Trade,growth and income redistribution: A case study of India

The concern of this exercise is with the effectiveness of trade policies and their assessment in achieving economic growth and income equality. A link between growth and equality is provided through employment. If there is substantial increase in employment, the inequality of income distribution is likely to be reduced. Thus, trade by bringing about higher levels of production and employment may reduce income inequality. We have applied a closed input-output model to the Indian data to estimate the interrelationships between trade, growth and income redistribution. It has been found that employment opportunities could be raised substantially through redistribution as well as through export promotion in developing countries such as India, if capital and foreign exchange constraints are not binding. Import substitution, however, does not turn out to be as effective a strategy to achieve these goals.