Trade Policy and Productivity Growth in Indian Manufacturing

摘要

A central thesis of Balasubramanyam (1984) was the need for India to shift its development strategy in favour of outward-looking economic policies. The underpinning for this thesis might have been viewed as an ex-ante evaluation. An evaluation of what Indian performance could be with a different policy environment; comparing what was happening under the current policy environment with what might be (or what a particular model indicated might be). In this paper, we do an ex-post evaluation of what has happened in the case of productivity performance in Indian manufacturing industry in the light of the type of policy changes that Balasubramanyam was advocating 20 years ago. On the basis of our before-and-after methodology, we find strong support in favour of the Balasubramanyam thesis. Of course, this does not strictly mean that the (explicit or implicit) model that Balasubramanyam used to underpin the thesis is necessarily the appropriate model to apply in this context, but the results are consistent with it. Similarly, we cannot be strictly confident about what would have happened if there had been no or different trade reforms, but again the results provide a challenge to those who would wish to find some other explanation for why the post-reform TFP growth performance of Indian manufacturing has been stronger than pre-reform performance. These authors are content to believe that the results do provide support for Balasubramanyam's earlier good judgement!