Measuring Protection in Indian Industries

Abstract

Liberalization has been a key ingredient of recent economic policies in India and elsewhere, based upon the notion that removing restrictions on domestic economic activity as well as on the trade relations with other countries has a beneficial impact on the economy. Studies attempting to measure tariff and non-tariff barriers have shown gradual decline in tariff and non-tariff barriers [World Bank (1989), Aksoy & Ettori (1992), Goldar and Hasheem (1992), Gang and Pandey (1998), Hasheem (2001), Pandey (2004)]. In this paper, the authors have made an attempt to quantify the trade barriers operating in Indian industry in order to understand whether protection levels actually decrease following trade liberalization. The authors have also computed several measures of trade liberalization covering tariff barriers � effective rate of protection and import penetration rates under different phases of trade reforms.