Role of trade policies in growth of Indian manufacturing sector
Abstract: Indian manufacturing sector witnessed an unprecedented growth in the decade of 2000. Not only did the average annual growth touch 8%, there was a stupendous rise in growth of real exports and real imports of manufactures in this decade. This is also the decade when the average annual growth of real per capita income was the highest (5.6%). In this scenario, the paper examines three issues: firstly, the role played by trade polices and reforms in the growth of the manufacturing sector. Secondly, whether this growth was an export-led growth? And thirdly, what are the successful stories at the industry level. Structural breaks are identified in growth rate of manufacturing sector and growth rates of real exports and real imports using Additive Outliers (AO) and Innovative Outliers (IO) tests. The results show that the reforms of 1991 played a more crucial role than the reforms of 1980s in causing structural break in overall manufacturing growth. Changes in export and import policies which were brought about in 2001 and 2002 led to structural breaks in real exports and real imports of the sector. Time series analysis is undertaken and Vector Error Correction model is estimated using two different specifications to test whether manufacturing growth is an export-led growth or not. Granger causality tests are undertaken to check the causality. The results show that growth of Indian manufacturing sector is not an export-led growth but has been induced by domestic demand and import growth. Motor vehicles and food and food products industries are identified as successful stories with respect to growth in value added and growth in trade while electrical machinery and, chemicals and chemical products with some others are identified as industries which need to be closely monitored as they may have the danger of possible hollowing out.
|Date of creation:||Dec 2010|
|Date of revision:|
|Contact details of provider:|| Postal: Ludwigstraße 33, D-80539 Munich, Germany|
Web page: https://mpra.ub.uni-muenchen.de
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Chow, Peter C. Y., 1987. "Causality between export growth and industrial development : Empirial evidence from the NICs," Journal of Development Economics, Elsevier, vol. 26(1), pages 55-63, June.
- Balassa, Bela, 1985. "Exports, policy choices, and economic growth in developing countries after the 1973 oil shock," Journal of Development Economics, Elsevier, vol. 18(1), pages 23-35.
- Marin, Dalia, 1990.
"Is the Export-Led Growth Hypothesis Valid for Industrialized Countries?,"
CEPR Discussion Papers
362, C.E.P.R. Discussion Papers.
- Marin, Dalia, 1992. "Is the Export-Led.Growth Hypothesis Valid for Industrialized Countries?," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 678-88, November.
- Marin, Dalia, 1992. "Is the Export-led Growth Hypothesis Valid for Industrialized Countries?," Munich Reprints in Economics 3112, University of Munich, Department of Economics.
- Kasahara, Hiroyuki & Rodrigue, Joel, 2008.
"Does the use of imported intermediates increase productivity? Plant-level evidence,"
Journal of Development Economics,
Elsevier, vol. 87(1), pages 106-118, August.
- Hiroyuki Kasahara & Joel Rodrigue, 2005. "Does the Use of Imported Intermediates Increase Productivity? Plant-Level Evidence," University of Western Ontario, Economic Policy Research Institute Working Papers 20057, University of Western Ontario, Economic Policy Research Institute.
- Joel Rodrigue & Hiroyuki Kasahara, 2004. "Does the Use of Imported Intermediates Increase Productivity? Plant-Level Evidence," Econometric Society 2004 North American Summer Meetings 511, Econometric Society.
- Heller, Peter S. & Porter, Richard C., 1978. "Exports and growth : An empirical re-investigation," Journal of Development Economics, Elsevier, vol. 5(2), pages 191-193, June.
- Arvind Virmani & Danish A. Hashim, 2010. "Factor Employment, Sources and Sustainability of Output Growth: Analysis of Indian Manufacturing," Working Papers id:2415, eSocialSciences.
- Arvind Virmani, 2011. "The Dynamics of Competition: Phasing of Domestic and External Liberalisation in India," Working Papers id:3556, eSocialSciences.
- Ram, Rati, 1985. "Exports and Economic Growth: Some Additional Evidence," Economic Development and Cultural Change, University of Chicago Press, vol. 33(2), pages 415-25, January.
- Greenaway, David & Sapsford, David, 1994. "Exports, growth, and liberalization: An evaluation," Journal of Policy Modeling, Elsevier, vol. 16(2), pages 165-186, April.
- Robert A. Blecker, 2006. "Macroeconomic and Structural Constraints on Export-Led Growth in Mexico," Working Papers 2006-05, American University, Department of Economics.
- Ahmad, Jaleel & Kwan, Andy C. C., 1991. "Causality between exports and economic growth : Empirical evidence from Africa," Economics Letters, Elsevier, vol. 37(3), pages 243-248, November.
- Perron, Pierre & Vogelsang, Timothy J, 1992. "Testing for a Unit Root in a Time Series with a Changing Mean: Corrections and Extensions," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(4), pages 467-70, October.
- Asafu-Adjaye, John & Chakraborty, Debasish, 1999. "Export-Led Growth and Import Compression: Further Time Series Evidence from LDCs," Australian Economic Papers, Wiley Blackwell, vol. 38(2), pages 164-75, June.
- Jordan Shan & Fiona Sun, 1998. "Export-led growth hypothesis for Australia: an empirical re-investigation," Applied Economics Letters, Taylor & Francis Journals, vol. 5(7), pages 423-428.
- Subrata Ghatak & Chris Milner & Utku Utkulu, 1997. "Exports, export composition and growth : cointegration and causality evidence for Malaysia," Applied Economics, Taylor & Francis Journals, vol. 29(2), pages 213-223.
- Muhammed Islam, 1998. "Export expansion and economic growth: testing for cointegration and causality," Applied Economics, Taylor & Francis Journals, vol. 30(3), pages 415-425.
- Jung, Woo S. & Marshall, Peyton J., 1985. "Exports, growth and causality in developing countries," Journal of Development Economics, Elsevier, vol. 18(1), pages 1-12.
- Arvind Virmani, 2006. "India's Economic Growth History: Fluctuations, Trends, Break Points and Phases," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 41(1), pages 81-103, July.
- Feder, Gershon, 1983. "On exports and economic growth," Journal of Development Economics, Elsevier, vol. 12(1-2), pages 59-73.
When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:35198. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Joachim Winter)
If references are entirely missing, you can add them using this form.