Chapter 8: India’s Manufactured Exports: Comparative Structure and Prospects
* 8.1 INTRODUCTION India’s prolonged inward-orientated, heavy industrialization strategy fostered a large and diverse industrial sector. Over time, this sector accumulated impressive technological capabilities, but these were accompanied by widespread technical lags and inefﬁciencies (Lall, 1987). Its development suffered from a number of policy-induced constraints. These included inadequate access to new technologies and capital goods, restricted inward investment, controls on the growth of large private domestic ﬁrms in favour of public enterprises, government direction of investments, a rent-seeking bureaucratic and business culture, and inadequate infrastructure. The stiﬂing nature of the trade and industrial regime forced India down from its position as the leading exporter of manufactures in the developing world some four decades ago to eleventh today. Indian industry was largely bypassed by the globalization that drove industrial development and exports in many other industrializing countries. By the 1980s, Indian policy makers had accepted the need to liberalize the economy. The process, however, was reluctant, intermittent and patchy. It was only in 1992, after a severe macroeconomic crisis, that a serious attempt was made to free up trade, domestic competition and technology inﬂows and attract foreign investment (Joshi and Little, 1996). Exports were encouraged more actively, quantitative restrictions on imports were relaxed (though not removed, particularly on consumer goods), and tariffs (particularly on industrial inputs and capital goods) lowered. The government eased domestic licensing, and gave large private ﬁrms greater freedom to grow. It also launched a timid and hesitant privatization process. But many uneconomic interventions remain. Effective...
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