Analysis of India's Policy Reforms

Abstract

HE process of major economic reforms undertaken in the Indian economy has now completed six years of implementation. The economy has entered into a new phase of development directed towards becoming globally competitive through opening up to trade, foreign investment, and technology inflows. The unilateral reforms of the trade and domestic policies of India, along with reforms of the tax regime since 1991, represent a significant departure from the policy framework of the previous four decades and are important to the future course of the Indian economy. There is an ongoing debate in India regarding the likely impacts of sectoral reforms on output, employment and other variables that affect the economic wellbeing of the country's population. It thus becomes important to evaluate the effects of such policy reforms on factor prices, output, and trade, along with inter-sectoral movement of resources, viz. land, labour, and capital. To address these issues, we use a 34-sector computable general equilibrium (CGE) model for India. Though such ex-ante analysis may not be replicated ex-post due to various macroeconomic and other factors that our model does not capture, the positive results nevertheless go a long way in establishing the credibility of the reforms process. We hope therefore that our analysis will provide a more solid underpinning for the ongoing policy debate. The paper proceeds as follows. The policy relevance of our research is outlined in Section 2. In Section 3, we elaborate briefly the essential features of the India CGE model. The various policy scenarios are discussed in Section 4, and the results are presented in Section 5. In Section 6, we report on the sensitivity of the model to changes in some of its essential parameters. Our findings are summarised in Section 7.

An Analysis of Factors Influencing the Anti‐dumping Behaviour in India

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