Academic journal article Journal of Economics and Economic Education Research

Liberalization Reform and Export Performance of India

Academic journal article Journal of Economics and Economic Education Research

Liberalization Reform and Export Performance of India

Article excerpt


Improving export performance is one of the key objectives of liberalization reforms in developing countries. For over four decades since independence in 1947, India pursued importsubstitution development strategy under stringent trade protection. During this period, export stagnation was a prominent feature of India's economic performance despite the strong wave of export promotion in global context. India remains a small player in the world trade accounting for around 1 per cent of world exports, even following the liberalization reforms when export growth has been much faster. This export scenario contrasts with the size of Indian economy.

There is a sizeable literature on Indian export trade that explored the various aspects of the Indian export performance (See Section 2 for details). However, a few issues remain unanswered: has the liberalization reform improved the export performance in India? Why India's export performance during the reform era has not matched the initial expectations of the policy makers? What are the major determinants of export performance in India during pre- and post-reform period? To my knowledge, no systematic econometric analysis has so far been undertaken to address these issues. This study aims to bridge these gaps.

This study contributes to the literature in number of ways; firstly, it has made an intensive econometric analysis of Indian exports using Autoregressive Distributed Lag (ARDL) approach of cointegration, which has not been used previously to study Indian exports. ARDL approach is more reliable to fit the small data sample, and does not need any prior knowledge about the integration properties of the variables the common feature of time series data. Secondly, this study estimates both manufacturing and merchandised exports demand and supply model using a wider coverage of variables compared to that of other studies in the context. Finally, unlike many studies, this study uses alternate measures of liberalization, which is measured by the average nominal protection coefficients to investigate the impact of liberalization reform in export performance.

The organization of this study is as follows: the next section presents a brief discussion on liberalization reform and export performance literature in the global and Indian context. Section 3 presents an overview of Indian policy reform and export performance; section 4 discusses about the model, data and research methodology used in the paper. Section 5 analyses the result from empirical estimations, and the final section concludes.


Liberalization reform and its impact on trade, particularly exports, has been one of central issues among economists and policy makers in the global arena. The foundation of export led growth hypothesis led to pay the attention on how exports growth is possible in a country. This is the reason for shifting trade policies from adopting import substitution trade strategy to export promotion strategy since the early 1980s. This shift has created a wave of liberalization reform in the global context with the belief that export promotion helps to create more employment, increases output, earns foreign currency, mobilises domestic resources and saving optimally so that the economic benefits reach to the wider group of people. In the liberalised economic policy regime, a country participates in international trade reducing its tariff and non-tariff barrier so that business communities perform better and country successes to achieve the faster economic growth. Trade is the engine of economic growth as stated in Bhagawati (2000). This statement seems to be realistic via export growth of the comparative advantages products that improves the overall economic performance and activities.There is an evidence that, open developing economies grew faster than closed economies during 1970-1989; further, open developed economies also grew faster than closed developed economies and the speedy growth is found in developing economies as concluded by Srinivashan (1998). …

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