India's Trade Policy Reforms and Industry Competitiveness in the 1980s

The paper proposes a method of measuring and analyzing competitiveness, and applies it to Indian manufacturing data of 1980/81, 1987/88 and 1991/92. The method consists of computing a unit cost ration and breaking it down into various components, ditinguishing between comparative advantage measured at shadow prices, and competitive advantage measured at market prices. The difference, equal to the sum of all price ditortions, may enhance or diminish competitiveness, depending on whether the distortions are cost‐increasing or ‐decreasing. The study reviews first the limited trade reforms of the 1980s and examines whether they have led to increased competitiveness. Although the present study is limited to less than the full potential of the method, due to lack of adequate data, it demonstrates, that the policy changes of the 1980s have failed to enhance the competitiveness of the industrial sector as a whole, while some industries have undergone substantive changes. In three industry case studies the results are compared with the findings of earlir studies.