Exploring the prospects of cooperation in the manufacturing industries between India and China: A perspective of embodied energy in India-China trade

Manufacturing reforms are facing energy constraint in both India and China. In this paper, an international input-output analysis (IOA) was applied and several expanding-descriptive indicators were chosen to measure the energy transformation embodied in India-China manufacturing trade from 1996 to 2011. Furthermore, the main driving factors of the change in embodied energy were examined by structural decomposition analysis (SDA). The results showed that the total energy use in bilateral trade and net embodied energy imports in India's manufacturing increased by about 11 times and 40 times, respectively. Energy terms of trade in India's manufacturing appeared in an “M” shape with a deteriorating tendency, which indicated that India's manufacturing gradually lost its advantage of energy conservation exchanged by trade deficit. The major manufactures, which had lower trade profits and larger energy demands, were of light industries in India but were of heavy industries in China. Scale effect was the strongest driving factor for the increase of the embodied energy. Technique effect had the greatest negative effect and could offset the increase in embodied energy by about 13.18-54.49%. According to our research, it could be concluded that energy cooperation is necessary and has a wide prospect for India and China.