500000

3000000

2500000

2000000

1500000

1000000

500000

Wood Raw materials Minerals Metals

SOURCE:
https://wits.worldbank.org/CountryProfile/en/Country/IND/StartYear/1990/EndYear/2017/TradeFlow/Import/Indicator/MPRT-TRD-
VL/Partner/CAN/Product/all-groups#

Canada also exports a lot of Raw Materials but it is also a major exporter of Metals. India imports other
products like agricultural products, minerals, agrochemicals, cereals and vegetable oil, paper and pulp, etc.
from Canada.
 GRAPH 10 - INDIA-MEXICO IMPORT PRODUCT SHARE (in US$ Thousand)
4500000
4000000
3500000
3000000
2500000
2000000
1500000
1000000
500000
0

Chemicals Metals Plastic or Rubber Raw materials

SOURCE:
https://wits.worldbank.org/CountryProfile/en/Country/IND/StartYear/1990/EndYear/2017/TradeFlow/Import/Indicator/MPRT-TRD-
VL/Partner/MEX/Product/all-groups#

Mexico export to India majorly dominated by Raw Materials. India also imports Metals, Plastic,
Rubber, Chemicals etc. from Canada.
 GRAPH 11 - INDIA TO World EXPORT PRODUCT SHARE (in US$ Thousand)

160000000
140000000
120000000
100000000
80000000
60000000
40000000
20000000
0

Textiles and Clothing Stone and Glass Raw materials Vegetable

SOURCE:
https://wits.worldbank.org/CountryProfile/en/Country/IND/StartYear/1990/EndYear/2017/TradeFlow/Export/Indicator/XPRT-TRD-
VL/Partner/WLD/Product/all-groups#

The leading commodity in India’s overall export to the rest of the world consists of precious stones followed by garments
and machinery. India also export Vegetables to rest of the world.
 GRAPH 12 - INDIA -World IMPORT PRODUCT SHARE (in US$ Thousand)

600000000

500000000

400000000

300000000

200000000

100000000

Raw materials Fuels Capital goods Consumer goods

SOURCE:
https://wits.worldbank.org/CountryProfile/en/Country/IND/StartYear/1990/EndYear/2017/TradeFlow/Import/Indicator/MPRT-TRD-
VL/Partner/WLD/Product/all-groups#

India import lots of Raw Materials from rest of the world as well as Fuel and Consumer goods.
BIBLIOGRAPHY-
 https://en.wikipedia.org/wiki/North_American_Free_Trade_Agreement
 https://atlas.media.mit.edu/en/visualize/line/sitc/show/ind/all/all/1990.2016/
 https://fred.stlouisfed.org/search?st=Total+Factor+Productivity+Level+at+Current+Purcha
sing+Power+Parities
 https://data.worldbank.org/country/india
 https://wits.worldbank.org