Industrial performance has been a subject of debate in India since the advent in
the early 1950s of import substitution and industrialization strategy based on public
sector as the engine of growth. Following changes in trade policy stance in the 1980s and
1990s, the linkage between trade liberalization and productivity growth as an indicator of
industrial performance has assumed importance. The 1980s saw changes in the external
and the industrial sector in matters pertaining to licensing for scale and technology as
well as quantitative restrictions on imports and tariff rates. The 1990s brought about
comprehensive trade liberalization encompassing abolition of non-tariff barriers,
reduction of peak tariff rates and dispersion along with devaluation of the rupee. Against
this background, it is important to analyze the impact of the economic liberalization on
manufacturing productivity in the industrial sector. More importantly, in the context of
policy reforms, we need to assess whether there was any beneficial impact on
productivity growth of trade liberalization. To this end our study seeks to explore the
nature and magnitude of total factor productivity (TFP) change under different trade
regimes.