Are developing countries exporting or importing pollution-intensive goods?: analyzing the trade composition of India
Student name: Ms Arpita Chhikara
Guide: Dr Seema Sangita
Year of completion: 2016
Host Organisation: TERI University
Abstract: The debate between trade and its impact on the environment has been going on for long and one
of the issues regarding this is the composition of trade post trade liberalization. Trade
liberalization consists of policies which are aimed at opening up the economy and lowering trade
barriers. However, while trade may stimulate growth; it may simultaneously lead to more
pollution either as a result of relocation of polluting industries from countries with strict
environmental policy to countries with a relatively lax environmental regime, commonly known
as the Pollution Haven Hypothesis; or due to increased production in dirty industries so as to
meet the export demands of the foreign country, which is precisely the scale effect.
Thus, the composition of trade becomes an important aspect to analyze in terms of its impact on
the environment that is, examining the imports and exports of a country and their corresponding
pollution intensities. Such an analysis can give us a fair idea whether a country is exporting
pollution-intensive goods or is it importing pollution-intensive goods, because, if a country is
importing a pollution intensive good, whose production is taking place somewhere abroad, then
such an activity is actually benefitting the importing country, who do not have to bear the
consequences of pollution that is being emitted from the manufacture of the good.
Thus this paper aims to assess the impact on environment due to this change in composition of
trade post liberalization for India over a period of time- from 1993 to 2013 through the
estimation of an index. The study is carried out at two levels; India’s trade with rest of the world
and a bilateral analysis of its trade with a select group of economies for the same time frame. It is
seen that there has been a significant change in the composition of India’s trade post the
liberalization policies of 1991.
Key words: International trade, environment, input-output analysis, export, import, trade policy,
pollution terms of trade.
