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Trade Liberalisation, Capital-Intensive Export and Informalisation: A Case Study of India’s Manufacturing Sector

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Abstract

There has been widespread concern among the academicians regarding the changing composition of trade in the aftermath Washington Consensus regime, which enforced the structural adjustment programme among developing economies. The policy mantra of the regime was rested on “stabilize, privatize, and liberalize”—give market free rein strategy. Since then, there has been a systematic shift in developing economies’ trade basket towards capital- and skill-intensive products, and India was no exception. In this study, we have made an attempt to understand the changing dynamics of India’s manufacturing trade under the liberalised regime. In the last couple of decades, the country’s manufacturing export basket had shown rapid changes towards capital- and skill-intensive goods. These changes are, however, understood as India’s failure to specialise in its comparative advantage. Under the new global production structure, this poses a serious threat to the country as this marked shift has not resulted in labour absorption. This has further abetted the process of informalisation—as we noticed more employment across the export-led industries gradually shifting towards the unorganised informal sector. The growing informalisation of the economy should be understood from the prism of global production structure that uses cheap labour from developing economies by infusing a dangerous obsession for competition.

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Fig. 1

Source: export and import data are from UN Comtrade, and GDP at market prices is from World Bank Database

Fig. 2

Source: Authors’ calculation using UN Comtrade Database

Fig. 3

Source: Authors’ calculation using UN Comtrade Database

Fig. 4

Source: Authors’ calculation using UN Comtrade Database

Fig. 5

Source: authors’ estimation using UN Comtrade Database

Fig. 6

Source: authors’ estimation using UN Comtrade Database

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Notes

  1. See Chaudhuri (2013) for the detailed enquiry in India’s sector-specific manufacturing trade deficit.

  2. For correspondence between BEC and SITC Rev. 2, visit http://unstats.un.org/unsd/cr/registry/regso.asp?Ci=5&Lg=1 (last accessed on 10 May 2016).

  3. The return to capital comes with a lag, and thus, the capital productivity could be seen as positive.

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Acknowledgements

The authors would like to thank Prof. Surajit Mazumdar, CESP, JNU, for his valuable suggestions and helping us in developing the arguments for this paper. We would also like to thank Dr Sanjaya Kumar Malik, Anshu Saluja and Sunit Arora for their valuable comments.

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Authors and Affiliations

  1. Centre for the Study of Regional Development (CSRD), JNU, New Delhi, 110 067, India

    Sonal Ann D’souza

  2. Centre for Development Studies (CDS), Trivandrum, Kerala, 695 011, India

    Panchendra K. Naik

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  1. Sonal Ann D’souza
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Correspondence to Panchendra K. Naik.

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D’souza, S.A., Naik, P.K. Trade Liberalisation, Capital-Intensive Export and Informalisation: A Case Study of India’s Manufacturing Sector. Ind. J. Labour Econ. 61, 377–399 (2018). https://doi.org/10.1007/s41027-018-0136-1

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