Note: In preparation for the Raj Centennial conference, CDS faculty and PhD scholars have put together notes on the research work from the Centre using the conference panels as categories. This note on Trade, Industrialisation, and Growth should be interpreted as a work-in-progress, and the Centre hopes to work on it further based on feedback and more archival exploration. Further, we acknowledge that there are different possible thematic narratives of the research; the present note can be seen as a preliminary perspective constructed by the corresponding authors using a style and approach preferred by them.

Trade, Industrialisation, and Growth

Industry

Right from the inception of the CDS, industry has been an important research focus for numerous faculty and research scholars. Diverse industries have been studied, including cotton mills, tea, tyre, coir, beedi, footwear, pharmaceutical, electronics, telecommunication, capital goods, and automation. Themes include structure, growth, stagnation, industrial development, industrial backwardness, liberalisation, multinational enterprises (MNE), mergers, clusters, productivity, competition, sub-contracting, research and development, technology, innovation, and labour and employment. While many studies have been pan-India, some have taken a regional (south) focus, particularly Kerala. Issues pertaining to both the public sector and the private sector have been explored. Many scholars have focused on medium, small, and micro enterprises (MSMEs). Keeping policy possibilities in mind, the studies have typically adopted an empirical approach using national industrial classification (NIC) two-digit, three-digit, four-digit and five-digit level data—besides use of firm-level databases. All this work not only had considerable scholarly value but it also nurtured expertise that has given vital inputs to state, regional, and national policymaking. Although this brief summary of such vast work will not do justice to all the scholars who have contributed, this note will highlight a few contributions to give a sense of the larger body of work.

After independence, Indian planners subscribed to a supply-side view; however, in the next two to three decades, industrial growth left much to be desired. K. N. Raj (1976a) contributed to this debate by pointing out the importance of demand for manufactured products. Desai (1980) surveyed the trends in industrial R&D in India, assessed its technology capability, and commented on market structure and technology in three dozen industries in India. Studies at the CDS also took interdisciplinary approaches, such as K. N. Nair’s (1979) work on technological change in milk production. Scholars also focused on comparisons of technology across countries, for example, Sudipto Mundle compared technology and organisation of industrial production in India with that of Japan. Studies that focused on diffusion of technologies started in the late 1980s, when Pillai & Subrahmanian (1989) studied the impact on policy of diffusion of microelectronics in India and consequent innovations. In the 1990s and 2000s, K. J. Joseph and Sunil Mani built on this focus on technology in the Indian context and incorporated the perspective of innovation systems (Joseph, 2001; Mani, 1997). Their external collaborations put the CDS on the global map of innovation systems literature. Recent industry research at the CDS includes work characterising the Indian space economy, laying out the Indian digital payment innovation system, and the characteristics of the mobile phone manufacturing ecosystem in India.
The CDS was probably among the earliest in India to focus on multinational enterprises (MNEs), when Panikar (1979) focused on them in the Indian pharmaceutical industry; this was followed by a book on the impact of MNEs on the development of the pharma industry in India. CDS scholars also contributed to the debate on productivity growth in Indian manufacturing. By focusing on measurement issues and using large samples, Balakrishnan & Pushpangadan (1998) argued that productivity growth in the 1980s was much slower than popular belief would have it, and that there was no acceleration in productivity growth subsequent to the 1991 reforms. Work on the corporate sector at the CDS began early on N. Shanta focused on size, profitability, and growth. Later, P.L. Beena worked on the development and patterns of mergers and acquisitions in the Indian corporate sector and antitrust issues related to innovation and competition under the WTO regime. Scholars have also explored the importance of political economy in industrial performance; for example, Kannan & Pillai (2001) pointed out the plight of the state electricity boards under the control of state governments.

Scholarship on industry at the CDS also turned to Kerala-specific issues and policies. As plantation crops form an important aspect of Kerala’s economy, scholars have studied industries that process plantation crops—cashew, coir, rubber, tea, among others—not only from a market structure and productivity perspective but also in terms of employment, wages, gender, and child labour. Subrahmanian & Pillai (1986) challenged the attribution of Kerala’s industrial backwards to labour militancy, high wage cost and low productivity by focusing on the state’s locational cost advantage or disadvantage. In subsequent work (Subrahmanian & Pillai, 1994), they also suggested growth strategies for small industries in Kerala, including the state becoming a market-friendly facilitator to ensure competition as well as cooperation.

International economics

From the 1960s onwards, many economists explored the crossroads between economic development, international trade, foreign investment, and domestic capital formation. K. N. Raj & Sen (1961) and K. N. Raj (1987) made significant contributions by linking this discussion with the efficacy of BoP-related policies, especially currency devaluation. Raj was also concerned with the impact of foreign capital on the domestic rate of savings. Keeping this tradition alive, international trade has always been an active research area at the CDS. Theory-informed empirical research has been the prevalent style of work.

The political economy of trade negotiations, especially in the context of the WTO, has been an area of interest for CDS faculty and scholars. I. S. Gulati (1976) highlighted the significant challenges faced by the post-World War II international monetary system, particularly following the collapse of the Bretton Woods agreement. I. S. Gulati (1983) addressed the enduring inequalities within the global financial system. One of the central critiques was the growing dominance of flexible exchange rates and the increasing reliance on private bank financing. Harilal (1999) showed that trade barriers in the global North systematically block the global South from transitioning to more dynamic sectors. Ghosh (2018) analysed the conditions under which an existing bilateral free trade area (FTA) prefers to expand in size and when it prefers consolidation through customs union (CU) formation when the existing members of the FTA are asymmetric, both with respect to production technology and domestic market sizes.
CDS scholars have also explored trade patterns. Veeramani (1999) showed that export-intensive industries had higher intra-industry trade (IIT) levels, and IIT between the global North and South was vertical in nature. Veeramani (2003) explored IIT in India, particularly in the context of the economic liberalisation, and suggested that India’s shift towards IIT reflects changes in its industrial structure, supporting more efficient production and export strategies. S. Roy (2005) examined the long-term behaviour of India’s merchandise exports in 1960–2000, a period marked by a shift from import substitution to outward-oriented strategies.

CDS scholarship has also explored open economy macroeconomics. For example, N. Roy (2007) showed that foreign portfolio flows to India were primarily driven by the motive for capital gains, and changes in stock prices were a key determinant of these flows. Abraham (2013) identified four distinct phases in the trends of portfolio flows in 1987-2012, revealing concentration in certain regions and countries based on income and economic performance. Beena & Mallick (2010) showed that devaluation of the rupee does not always help the Indian export sector.

While the area of international economics remains an area of active research at the CDS, one weakness seems to be that it has not always remained in tandem with recent theoretical developments in the field. Current global research relies heavily on models of Industrial Organization to explain international trade, especially contract theory and such issues are not much reflected in the research profile of the CDS. Some amount of introspection may be needed on that front.

Economic growth

Research at the CDS has actively explored the sources, determinants and nature of economic growth in Kerala and India. Early studies focused on questions related to resource mobilisation for investment. After examining the historical experience of many countries, Mody (1981) argued that the importance of agricultural surplus in modern economic growth is exaggerated. Later studies focused on the role of policy, financial and fiscal factors, and internal dynamics of the economy. Balakrishnan (2007) argued that economic policy in the first 15 years of planning era led to resurgent growth and lasting transformation of a colonial enclave into an economy with a firmer foundation capable of sustained growth. Balakrishnan & Parameswaran (2007) argued that India’s growth acceleration happened at the end of the 1970s and hence cannot be attributed to major changes in policy regime. Later, Balakrishnan et al. (2017) explored the role of internal dynamics of the Indian economy in the acceleration of its growth rate overtime.

Another set of studies focused on the role of financial development and fiscal policies on economic growth. Janardhan (2006) and Dash (2011) explored the significant role of financial development in growth. Mohan (2003) showed that government spending, particularly capital and social sector spending, enhances growth. On the other hand, Behera (2019) found that fiscal and revenue deficit reduces growth.

Kerala-focused research has also been considerable. Harilal & Joseph (2000) examined the trajectory of Kerala economy over a long period and established the role of migration and consequent remittances in shaping the structure of the Kerala economy. Later Pillai & Shanta (2005), while examining the turnaround in the growth of Kerala during the 1990s, observed that transport, trade and hotels as well as banking and insurance had emerged as leading sectors of the state economy. They further observed that despite the increase in the growth rate, it remains a consumer/trade economy rather than a producer economy. Parameswaran (2020) examined this issue of relative stagnation of industry and agriculture in the state and provided evidence on the impact of migration and remittances on the growth and structure of the Kerala economy.

References

Abraham, M. (2013). Foreign Portfolio Equity Investment in India: A Comparative Analysis of Determinants and Impact [PhD Thesis]. Centre for Development Studies / Jawaharlal Nehru University.

Balakrishnan, P. (2007). Visible hand: Public policy and economic growth in the Nehru era. CDS Working Paper, 391.

Balakrishnan, P., Das, M., & Parameswaran, M. (2017). The internal dynamic of Indian economic growth. Journal of Asian Economics, 50, 46–61.

Balakrishnan, P., & Parameswaran, M. (2007). Understanding Economic Growth in India: A Prerequisite. Economic and Political Weekly, 42(27/28), 2915–2922.

Balakrishnan, P., & Pushpangadan, K. (1998). What Do We Know about Productivity Growth in Indian Industry? Economic and Political Weekly, 33(33/34), 2241–2246.

Beena, P. L., & Mallick, H. (2010). Exchange Rate and Export Behaviour of Indian Textiles and Clothing Sector: An Enquiry for Major Destination Countries. CDS Working Paper, 425.

Behera, B. K. (2019). Fiscal deficit and economic growth performance of major selected states in India [MPhil Thesis]. Centre for Development Studies / Jawaharlal Nehru University.

Dash, R. K. (2011). Stock Market Development and Economic Growth in India: A Study in the Context of Financial Liberalization [PhD Thesis]. Centre for Development Studies / Jawaharlal Nehru University.

Desai, A. V. (1980). The origin and direction of industrial R&D in India. Research Policy, 9(1), 74–96.

Ghosh, S. (2018). Enlargement decisions of regional trading blocs with asymmetric members. CDS Working Paper, 480.

Gulati, I. S. (1976). International Monetary Reforms in Retrospect and Prospect. CDS Working Paper, 38.

Gulati, I. S. (1983). Asymmetries, Old and New in International Finance – International Monetary Reform Efforts and Low-Income Countries. CDS Working Paper, 157.

Harilal, K. N. (1999). Trade Barriers, Structural Mobility and Unequal Exchange: A Study of India-EEC Trade [PhD Thesis]. Centre for Development Studies / Jawaharlal Nehru University.

Harilal, K. N., & Joseph, K. J. (2000). Stagnation and Revival of Kerala Economy an Open Economy Perspective. CDS Working Paper, 305.

Janardhan, S. (2006). Financial development and economic growth in India: An analysis [MPhil Thesis]. Centre for Development Studies / Jawaharlal Nehru University.

Joseph, K. J. (2001). India’s IT Export Boom: Challenges Ahead. CDS Working Paper, 317.

Kannan, K. P., & Pillai, N. V. (2001). The Political Economy of Public Utilities: A Study of the Power Sector. CDS Working Paper, 316.

Mani, S. (1997). Government Intervention in Industrial R&D, Some Lessons from the International Experience for India. CDS Working Paper, 281.

Mody, A. (1981). Financing of modern growth: The historical role of agricultural resources. CDS Working Paper, 121.

Mohan, R. (2003). Economic growth performance of India: Sources and determinants 1970-71 to 1999-2000 [MPhil Thesis]. Centre for Development Studies / Jawaharlal Nehru University.

Nair, K. N. (1979). Milk Production in Kerala: Trends and Prospects. Economic and Political Weekly, 14(12/13), A25–A39.

Panikar, P. G. K. (1979). Multi-National Enterprise in Pharmaceutical Industry and Less Developed Countries. Indian Economic Journal, 26(3).

Parameswaran, M. (2020). Migration, Remittances and Dutch Disease: Evidence from Kerala Economy. In S. Mani (Ed.), Kerala and World Economy (pp. 418–445). Centre for Development Studies.

Pillai, P. M., & Shanta, N. (2005). Long term trends in the growth and structure of the net state domestic product in Kerala. CDS Working Paper, 376.

Pillai, P. M., & Subrahmanian, K. K. (1989). Diffusion of microelectronics technology A study of application of microelectronics in Indian capital goods and process industries [Report of a research project under Indo-Dutch programme on alternatives in development]. CDS.

Raj, K. N. (1976). Growth and stagnation in Indian industrial development. Economic and Political Weekly, 11(5/7), 223–236.

Raj, K. N. (1987). Structural Changes in the World Economy: Implications for Development Policy and International Co-operation. Economic and Political Weekly, 22(52), 2266–2284.

Raj, K. N., & Sen, A. K. (1961). Alternative patterns of growth under conditions of stagnant export earnings. Oxford Economic Papers, 13(1), 43–52.

Roy, N. V. P. (2007). An Analysis of RBI and SEBI Foreign portfolio flows in the Context of Capital Account Convertibility in India [MPhil Thesis]. Centre for Development Studies / Jawaharlal Nehru University.

Roy, S. S. (2005). Factors in the Determination of India’s Exports [PhD Thesis]. Centre for Development Studies / Jawaharlal Nehru University.

Subrahmanian, K. K., & Pillai, P. M. (1986). Kerala’s Industrial Backwardness: Exploration of Alternative Hypotheses. Economic and Political Weekly, 21(14), 577–592.

Subrahmanian, K. K., & Pillai, P. M. (1994). Liberalisation and Small Industry: Need for New Growth Strategy in Kerala. Economic and Political Weekly, 29(33), 2168–2174.

Veeramani, C. (1999). Intra-industry trade under economic liberalisation: The case of Indian capital goods industries. Journal of Indian School of Political Economy, 11(3), 455–473.

Veeramani, C. (2003). Intra-Industry Trade under Economic Liberalization: An Analysis of India’s Manufacturing Sector [PhD Thesis]. Centre for Development Studies / Jawaharlal Nehru University.

The note on Industry was prepared by Abhinav Surya, Arun M. Balaji, Ashish Biswas, Prof. P. L. Beena, Dr. Chidambaran G. Iyer, Jithin Bhatraju, Sarath U. V., and Subraneel Nandi. The note on international economics and growth was prepared by Jithin Bhatraju, Manish Sharma, Prof. M Parameswaran, Dr. Rajit Biswas, and Sabeer V. C.