Trade in services
Sources of India’s export growth in pre- and post-reform periods
India’s economy goes with the flow
Authors:
C. Veeramani
Publisher:
Economic and Political Weekly, India, 2007
What role have liberalisation policies had on India’s exports growth? This paper examines the response of the country’s exports to reforms in domestic policy and changes in world demand. It decomposes India’s export growth during the pre- and post-reform periods into the four effects:
• world trade effect: the impact of global trade on Indian exports
• commodity composition effect: the role of commodities produced in India whose world demand grew relatively fast
• market distribution effect: exports flow to the fast growing regions of the world
• overall competitiveness effect: the country’s ability to expand exports faster than the world average.
A detailed analysis of the trends and patterns of exports indicates that:
• merchandise exports has been mainly driven by a buoyant world economy
• increased competitiveness has not been a major contributing factor to the growth of merchandise exports
• the competitiveness effect is a major positive source of growth for the export of services
• all exports have been adversely affected by the appreciation of the real exchange rate.
The author concludes that export promotion cannot be the sole criterion in deciding for or against intervention. Rather, export policy should focus on measures that improve the competitiveness of exports on a sustained basis.
