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International Trade and Uneven Gains: What Do Theory and Structure of India’s Foreign Trade Tell Us?

In: 75 Years of Growth, Development and Productivity in India

Author

Listed:
  • Rajat Acharyya

    (Jadavpur University)

  • Shrimoyee Ganguly

    (BIT Mesra)

Abstract

The Gains from Trade theorem, based on the Ricardian doctrine of comparative advantage, constitutes one of the core propositions in international trade theory. But while it postulates that the trading nations will experience welfare gains at the aggregate when they specialize according to their comparative advantage, it does not suggest that all economic agents within a trading nation will gain. This chapter reviews the theoretical discourses and country experiences regarding such uneven gains from trade that have been pushing policy makers towards trade-policy reversals and raising concerns for future of globalization. We build an analytical model of politically optimum trade liberalization based on inequality driven discontents regarding trade liberalization to show that the politically optimum choice of tariff rate is larger than economic optimum rates. Finally, we review India’s trade-policy paradigm before and after the 1991 Crisis, and discuss changing structure and increasing skill composition of our exports as potential sources of uneven gains and income inequality.

Suggested Citation

  • Rajat Acharyya & Shrimoyee Ganguly, 2025. "International Trade and Uneven Gains: What Do Theory and Structure of India’s Foreign Trade Tell Us?," India Studies in Business and Economics, in: Dibyendu Maiti & Bishwanath Goldar & K.L. Krishna (ed.), 75 Years of Growth, Development and Productivity in India, chapter 0, pages 683-720, Springer.
    • Handle: RePEc:spr:isbchp:978-981-97-8054-9_21
    DOI: 10.1007/978-981-97-8054-9_21
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