Trade, Technology and Wage Effects of the Economic Policy Reforms on the Indian Private Corporate Sector

Kapur Deepak and Ravindra H. Dholakia

No WP1999-10-01, IIMA Working Papers from Indian Institute of Management Ahmedabad, Research and Publication Department

Abstract: The economic growth achieved in India after 1991 bears an imprint of the economic policy reforms which were accelerated in 1991 with a shift in development strategy towards increasing liberalisation and globalisation of Indian economy. The present paper examines various hypotheses regarding trade, technology and wage effects of the economic policy reforms on the Indian private corporate sector. The analysis has been carried out using detailed annual financial statements of 563 non-government non-financial public limited companies for which a continuous time series data was obtained from 1980-81 to 1995-96. It has been found that not only is there a substantial increase in the number of companies engaged in export activity but there is also an increase in export intensity of the companies after the reforms. It is also seen that both the overall import intensity and raw material import intensity are higher on an average for the exporting firms than for the non-exporting firms after 1991. Technology related expenditure showed greater increase in the exporting firms which is consistent with the neo-technology theories of international trade. It was also found that for exporting firms there was a greater decrease in the salary/wage related expenditure whereas for non-exporting firms the decrease was more for employee welfare related expenditure though both salary/wage expenditure and welfare expenses have decreased for both exporting and non-exporting firms since 1980-81. It is also argued that the real wage bill in the exporting companies increased by a substantially higher rate than in the non-exporting companies. This could be on account of increase in employment or real wage rate or both.

Date: 1999-10-01
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