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Comparative Advantage of India

Discuss the position of India with respect to the comparative advantage it holds in gems and jewellery, software services, and petroleum.

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The principle of comparative advantage states that a state should specialize in the production or manufacturing of those goods or services in which it has a lower opportunity cost, and trade it with those countries who have a higher opportunity cost for those goods or services. With this arrangement, and having reasonable terms of trade, both the countries can consume at a point beyond their Production Possibilities Frontiers (PPF's). As an emerging world power after China in the global market today, India has many highly developed resources to offer to the world, in which it specialises through its immense natural or human resources. To its own benefit, India has been engaging in production/manufacturing of these goods and services ...

Solution Summary

Comparative advantages of India is examined. The position of India with respect is determined.