Post-reform Period In India Research Articles

IMPACT OF FOREIGN TRADE ON ECONOMIC GROWTH IN INDIA IN THE POST REFORM PERIOD: AN EMPIRICAL ANALYSIS

Foreign trade plays an important role in the economic development of a nation. It is called engine of growth. It signifies trade between one country and other countries. Until 1991, India’s development strategy was mainly import substitution and self-reliance oriented. India has moved from a protectionist policy toward trade liberalization since 1991. The importance of foreign trade has increased in India due to liberalization, privatization and globalization, known as LPG reforms of 1991. These policies opened the Indian economy for foreign trade. During the reform period, Indias GDP has substantially increased. Today, India is one of the fasted growing economies in the world. Both exports and imports have also increased substantially in the post reform period in India. However, exports are lower than imports in India implying that Indias trade balance remains negative in the post liberalization period. This may be due to the fact that India is one of the largest importers of crude oil. The present paper examines the impact of foreign trade on India’s economic growth by applying regression. The study reveals that exports have significant positive impact on economic growth in India. KEY-WORD: Foreign trade, Export, Import, Regression, Economic growth

Inter-State Disparities in the Reduction of Multidimensional Deprivations in India

The higher economic growth in the post-reform period has increased the standard of living of the people. At the same time, it widened the inter-state inequality. It was argued that the increasing inequality might lead to social disarticulation and hinder growth. Thus, a discussion on growing inter-state inequality became a policy debate in recent years to achieve inclusive growth. In this backdrop, this article analyses trends in the inter-state inequality with regards to multidimensional deprivations (MD) in the domains of education, health and poverty during the post-reform period in India. It also assesses whether levels of deprivation among the Indian states are converging/diverging over a period of time. Weighted coefficient of variation and Theil entropy measures were used to assess the inter-state inequality and β-convergence estimates were used to test whether there is convergence/divergence among the Indian states with regards to reduction in MD over time. The analysis found that the inter-state disparity in MD has increased during the post-reform period in India; the levels of deprivation among the better off states declined over time, while most of the backward states could not do so due to their high initial level deprivations.

Firm size, R&D expenditure, and international orientation: an empirical analysis of performance of Indian firms

We examine the Schumpeterian hypothesis that large firms have an advantage in research and development. Using CMIE Prowess data of S&P BSE index, the firms are segregated as per the market capitalisation into large, mid and small cap firms. We analyse the financial performance of these firms for the post-reform period in India (1992-2017). The study finds that the R&D expenditure has statistically significant effects on firms' total income when either fixed industry effects or fixed year effects are taken into account. The income of the firms is also determined by the export earnings and total imports but with less impact than R&D. The results also show that outward-oriented firms have a greater tendency to spend on research and development expenses. Results from quantile regression suggest that the firms in the higher quantile have statistically higher significant effects of R&D expenditure and outward orientation, on firms' total income than the firms in the relatively lower quantile.

Firm size, R&D expenditure, and international orientation: an empirical analysis of performance of Indian firms

We examine the Schumpeterian hypothesis that large firms have an advantage in research and development. Using CMIE Prowess data of S&P BSE index, the firms are segregated as per the market capitalisation into large, mid and small cap firms. We analyse the financial performance of these firms for the post-reform period in India (1992-2017). The study finds that the R&D expenditure has statistically significant effects on firms' total income when either fixed industry effects or fixed year effects are taken into account. The income of the firms is also determined by the export earnings and total imports but with less impact than R&D. The results also show that outward-oriented firms have a greater tendency to spend on research and development expenses. Results from quantile regression suggest that the firms in the higher quantile have statistically higher significant effects of R&D expenditure and outward orientation, on firms' total income than the firms in the relatively lower quantile.

Exchange Rate Pass-through to Domestic Prices

This study makes an attempt to examine the exchange rate pass-through (ERPT) to domestic prices in the post-reform period in India. It also analyzes the effect of global financial crisis of 2007 on the ERPT. It has used the standard vector auto-regression (VAR) model taking five variables (viz., exchange rate, oil price, output gap, money supply and wholesale price index (WPI)) for analysis. Using impulse response function, the study finds that a 10 per cent depreciation in rupee (`) results in 0.011 per cent rise in WPI after one month. It found moderate ERPT estimates ranging from 0.01112 per cent (after first month) to 0.01197 per cent (after six months). The cumulative pass-through is found to be 0.07 for one month, it is stabilized at 0.06. The main drivers of price change are identified through variance decomposition. Persistently rising WPI and the oil price hike are found as the main drivers of price rise. Pressure of exchange rate on the WPI is found to be very modest, that is, about 7 per cent. Using the Quandt-Andrews Unknown Breakpoint test, the study found a structural break at November 2007, but the effect of the crisis on ERPT is found to be insignificant. The study explains the low ERPT in terms of India’s large import size and its composition in favour of raw materials and intermediary goods, exchange rate volatility and moderate inflation. It reduces the apprehension of domestic price instability arising from the floating exchange rate.

Poverty, inequality and inclusive growth during post-reform period in India

It is widely accepted fact that since inception of New Economic Policy in 1991, the Indian economy is growing on remarkably higher economic growth trajectory. However impact of this reform led growth on poverty, inequality and inclusive growth is a matter of debate. The economic growth without inclusive growth cannot help an economy in reducing poverty, inequality and other associated disparities. In present paper the performance of various inclusive growth parameters during the post reform periods are looked upon. The study concludes that whereas impact of reforms led growth on proportion of population living below national poverty line is positive; its impact on the inclusive growth parameters such as inequality and income share held by lowest quintile is negative. The causal relationship between poverty headcount below the $2 Line taken as proxy to represent Inclusive Growth and per capita income and Gini coefficient shows the existence of negative and significant relationship between inclusive growth and growth of per capital income.

Industrial Development of India in Pre and Post Reform Period

Industrial sector plays a vital role in the development of Indian economy because they can solve the problems of general poverty, unemployment, backwardness, low production, low productivity and low standard of living etc. The Indian Government had undertaken policy reforms since 1980, but the most radical reforms have occurred since 1991, after the severe economic crisis in fiscal year 1990-91. These reforms mainly aimed at enhancing the efficiency and international competitiveness in Indian industry. After nearly more than two decades of reforms, a question that has engaged the attention of the economists in recent times is what has been the effect of these economic reforms measures on the performance of industrial sector in the post-reform period in India. To know the answer the present paper attempts to present the industrial development of India in pre reform and post reform period, and investigate the impact of globalization on industrial sector in India.

Agricultural Price Policy, Output, and Farm Profitability—Examining Linkages during Post-Reform Period in India

The formulation of agricultural price policy is complicated by the multiplicity of functions that price performs. The objectives, thrust, and instruments of agricultural price policy in India have undergone conspicuous shifts during the past 50 years and so has the role and effectiveness of price policy as a tool to influence the agricultural economy. The country’s post-reform period witnessed higher emphasis and dependence on price policy compared with previous decades, where price policy aimed only at maintaining a balance between the interests of consumers and producers. It is in this context that the paper examines the effectiveness of procurement prices in getting sufficient income to the farmers. An in-depth analysis of costs and returns was conducted for wheat and paddy, the crops offered the highest protection by the state, to get idea of the profitability of Indian agriculture and gain insights into the workings of the price policy.

Trends and composition of institutional credit to the agriculture sector during the post-reform period in India

This paper attempts to analyse the changes in trends and composition of multi-agency network (Co-operatives, SCBs, and RRBs) in issuance of credit to agriculture sector during the post-reform period by using time series data from 1975 to 2005. The analysis reveals that the trends of direct (short and long-term) and indirect institutional credit to agriculture sector has increased significantly during the post-reform period. As far as the composition is concerned, the share of SCBs as percentage of total direct institutional credit has increased significantly whereas the co-operatives share has decreased. The regional rural banks contribution has been almost constant. We have also tried to find out the distribution of indirect finance through Scheduled Commercial Banks.

Financial Inclusion Strategies for Inclusive Growth in India

The two decades of post reform period in India witnessed transformation of the economy in to a higher growth plane signaling the arrival of the country in the global stage. But this robust growth failed to translate the economic well being of the large number of marginalized and excluded sections due to structural rigidities. For economic growth of a nation to be sustainable, it requires all sections of the society included and participates in the growth process. One of the many alternative strategies available for Inclusive Growth is through developing an Inclusive Financial System. Financial inclusion is useful to facilitate economic transaction, manage day today resources, improve quality of life, protect against vulnerability, make productivity enhancing investments and leverage assets. But the indicators of financial use in the country are very poor and there is wide inequality among different sections of the society, between rural and urban areas and between geographical areas. In this context, the paper builds the case for developing inclusive financial system for achieving inclusive economic growth in India. The rationale for inclusive financial system, taking banking services to the vulnerable sections, role of micro finance institutions in spreading financial literacy and the role of technology in taking financial services available & affordable to the poor are discussed in the paper.

Factors Determining the Exchange Rate Movement under a Partial Capital Mobility Regime

The study examines the rupee–US dollar exchange rate (Rs/$) behaviour in the presence of increasing and ample capital inflows in the post-reform period in India. Using monthly data (1994:4 to 2007:8) the study estimates a basic exchange rate model in a time series framework in order to assess the relative significance of capital inflows in the presence of interest rate, inflation rate and growth rate differentials and other factors (forward exchange rate/expected exchange rate) in influencing the rupee–dollar exchange rate behaviour. It finds the dominance of foreign institutional investments affecting the rupee–dollar exchange rate and, to a certain extent, it is seen that the influence of the growth rate differential affects the exchange rate behaviour in India.

Firm location choice in cities: Evidence from China, India, and Brazil

This paper contributes to the industrial location literature by examining why industry locates or refrains from locating in large, medium and small cities of India, China and Brazil using firm-level data from the World Bank. Results from ordered logistic regressions indicate that capital cities are not attractive for firms to locate, when they are large. In India and China, labor intensive firms do not locate in large cities. Proximity to inputs has a positive impact on firm location in China. While availability of inputs has a positive impact on firm location in India, the availability of raw materials has a negative impact on firm location in Brazil. Firms established in post-reform period in India tend to locate in large cities; in China, these firms avoid medium and large cities. The implications for urban governance in these countries are discussed.

Pass-Through of Exchange Rate and Tariffs into Import Prices of India: Currency Depreciation versus Import Liberalisation

This paper examines the extent of pass-through of exchange rate and tariff changes into import prices using sectoral panel data (at the 2-digit SITC level) for the post-reform period in India (1990-2001). After having controlled for unobserved effects that might have an impact on the import prices by using sector dummies, we find that on average exchange rate pass-through (ERPT) is a dominant effect compared to tariff rate pass-through (TRPT) in explaining changes in India's import prices. The sectoral panel results suggest that the pass-through of exchange rates and tariff rates varies across products. ERPT into import prices is significant in 12 industries, whereas TRPT is significant only in 6 industries, with full pass-through. However, ERPT is incomplete only in 4 industries, but TRPT is incomplete in 36 industries, which means that firms exporting to India more frequently adopt strategies to maintain their market share against tariffs than against exchange rate changes. The sectoral differences in pass-through seem to be related to the sector's share in total imports and the sector's effective protection rate. Hence India's relatively high levels of protection have an impact on the behaviour of foreign exporters.