Manufacturing and Trade Liberalisation of India: The Continuing Debate

Abstract

The paper identifies the reasons behind the differential performance of the registered and unregistered manufacturing sectors of India during the postreform period. The motivation for this study comes from the econometric findings of Ghosh Dastidar and Veeramani (2014) that trade liberalisation has positively influenced the growth performance of the unregistered sector but not that of the registered segment. Trade liberalisation seems to have benefitted the unregistered sector indirectly through the increase in subcontracting activities from the registered sector. The absence of rigid labour regulations also helped the unregistered sector undergo restructuring during the post-reform period and achieve faster growth through the elimination of inefficient firms, something that the registered segment failed to do.

Economic growth, structural changes and employment linkages in India

“…The ECT coefficient is significantly negative, highlighting that a 10% rise in the share of Industry in national income leads to a 0.05% increase in the LPR in the country. In fact, the share of employment in the formal IS has declined over the years, whereas the growth in employment in the informal sector which comes to be a major source of employment of the total manufacturing sector has increased over the years (see, Ghosh Dastidar, 2015).…”

Determinants of Growth in Manufacturing Industries: Empirical Evidence from Egypt Using the ARDL Approach

“…Proudman and Redding (1998) support the idea that trade promotes productivity growth, while Auzina (2011) finds that export is an outlet for the manufacturing sector in foreign markets, making them crucial to this sector. Trade liberalization also has a positive effect on industrial growth, as shown by Dutta and Ahmed (2001) for Pakistan, Dastidar (2015) for India, Chete and Adenikinju ( 2002), Adebiyi and Dauda (2004), and Umoru and Eborieme (2013) for Nigeria.…”