Abstract
Trade liberalization enables the country to compete with other countries. The increase in competition directs the resources from less advantageous activity to more advantageous activity. The efficient allocation of resources enhances productivity. Considering the importance of trade in the growth process, India’s post-liberalization growth experiences are highly influenced by its restructured trade pattern. This chapter captures these experiences by focusing on trade liberalization process and emerging pattern of India’s external trade. The chapters includes an overview of India’s trade liberalization process, tariff policy according to industrial products and stages of processing; trends and patterns of FDI flow in Indian industries; foreign technology transfers; post-liberalized experiences in terms of exports, imports and trading partners; and relationship between India’s post-reforms growth and instruments of trade liberalization using elasticity coefficients.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
Topawala and Khandelwal (2010).
- 2.
In the programme of macroeconomic stabilization, there are two fundamental objectives. The first objective is to pre-empt a collapse of the balance of payments situation in the short term and to reduce the current account deficit in the medium term. The second objective is to curb inflationary pressures and expectations in the short term and to reduce the rate of inflation as soon as possible thereafter. The principle instruments of stabilization are fiscal policy and monetary policy, which seek to reduce the level of aggregate demand in the economy, and are often used in conjunction with a devaluation, which seeks to stem destabilizing expectations (Nayyar 2011).
- 3.
In response to a macroeconomic crisis, stabilization is often combined with adjustment and reform. Such programmes of structural adjustment, based on policy reform advocated by the international financial institutions, are concerned with the supply side in an endeavour to raise the rate of growth of output. Structural reform seeks to shift resources: (a) from the non-traded goods sector to the traded goods sector and within the latter from import competing activities to export activities; and (b) from the government sector to the private sector. Apart from resource allocation, structural reform seeks to improve resource utilization by (a) increasing the degree of openness of the economy and (b) changing the structure of incentives and institutions, which would reduce the role of State intervention to rely more on the market forces, dismantle controls to rely more on prices, and wind down the public sector to rely more on the private sector (Nayyar 2011).It is also to be noted here that stabilization programmes were a part of an arrangement with the IMF and structural adjustment programmes were a part of arrangement with the World Bank. It is worth noting that it was not possible for a country to enter into a stabilization programme with the IMF unless it entered into a structural adjustment programme with the World Bank (Nayyar 2011). These prescriptions of IMF and World Bank are based on neoclassical economics which assumes competitive markets, profit-maximizing firms and rational consumers.
- 4.
The guidelines were outlined in the Chelliah report of the Tax Reform Commission constituted in 1991 (Topavala and Khandelwal 2010).
- 5.
Division of the International Trade and Finance, Department of Economic and Policy Research, Reserve Bank of India.
- 6.
Division of the International Trade and Finance, Department of Economic and Policy Research, Reserve Bank of India.
- 7.
Reserve Bank of India, Annual Report, 2007–08, Mumbai, 2008.
- 8.
Emerging Market Economies; Argentina, Brazil, Chile, India, Indonesia, Mexico, South Africa and Thailand.
- 9.
These institutional factors are explained in terms of procedural delays, complex rules and regulations related to land acquisition, legal requirements and environmental obligations (CRISIL Report 2011; FDI Survey by FICCI, December 2010; Economic and Political Weekly, October 16, 2010; China Daily, November 6, 2010).
- 10.
SIA Newsletter, Annual Issue, 2012.
- 11.
DIPP, GoI.
- 12.
The India-Mauritius Double Taxation Avoidance Agreement (DTAA) was signed in 1982. According to DTAA between India and Mauritius, capital gains arising from the sale of shares are taxable in the country of residence of the shareholder and not in the country of residence of the Company whose shares have been sold. Therefore, a Company resident in Mauritius selling shares of an Indian company will not pay tax in India. Since there is no capital gains tax in Mauritius, the gain will escape tax altogether.
- 13.
This period is pronounced by trade contraction in India.
- 14.
Also see Kumar and Gupta (2008).
- 15.
Also noted in Nayak et al. (2013).
- 16.
As particular parts of a manufacturing process were separated out and located in different countries to take advantage of differences in labour and other costs, trade in intermediate goods grew rapidly (Ghose 2008). In theory, increased capital flows should have led to a substantial transfer of capital from developed countries, where it is abundant and hence earns low return, to developing countries, where it is scare and hence should bear high return (Ghose 2008).
- 17.
The trade statistics treats petroleum products separately from manufacturing goods (Economic Surveys, all issue).
References
Agarwal, R N, and B Goldar. (1995): “Economic Reforms and Employment in India: Projections for the Year 2001-02”, Indian Journal of Labour Economics, Vol. 38(4).
Bhattacharyya, Rajib. (2012): “The Opportunities and Challenges of FDI in Retail in India”, IOSR Journal of Humanities and Social Sciences, Vol. 5(5), Nov.–Dec.
Cerra, Valerie, and Sweta Chaman Saxena. (2000), “What Caused the 1991 Currency Crisis in India?” International Monetary Fund Working Paper 00/157, IMF.
Chand, Satish, and Kunal Sen. (2002): “Trade Liberalization and Productivity Growth: Evidence from Indian Manufacturing”, Review of Development Economics, Vol. 6(1).
China Daily, November 6, 2010, weblink: www.chinadaily.com, accessed on 24-12-2013.
Chopra, Ajai, Charles Collyns, Richard Hemming, and Karen Parker (1995): “India: Economic Reform and Growth”, IMF Occasional Paper No. 134.
CRISIL Report (2011), weblink: www.crisil.com, accessed on 12-03-2013.
Das, D.K., (2003): “Manufacturing Productivity under Varying Trade Regime: India in the 1980s and 1990s”, Working Paper 107, ICRIER, New Delhi.
Databook for DCH, Planning Commission, Government of India (10th March, 2014), weblink: http://www.planningcommission.gov.in/data/datatable/1203/databook_1203.pdf
Department of Industrial Policy and Promotion (DIPP), Government of India, Ministry of Commerce and Industry, weblink: www.dipp.nic.in
Division of the International Trade and Finance, Department of Economic and Policy Research, Reserve Bank of India.
Economic and Political Weekly, October 16, 2010.
Economic Survey (2007–08): Ministry of Finance, Government of India.
Economic Survey (various issues), Government of India, weblink: indiabudget.nic.in/survey.asp
FDI Survey by FICCI, December 2010, weblink: ficci.in/Sedocument/20097/FICCI_FDI_Survey_Dec_2010.pdf, accessed on 18-06-2013.
Ghose, Ajit K. (2008): “Globalisation and Employment in Developing Countries”, Indian Journal of Labour Economics, Vol. 51(4).
Ghosh, Jayati. (2006): “Trade Liberalisation and Economic Restructuring: Can India skip the Industrial Phase?”, Paper for IDEAs Conference on Post Liberalisation Constraints on Macroeconomic Policies, Muttukadu, 27–29 January.
Goldar, Bishwanath. (2002): “Trade Liberalization and Manufacturing Employment: The Case of India”, International Labor Organization Employment Paper 2002/34.
Handbook of Statistics on Indian Economy, Reserve Bank of India, weblink: https://rbidocs.rbi.org.in/.
Hasan, Rana, Devashish Mitra, and K. V. Ramaswamy. (2003): “Trade Reforms, Labor Regulations and Labor Demand Elasticities: Evidence from India”, NBER Working Paper No. 9879, Cambridge, MA: National Bureau of Economic Research, August.
IMF, Balance of Payment Statistics, weblink: http://www.imf.org/external/pubs/cat/longres.aspx?sk=19299
Krishna, Pravin, and Devashish Mitra. (1998): “Trade Liberalisation, Market Discipline and Productivity Growth: New Evidence from India”, Journal of Development Economics, Vol. 56(2), 4.
Kumar, R., and A.S. Gupta (2008): “Towards a Competitive Manufacturing Sector”, Working Paper No. 203, Indian Council for Research on International Economic Relations.
Ministry of Commerce and Industry, Government of India (27th October 2011),
Mishra, S.K., and V.K. Puri. (2011): Economics of Development and Planning: Theory and Practice, Himalaya Publishing House.
Nayak, Shibananda, Vani Aggarwal, and Preeti Mann (2013): “India’s Manufacturing Exports Dynamics: An Analysis of Technology Intensity Transition”, Working Paper CWS/WP/200/6, Centre for WTO Studies, Indian Institute of Foreign Trade, New Delhi, March.
Nayyar, Deepak. (2011): Liberalization and Development, Oxford University Press.
NCAER. 2010–11, weblink: http://www.ncaer.org/data.php
SIA Newsletter (various issues), Deptt. of Industrial Policy and Promotion, GoI, Ministry of Commerce and Industry, Jan 2005, Nov 2008 and Jan 2014.
Taneja, Rashmi. (n.d.): “Indian Textile Exports: Past and Present”, International Journal in Multidisciplinary and Academic Research, Vol. 2(2),March-April, weblink: http://ssijmar.in/vol2no2/vol2no2.22.pdf, accessed on 12-10-2014.
Topavala, P., and A. Khandelwal. (2010): “Trade Liberalization and Firm Productivity: The Case of India”, The Review of Economics and Statistics, January.
Trade Policy Review India (TPRI), 2010–11, World Trade Organization.
UNCTAD Handbook of Statistics, 2012.
Veermani, Arvind. (2012): Accelerating and Sustaining Growth: Economic and Political Lessons, IMF Working Paper WP/12/185, July.
WITS COMTRADE Database, http://wits.worldbank.org/wits/.
WTO Secretariat Solution.
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2017 The Author(s)
About this chapter
Cite this chapter
Jain, H. (2017). Trade Liberalization Process and India’s Growth Experiences. In: Trade Liberalisation, Economic Growth and Environmental Externalities. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-10-2887-8_4
Download citation
DOI: https://doi.org/10.1007/978-981-10-2887-8_4
Published:
Publisher Name: Palgrave Macmillan, Singapore
Print ISBN: 978-981-10-2886-1
Online ISBN: 978-981-10-2887-8
eBook Packages: Economics and FinanceEconomics and Finance (R0)