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Parthasarathi Shome: Venice to Verona via Vittorio Veneto

Indo-Italian trade remains way below potential

Parthasarathi Shome 

Venice is invariably on Indian tourists’ travel route. They ride excessively priced gondolas through its canals, gazing at dilapidated, photogenic homes with sculpted exterior mouldings, hanging clothes and blooming flowers. Stopping to pick up exquisitely crafted Murano glass or Cameo pendants for loved ones and gorging on seafood and wine are other musts. The more adventurous tourists criss-cross the waterways in crowded Vaporettos or navigate narrow lanes in sneakers, doing the rounds of the Bridge of Sighs or the hidden treasures of San Rocco, where frescoes by Tintoretto led it to be termed the Sistine Chapel of Venice. The Moor sounding the gong of the clock at St Mark’s Square reveals the millennia-old dependence on Africa for physical tasks. Yet, such were the rigours of the Venetian Republic that once the Doge, its administrator, was elected and entered his palace, he never emerged from it again, like the living child goddess of Kathmandu. Of course, the Doge’s decisions were final.

A well-heeled tourist looks for more and ventures out of Venice. One cannot but notice striking similarities in the political economy of India and Italy. In the post-Roman period, Italy had been fragmented into city states and kingdoms until, after an extended tumultuous period, it was unified in the 1860s. Reflecting the different economic stages of the regions – the poor south including Sardinia and the rich north including Venice to Verona – a complex system of fiscal federalism emerged. Even today, tempers tend to run high among Italian regions on the matter of inter-regional transfers.

Moving east to west, Vittorio Veneto is located between Venice and Verona. Its calendar-perfect historical neighbourhood is from when it was in the Venetian Republic until annexed to the Kingdom of Italy in 1866. Not only did it produce a pope, but the final battles of World War I were also fought here. Its gracious environs produce Amarone, the best Italian wine. There to celebrate a friend’s hallmark birthday, I found myself among friends from Colombia, Venezuela, Canada, UK, and other Italians, a veritable mix. At dinner, I realised that Italians could be louder than Indians over meaningless banter, in a relaxed ambience of perfect camaraderie. Their menu could be more extensive than ours with antipasto, cheeses, pasta, fish and meat dishes, and various desserts, comprising a cuisine finessed over millennia from the epicurean Romans. No wonder then that the modern Italian feels comfortable in an Indian milieu with our chaotic debates over delectable food.

The highway to Verona revealed a super-developed region of manufacturing units. It led me to think of Indo-Italian trade. How we are, or might be, linked, I thought. Reaching Verona, though I failed to find the Two Gentlemen of Verona, I did make it to Juliet's little balcony and the small courtyard from where Romeo would have climbed up to her. Moving on, an unforgettable asparagus risotto topped with Amarone at Botega del Vino, a timeless boutique restaurant, completed the visit.

Coming back to my query, over the last decade, India’s exports to Italy as a share of exports to the European Union (EU) fell from over 12 per cent to 10 per cent (see graph). The share of imports rose from 6 per cent to 10 per cent. Further, Indo-Italian bilateral trade suffered in particular in the 2008-09 global economic recession. A negative growth rate of over 10 per cent was registered in 2009. However, since the recession, it grew 22 percent in 2010-11 albeit from the shrunk 2009-10 base, reaching $8.85 billion. The number of traded commodities also expanded. An Italian diplomat recently expressed optimism that Indo-Italian trade would reach $17.5 billion by 2014. After all, since Italy is not the largest trading partner of India among EU countries, possibilities are not saturated.

Selected important items in Indo-Italian trade are shown in Tables I and II. India exports textiles, vehicles and transport equipment, base metals, chemicals, machinery, leather goods, gems and jewellery, engineering goods, iron and steel products, automobiles and auto parts (Table I). It imports machinery and mechanical appliances such as precision tools, articles of base metal, chemicals, vehicles and aircraft, plastics and rubber, and optical instruments (Table II).

But has Indo-Italian trade neared its potential? Economists measure bilateral export potential by using the Revealed Comparative Advantage (RCA) index and then combining it with some assumptions. RCA is defined as a ratio of two shares. The numerator is the share of India’s exports of a commodity in its total exports. The denominator is the share of world exports of the same commodity in total world exports. An RCA value higher than one for the commodity indicates India has a comparative advantage in exporting it to the world.

But is there potential for India to export it to Italy? For this, we select India’s RCA commodities in Italy’s import basket that have a share of at least 0.5 per cent in Italy’s total imports. And we use two criteria. One, India could export all exports of a particular commodity to the world (that Italy imports from India) to Italy alone. And two, Italy would shift all its global imports of a particular commodity to India alone. The lesser of the two is selected and is used to indicate India’s export potential of the commodity to Italy (Table I). It is an upper bound of India’s export potential to Italy. It reveals that India’s potential exports to Italy are $23 billion. Similarly, Table II shows Italy’s potential exports to India are $12 billion.

Comparing the actuals with potential in Tables I and II reveals that in both cases exports could increase significantly. But the difference between actual and potential exports from India to Italy is much higher than that from Italy to India. There is optimism in the air but India needs to seek Italian markets more aggressively.

The author is director and chief executive, Icrier
All opinions are exclusively those of the author

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First Published: Wed, June 08 2011. 00:21 IST