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Citation Information

Type Working Paper - ICRIER Working Paper Series
Title Impact OF Trade Liberalisation IN Manufacturing
Issue 140
Publication (Day/Month/Year) 2004
URL http://test.icrier.org/pdf/wp140.pdf
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. Earlier, India, like many other developing countries, based her
industrialization and development strategies on the inward looking policy of importsubstitution.
The developing countries’ experience of the 1950s and 1960s, however,
suggested that countries that adopted outward looking export-oriented industrialization
policies experienced higher growth rates than those countries that followed inwardlooking
import substitution policies. The most outstanding evidence for this has been the
experience of the East-Asian countries that followed open policies since the 1960s. These
countries achieved high trade ratios and experienced high rates of growth of industrial
output and per capita incomes.
1 However, while it is true that these countries had high
trade ratios, it is not clear to what extent high trade ratios are attributable to free-trade
policies, or what the direction of causation is. Moreover, the high-growing Asian
economies have other distinct attributes that may have contributed to their high growth
2 Nevertheless, the relationship between the orientation of trade policies and the
development / industrialization strategy is considered to be of key importance in
economic policy formulation.

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