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Manufacturing and Trade Liberalisation of India: Continuing the Debate

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  • Ghosh Dastidar, Sayantan

Abstract

The paper attempts to identify the reasons behind the differential performance of the registered and unregistered manufacturing sectors of India during the post-reform period. The motivation for this study comes from the econometric results of Ghosh Dastidar and Veeramani (2014) who find that trade liberalisation has positively affected the unregistered sector growth performance but not that of the registered segment. Besides discussing the probable reasons behind the absence of a trade-growth nexus in the case of the registered sector, the paper reviews the theoretical literature on the unregistered sector - trade liberalisation association with an aim to identify the channels through which trade liberalisation might have affected the performance of the unregistered segment. It seems that trade liberalisation benefitted the unregistered sector indirectly through the increase in sub-contracting activities from the registered sector. Absence of rigid labour regulations also helped the unregistered sector undergo restructuring during the post-reform period and achieve faster growth through elimination of inefficient firms, something which the registered segment failed to do.

Suggested Citation

  • Ghosh Dastidar, Sayantan, 2015. "Manufacturing and Trade Liberalisation of India: Continuing the Debate," MPRA Paper 61907, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:61907
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    File URL: https://mpra.ub.uni-muenchen.de/61907/1/MPRA_paper_61907.pdf
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    References listed on IDEAS

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    1. Philippe Aghion & Robin Burgess & Stephen J. Redding & Fabrizio Zilibotti, 2008. "The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India," American Economic Review, American Economic Association, vol. 98(4), pages 1397-1412, September.
    2. Banga, Rashmi & Das, Abhijit, 2010. "Role of trade policies in growth of Indian manufacturing sector," MPRA Paper 35198, University Library of Munich, Germany.
    3. Kathuria, Vinish & Rajesh Raj, S.N. & Sen, Kunal, 2013. "The effects of economic reforms on manufacturing dualism: Evidence from India," Journal of Comparative Economics, Elsevier, vol. 41(4), pages 1240-1262.
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    5. Koujianou Goldberg, Pinelopi & Pavcnik, Nina, 2003. "The response of the informal sector to trade liberalization," Journal of Development Economics, Elsevier, vol. 72(2), pages 463-496, December.
    6. Nataraj, Shanthi, 2011. "The impact of trade liberalization on productivity: Evidence from India's formal and informal manufacturing sectors," Journal of International Economics, Elsevier, vol. 85(2), pages 292-301.
    7. Marjit, Sugata, 2003. "Economic reform and informal wage--a general equilibrium analysis," Journal of Development Economics, Elsevier, vol. 72(1), pages 371-378, October.
    8. Devashish Mitra & Beyza Ural, 2009. "Indian manufacturing: A slow sector in a rapidly growing economy," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 18(1), pages 205-205.
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    10. World Bank, 2012. "World Development Indicators 2012," World Bank Publications, The World Bank, number 6014, July.
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    13. Marjit, Sugata & Maiti, Dibyendu S., 2005. "Globalization, Reform and the Informal Sector," WIDER Working Paper Series 012, World Institute for Development Economic Research (UNU-WIDER).
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    17. Sarker, Debnarayan & Das, Debraj, 2011. "Performance of manufacturing industry in Indian states: who loose and why?," MPRA Paper 33645, University Library of Munich, Germany.
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    More about this item

    Keywords

    Registered Manufacturing; Unregistered Manufacturing; Trade Liberalisation; Growth; Employment; India;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy

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