India’s growth story has attracted worldwide attention, particularly because this growth has been fuelled by the wide-ranging economic reforms introduced since early 1990s. A distinctive feature of Indian liberalization was the gradual and calibrated manner in which the reforms were introduced in the various sectors of agriculture, manufacturing and services. This article is a modest attempt to capture the role played by trade liberalization and foreign direct investment (FDI) policies in growth and development of different sectors in India. We applied computable general equilibrium (CGE) modelling as our relevant methodology following Das and Chakraborti (doi:10.1007/s40622-013-0003-3), 2013. The article constructs a social accounting matrix (SAM) and attempts to analyze the impacts of reduced import tariff and increased FDI on export–import volumes of different sectors and on exchange rate, GDP, rural and urban income levels and government income under perfect competition market structure. The study reveals that reduction in import tariff increases imports leading to a depreciation of home currency and boosting exports. On the other hand, increase in FDI appreciates exchange rate, making import cheaper and so import increases in all sectors. Export becomes less profitable leading to a reduction in sectoral export.
BhideS. & PohitS. (1993). Forecasting and policy analysis through a CGE model for India. Margin, 25(3), 271–285.
2.
DasKoushik, & Chakraborti, Pinaki. (2013). General equilibrium analysis of trade and environment under alternative market structure: A computable general equilibrium study for India. Decision, 40(1–2), 99–116. doi: 10.1007/s40622-013-0003-3.
3.
DervisK.MeloJ.D. & RobinsonS. (1982). General equilibrium models for Development Policy. Cambridge: Cambridge University Press.
4.
DixonP.B.ParmenterB.R.PowellA.A. & WilcoxenP.J. (1992). Notes and problems in applied general equilibrium economics. Amsterdam: North Holland.
5.
HarbergerA.C. (1962, June). The incidence of the Corporation Income Tax. Journal of Political Economy, 70(3), 215–240.
6.
HarrisonG.W.RutherfordT.F. & TarrD.G. (1996). Increased competition and completion of the market in the European Union: Static and steady state effects. Journal of Economic Integration, 11(3), 332–365.
7.
HertelT.W. (1996). Global trade analysis: modelling and application. Cambridge: Cambridge University Press.
8.
JominiP.McDougallR.WattsG. & DeeP.S. (1994). The SALTER Model of the World Economy: Model structure, database and parameters (Industry Commission Staff Research Paper No. 24). Canberra: Industry Commission.
9.
LofgrenH.HarrisR.L. & RobinsonS. (2002). A standard computable general equilibrium (CGE) model in GAMS (Vol. 5). Washington, DC: International Food Policy Research Institute. ISBN 0-89629-720-9.
10.
McCullochN.WintersL.A. & CireraX. (2001). Trade liberalization and poverty: A handbook. UK: Centre for Economic Policy Research, UK Department for International Development.
11.
MckibbinW.J. & WilcoxenP.J. (1993). The global consequences of regional environmental policies: An integrated macroeconomic and multi-sectoral approach (Proceedings of the International Workshop on Costs, Impacts and possible benefits of CO2 Mitigation). Luxemburg, Austria: International Institute for Applied Systems Analysis.
12.
NarayanaN.S.S.ParikhK.S. & SrinivasanT.N. (1991). Agriculture, growth and redistribution of income: Policy analysis with a General Equilibrium Model of India. Amsterdam: North Holland.
13.
OjhaV.P. & PradhanB.K. (2003). Human capital formation and economic growth in India: A CGE analysis (Programme No-H/-3/015). New Delhi, India: National Council of Applied Economic Research
14.
OjhaV.P. & PradhanB.K. (2006). Macroeconomic and sectoral impacts of HIV and AIDS in India: A CGE Study (Report No. SE060005). New Delhi: National Council of Applied Economic Research (NCAER).
15.
OjhaV.P.PalB.D.PohitS. & RoyJ. (2009). Social accounting matrix for India. Retrieved 5December2011, from http://papers.ssrn.com/abstract=1457628
16.
PandaM. & KumarA.G. (2008). Impact of trade liberalization on poverty and food security in India (Working Paper No. WP: 2008-013). Mumbai: Indira Gandhi Institute of Development Research.
17.
PandaM. & QuizonJ. (2001). Growth and distribution under trade liberalization in India. In GuhaA.KrishnaK.L. & LahiriA.K. (Eds), Trade and industry: Essays by NIPFP-ford foundation fellows (Chapter 8). New Delhi: National Institute of Public Finance and Policy.
18.
PandaM. & SarkarH. (1990). Resource mobilization through administered prices in an Indian CGE. In TaylorL. (ed.), Socially relevant policy analysis. Cambridge, MA: MIT Press.
19.
ParikhK.S.NarayanaN.S.S.PandaM. & KumarA.G. (1997). Agricultural trade liberalization: Growth, welfare and large county effects. Agricultural Economics, 17(1), 1–20.
20.
PohitS.BiswasP.K.KumarR. & GoswamiA. (2010). Pricing model for biodiesel feedstock: A case study of Chhattisgarh in India. Energy Policy, 38(11), 7487–7496.
21.
PradhanB.K. & SahooA. (1996). Social accounting matrix and its multipliers for India. Margin, 28(2), 153–169.
22.
PradhanB.K.SahooA. & SalujaM.R. (1999). A social accounting matrix for India 1994–95. Economic and Political Weekly, 34(48), 3378–3394.
23.
PradhanB.K.SalujaM.R. & SharmaA.K. (2013). A social accounting matrix for India 2007–08 (IEG Working Paper No. 326). New Delhi: IEG.
24.
PradhanB.K.SalujaM.R. & SinghS.K. (2006). Social accounting matrix for India: Concepts, construction and applications. New Delhi: SAGE.
25.
PyattG. & RoundJ.I. (1979). Accounting and fixed price multipliers in a SAM Framework. Economic Journal, 89, 850–873.
26.
PyattG. & RoundJ.I. (1985). Social accounting matrices: A basis for planning (pp. 145–185). Washington, DC: The World Bank.
27.
RobinsonS.AntonioY.N.RaulH.O.JeffreyL.D. & ShantayananD. (1999). From stylized to applied models: Building multisector CGE models for policy analysis. The North American Journal of Economics and Finance, 10(1), 5–38.
28.
SalujaM.R. & YadavB. (2006, June). Social accounting matrix for India 2003–04 (India Development Foundation Project). India: Planning Commission, Government of India. Retrieved 5December2011, from http://planningcommission.nic.in/reports/sereport/ser/ser_sam
29.
SarkarH. & PandaM. (1986). Quantity-price-money interaction in a CGE Model with applications to fiscal policy, Margin, 17, 31–52.
30.
SarkarH. & PandaM. (1990). Short term forecasting and policy analysis through a structural macroeconomic model for India. UNESCAP seminar on inter-Linked country model system, Bangkok.
31.
SarkarH. & SubbaraoS.V. (1981). A social accounting matrix for India 1980–81. Margin, 13, 27–44.
32.
ScarfH.E. (1973). The computation of economic equilibria (with collaboration of T. Hansen), Cowles Foundation Monograph No. 24. New Haven: Yale University Press.
33.
ShovenJ.B. & WhalleyJ. (1984). Applied general equilibrium models of taxation and international trade. Journal of Economic Literature, XX1I(3), 1007–1051.
34.
ShovenJ.B. & WhalleyJ. (1992). Applying general equilibrium. New York: Cambridge University Press.
35.
SinhaA.SiddquiK.A.MunjalP. & SubudhiS. (2003). Impact of globalization on Indian Woman Workers: A study with CGE analysis (Working Paper). New Delhi: National Council of Applied Economic Research.
World Bank. (n.d.) Tariff rate, applied, weighted mean, all products (%). Retrieved from http://data.worldbank.org/indicator/TM.TAX.MRCH.WM.AR.ZS?page=1
