Dismantling the license raj: The long road to India’s 1991 trade reforms

Douglas Irwin

No WP25-2, Working Paper Series from Peterson Institute for International Economics

Abstract: In July 1991, India began to dismantle its long-standing, highly restrictive import control regime and move toward a more open economy. How were policymakers able to dislodge and replace an entrenched system with powerful vested interests behind it? Standard explanations for policy change--pressure from domestic producer interests, shifts in political power, or conditionality by international financial institutions--do not explain the dramatic transformation that took place. Instead, reform-minded technocrats persuaded political leaders to reject what had been a standard response to balance of payments pressure (import repression to avoid a devaluation) and embrace a new approach (exchange rate adjustment and a reduction of import restrictions). This paper explores the economic and political context behind the country's dramatic policy transformation. India's experience highlights the crucial link between exchange rate policy and trade policy.

Keywords: India; trade reform; exchange rates; foreign exchange reserves; tariffs; import licensing (search for similar items in EconPapers)
JEL-codes: F13 F31 F36 N15 (search for similar items in EconPapers)
Date: 2025-01
New Economics Papers: this item is included in nep-his and nep-int
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.piie.com/publications/working-papers/2 ... s-1991-trade-reforms (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iie:wpaper:wp25-2

Access Statistics for this paper

More papers in Working Paper Series from Peterson Institute for International Economics Contact information at EDIRC.
Bibliographic data for series maintained by Peterson Institute webmaster ().