The Role of Trade in Faster Job Creation and Economic Growth in India

Some Lessons and Policy Recommendations

Abstract

Issue: Jan-Feb 2021

India currently faces the twin problems of slow job creation and slow economic growth. Even when economic growth has been rapid, India has made slow progress in the creation of quality jobs. To address these issues, I first draw inferences from India’s post-independence economic history. The main lesson is that trade reforms have been followed by high rates of growth, while restrictive trade policies have led to slow growth. For the creation of quality jobs, I emphasize the importance of the exports of labour-intensive manufactures.  To dig deeper, the evidence on structural change and its determinants is presented, followed by some relevant theory.  Policy recommendations presented include tariff reductions, labour law reforms, setting up Autonomous Economic Zones (AEZs) and signing preferential trade agreements.