The Indo-US trade paradox: Understanding a deficit that really might not be

Apart from the fact that a $20 billion trade deficit is nothing to get worked up about, if proper accounting were done this could become less

Reams have been written about the trade between India and the US. No one, however, has noticed a peculiar paradox.

This paradox was first pointed out by Wassily Leontief in 1953 who, after a deep econometric study of US exports, said that contrary to expectation and belief, the US which was a labour scarce and capital abundant country, was exporting things which were labour intensive.

According to standard economic theory it should have been the other way round. The US should have been exporting things that were capital intensive.

The finding sparked off a huge debate amongst international economic theorists and