Question

dicuss reason why india trade cannot develop in the post independence? ​

Answer 1

Answer:

Among developing countries, India’s growth experience during the

past five decades has been unique. Unlike many of its East and

Southeast Asian neighbors, India did not grow at “miracle” rates that

exceeded 6 percent and reached as high as 10 percent. Nor, unlike Africa

and Latin America, did it suffer periods of prolonged stagnation or decline.

For three of the five decades (1950–80), India’s economy grew steadily at

the so-called Hindu rate of 31

⁄

2 percent a year in real terms, and during the

next two decades it grew at annual rates between 5 and 6 percent.

Although the credit for this steady growth without prolonged stagnation

or decline goes to the macroeconomic stability and policy credibility that

the government provided, the blame for the relatively low rate of growth,

especially during 1950–80, must be assigned to the myriad microeconomic

distortions and heavy state intervention that straitjacketed India’s entrepre-

neurs.1 The government effectively stamped out domestic competition

through strict investment licensing and eliminated foreign competition

through strict import licensing. It was only during the second half of the

1980s that the government began to loosen its grip on investment and

import licensing; this was followed by a more systematic and comprehen-

sive opening up in the 1990s and after.

This paper discusses India’s external sector policies, focusing especially

on the past two decades; the impact of these policies on trade flows, effi-

ciency, and growth; and the future direction trade policies must take. It

begins with a discussion of the major policy developments in trade in both

goods and services. This is followed by a discussion of the evolution of

trade flows—their growth, composition, and direction. The next section

describes the impact of trade liberalization on efficiency and growth.

Explanation:

India’s share in world exports of goods and services, which had declined

from 2 percent at independence to 0.5 percent by the mid-1980s, bounced

back to 0.8 percent by 2002.20 Thus, since the mid-1980s, India’s exports

of goods and services have grown faster than world exports. Table 2 offers

an overview of the evolution of India’s external sector during the 1980s

and 1990s compared with that of China. The numbers leave little doubt

that the liberalizations of the 1990s have had a more significant impact on

India’s trade than those of the 1980s. Although trade has performed less

Arvind Panagariya 13

20. Trade in services refers to nonfactor services and does not include remittances.