Interstate trade is relatively high in India

The first-ever estimates for interstate trade flows indicate a trade to GDP ratio of about 54 per cent, a number that is comparable to other large jurisdictions and that contradicts the caricature of India as a barrier-riddled economy; the ratio of India’s internal and international trade also compares favourably with others.  De facto, at least, India seems well-integrated internally.  A more technical analysis confirms this: trade costs reduce trade by roughly the same extent in India as in other countries.

When it comes to internal trade, the big negative outlier is in fact Indonesia.

That is all from the new and interesting Of Counsel: The Challenges of the Modi-Jaitley Economy, by the excellent Arvind Subramanian.

Comments

Indians are not ready for self-rule. A Brazilian embassador pointed that in the 40's. But who pays attention to Brazil? By all means, let's celebrate Red China, Germany, Saudi Arabia, Vietnam and all other American young men's murderers. Brazil is too peaceful and loyal to be of any interest.

I am eager to learn the relevance of your comment about stinky people to the topic of internal trade. Please educate me.

Indonesia is, of course, the only real archipelago country in the world. Does anyone know what proportion of trade barriers there are geographical versus regulatory?

There are only 17,500+ islands. it should not be hard to set up an inter-state system to connect them to help alleviate geographical barriers.

They could call it the "Archipelago-go"!

What, like Hawaii's "interstate" highways?

(and of course the Philippines as well)

"Does anyone know what proportion of trade barriers there are geographical versus regulatory?"

In Indonesia? I would say a lot. Take Easter Papua for instance. It is practically cut off from the rest of the country with some of the worst aviation infrastructure on planet earth. Even places like Bali have trouble, despite being a tourist destination.

Then there are the cultural barriers....

+1. The actual internal regulatory trade barriers (when compared to India) are pretty small. The 'Provinsi' governments don't have much power to collect revenue, and I think most of them are around transport (e.g. vehicle registrations) and property.

Even then, I'd be surprised if revenue collection is effective.

Driving across Sumatra, for example, there are no checkpoints or signage between any of the provinces. As I understand it this is quote different to India.

But that leads into barriers from poor infrastructure.

I remember my first visit to Jakarta around 15 years ago, and was struck by the fact that the drive from the hotel from the airport took much longer than the flight from Singapore.

Getting goods and services from one end of an island to the other is very difficult. Sumatra (the largest island by area) has one major road going through it and it's very poor. A 350km (220mi) drive from Pekanbaru to Riau will take a better part of 12 hours.

Similar case, if you have to go from Jakarta to Semarang (450km), you would never drive (perhaps 10 hours), you'd fly.

(Add to this: there's no cold-chain transport/storage across Indonesia.)

And as EverExtruder points out the cultural barriers are at times intriguing. There's a resentment towards Java/Jakarta in the same way there is towards all major capitals, but people from Medan in north Sumatra are likely to have more in common with Malaysians from Melaka than anyone from Central Java.

But for all that, I love it, and it's the home of my ancestors. It's a little bit like a bad girlfriend or boyfriend. They treat you badly, but it's so fascinating that you keep going back for more.

India has the fastest growing middle class in Asia if not the world. Of course, when you start at the bottom, there is a lot of room for improvement.

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