Free trade and inclusive development: lessons from the Indian experience

This repository item contains a single issue of Issues in Brief, a series of policy briefs that began publishing in 2008 by the Boston University Frederick S. Pardee Center for the Study of the Longer-Range Future.Can trade liberalization result in long-term economic growth for developing countries? In this Issues in Brief, Pardee Center Post-doctoral Fellow Suranjana Nabar-Bhaduri argues that the experiences of Latin America and, more recently, India, have shown that liberalization must be complemented by industrial and employment generation policies if the process of economic growth is to be made more sustainable and inclusive. She compares both the policies in place and the employment and productivity numbers for pre- and post-liberalization India, and suggests industrial and employment policies need to be coupled with trade liberalization for a positive outcome

Structural Change in India and China: External Sustainability and the Middle-Income Trap

This paper focuses on the different development strategies of China and India, particularly regarding the role of manufacturing and services, for long-run productivity growth, external competitiveness and financial fragility. The findings appear to support the argument that productivity improvements in manufacturing drive productivity improvements in other sectors. They also substantiate previous findings that the Indian services-led growth trajectory has had limited success in transferring surplus labor from agriculture to other sectors. Furthermore, the trajectories have affected the export performances of the two countries with the Indian trade balance and current account revealing persistent deficits, compared to China\u27s surpluses. The paper also argues that the way in which India has sought to sustain these deficits entails elements of financial fragility, and that the Chinese struggles with the internationalization of the renminbi also imply a possibility of financial instability

Remittance flows to post-conflict states: perspectives on human security and development

This repository item contains a single issue of the Pardee Center Task Force Reports, a publication series that began publishing in 2009 by the Boston University Frederick S. Pardee Center for the Study of the Longer-Range Future.Migrant remittances – that is, money or other goods sent to relatives in the country of origin– play an increasingly central role in post-conflict reconstruction and national development of conflict-affected states. Private remittances are of central importance for restoring stability and enhancing human security in post-conflict countries. Yet the dynamics of conflict-induced remittance flows and the possibilities of leveraging remittances for post-conflict development have been sparsely researched to date. This Pardee Center Task Force Report is the outcome of an interdisciplinary research project organized by the Boston University Center for Finance, Law & Policy, in collaboration with The Frederick S. Pardee Center for the Study of the Longer-Range Future. The Task Force was convened by Boston University development economist John R. Harris and international banking expert Donald F. Terry, and social anthropologist Daivi Rodima-Taylor, Visiting Researcher at the Boston University African Studies Center, served as lead researcher and editor for the report. The Task Force was asked to research, analyze, and propose policy recommendations regarding the role of remittances in post-conflict environments and their potential to serve as a major source of development funds. The report’s authors collectively suggest a broader approach to remittance institutions that provides flexibility to adapt to specific local practices and to make broader institutional connections in an era of growing population displacement and expanding human and capital flows. Conditions for more productive use of migrants’ remittances are analyzed while drawing upon case studies from post-conflict countries in Africa, Asia and Latin America. The papers in this Task Force Report establish the importance of remittances for sustaining local livelihoods as well as rehabilitating institutional infrastructures and improving financial inclusion in post-conflict environments. Highlighting the increasing complexity of global remittance systems, the report examines the growing informality of conflict-induced remittance flows and explores solutions for more efficient linkages between financial institutions of different scales and degrees of formality. It discusses challenges to regulating international remittance transfers in the context of growing concerns about transparency, and documents the increasing role of diaspora networks and migrant associations in post-conflict co-development initiatives. The Task Force Report authors outline the main challenges to leveraging remittances for post-conflict development and make recommendations for further research and policy applications

What Lies Beneath: A Case For Disaggregated Analysis In Evaluating Stuctural Policy Shifts

Much of the theoretical and empirical research regarding the impact of policy shifts on the economies of developing countries has tended to focus on macro-level aggregates, without adequate attention to sectoral-level dynamics. In the literature where such dynamics are emphasized, the focus has primarily been on the Latin American experience, where macro-economic instability can be attributed to the impact of structural reforms on the sectoral-level dynamics of these economies. What appears to be missing from the present literature is an adequate consideration of scenarios in which seemingly positive trends in macro-level aggregates could sometimes mask problems of concentrated productivity and employment growth that exist at the sectoral level. It is this aspect that this paper seeks to address more closely. By focusing on the Indian manufacturing sector in the pre-and the post-liberalization periods, this paper shows that positive trends in aggregate productivity may sometimes hide problems of structural heterogeneity and concentrated employment growth. This in turn suggests that in developing countries with high open and disguised unemployment, sustainable growth and development requires that liberalization policies be complemented by active industrial and employment generation policies on the part of the State.Sectoral-level dynamics, structural heterogeneity, structural policy shifts, technology frontier, technology gaps, technology catch-up

What Lies Beneath

Much of the theoretical and empirical research regarding the impact of policy shifts on the economies of developing countries has tended to focus on macrolevel aggregates, without adequate attention to sectoral-level dynamics. In the research in which such dynamics are emphasized, the focus has primarily been on the Latin American experience, where macroeconomic instability can be attributed to the impact of structural reforms on the sectoral-level dynamics of these economies. What appears to be missing from the present research is an adequate consideration of scenarios in which seemingly positive trends in macrolevel aggregates can sometimes mask problems of concentrated productivity and employment growth that exist at the sectoral level. This paper seeks to address this aspect more closely. By focusing on the Indian manufacturing sector in the pre- and postliberalization periods, this paper shows that positive trends in aggregate productivity may sometimes hide problems of structural heterogeneity and concentrated employment growth. This in turn suggests that in developing countries with high open and disguised unemployment, sustainable growth and development require that liberalization policies be complemented by active industrial and employment generation policies on the part of the state.sectoral-level dynamics, structural heterogeneity, structural policy shifts, technology frontier, technology gaps, technology catch-up,

No Easy Balancing Act: Reducing the Balance of Payments Constraint; Improving Export Competitiveness and Productivity; and Absorbing Surplus Labor – The Indian Experience

As per the balance of payments constraint hypothesis, in an open economy, achieving a high long-run rate of growth would require a country to reduce its balance of payments constraint through an improved export performance, and the production of import substitutes, which would lower the income elasticity of demand for imports. While a reduction of the balance of payments constraint is crucial for developing countries, in these countries, a sustainable and inclusive process of growth and development also requires the generation of high productivity activities, quality employment, and greater domestic value-added. By focusing on the Indian case, this paper shows that even if a developing country manages to reduce its balance of payments constraint, concentrated improvements in productivity and employment may remain at the industrial level. Consequently, active policy efforts to generate quality employment on a wide scale and to improve the productivity in different industrial and agricultural activities would remain crucial. Furthermore, as has been the case in India, this paper also shows that a reduction of the balance of payments constraint may be more the result of an improvement in the net exports of services, than an improvement in the external competitiveness of merchandise exports. As such, a country may exhibit trade balance deficits over a long period of time, thereby showing an increase in its external debt obligations. This then raises the question of whether a higher rate of growth facilitated by a reduction of the balance of payments constraint can be sustainable in the long-run. Even if the ability to service the external debt shows an improvement over time, such a services-led reduction of the balance of payments constraint may not necessarily address the more crucial problem of generating quality employment to make the process of growth more inclusive.Balance of payments constraint; export dynamics; technology gaps; import content of exports; structural heterogeneity; services-led growth. JEL Codes: F14 ; F41; F43; O11; O12; O14