Manufacturing trade deficit and industrial policy in India

Abstract

The manufacturing trade balance in India did not worsen after the economic reforms started in 1991. This was because of the successful growth of industries such as pharmaceuticals which the earlier planning strategy helped to develop. The reforms nevertheless changed the structure of demand in favour of capital goods such as new types of telecom equipment. But they did not help the domestic manufacturing of these goods. Indeed, the underdevelopment of such industries is the main reason why the manufacturing trade deficit has worsened since the early 2000s.