Abstract
The global economy is currently going through a transition period. The last two decades have witnessed some of the greatest financial and economic crises that have shook the developed economies. The Global Financial Crisis of 2008–2009 and Eurozone Debt Crisis of 2011–2012, along with the Brexit and mounting trade conflict between the USA and China have led to sluggish economic growth and intensified policy uncertainty. The international trade has started to lose momentum, partly due to tighter monetary policy, increased financial volatility and historically high levels of trade restrictions by the developed economies. China, one of the fastest growing economies, is also experiencing a slowdown, which is impacting its trade partners. The recent COVID-19 pandemic has further caused a dramatic fall in economic growth, international trade and capital inflows worldwide. Against this backdrop and given the current economic scenario, this book focusses on some of the key issues in trade and development. The book is a timely contribution to the existing empirical literature on crucial policy issues in trade and capital flows and their role in promoting economic development in emerging economies and India in particular. The papers included in this volume focus on the pre-COVID period. However, these core issues of trade and development will remain crucial and fundamental in the post-COVID period as well.
The book consists of an Introduction by the editors and 21 chapters, classified under four broad themes, namely (a) International Trade: Empirical and Policy Issues, (b) Foreign Capital Flows and Issues in Finance, (c) Trade and Development Interface: Implications for India and Emerging Economies and (d) Analysis of Sector-level Growth and Development in India. The first chapter by the editors presents an apt introduction, setting the context for the book and succinctly summarising the rest of the chapters in the volume. This is complemented by an analysis of recent economic development and performance of emerging economies in the wake of the COVID-19-driven health crisis.
The first section of the book, ‘International Trade: Empirical and Policy Issues’, contains six chapters and centres around key international trade issues involving Asia in general and India in particular. The topics covered in this section vary across issues such as effective rate of protection, factors affecting participation of a firm in the export market, Indo-Africa trade potential, validity of the J-curve for India vis-à-vis BRICS nations, challenges for trade between India and ASEAN economies and the relationship between information and communications technology (ICT) penetration and international trade. These issues have been studied using various econometric techniques such as gravity models, probit model and panel co-integration methodology. With India significantly targeting to increase its presence in international trade, studies relating to Indo-Africa trade potential and challenges for trade between India and ASEAN economies are crucial and hold significance in the current era. Further, the move towards paperless trade with increasing ICT penetration and a focus on ease of doing business by developing economies in a drive to make themselves more competitive in international trade is aptly covered in the sixth chapter. The role of ICT in the post-COVID world is expected to increase.
The second section of the book comprises six chapters that concentrate on foreign capital flows and the varied issues in finance during the last two decades. The first chapter of this section discusses the macroeconomic factors that impact foreign direct investment (FDI) inflows into emerging economies. The next chapter studies the pattern of inward FDI into India. The findings highlight that capital-intensive industries have attracted significant FDI inflows. The chapter interestingly also studies the FDI inflows at disaggregated industry level and by source country. The results show that FDI from relatively large open countries with stringent environmental regulations has been flowing to polluting industries in India and highlight the presence of a pollution haven effect. The next chapter begins by presenting a snapshot of the dependence of India’s current account on its invisible components, especially net remittances and net software services exports (SSE). The chapter highlights the importance of remittances and SSE in ensuring current account sustainability in the long run. The 10th chapter of the book analyses the role of FDI inflows with a special focus on greenfield versus merger and acquisition (M&A) on the economic growth of South Asian countries. The study brings out an interesting aspect that FDI in the form of greenfield investment is much more favourable for economic growth in the form of employment generation, while the FDI inflow in the form of M&A has failed to serve its purpose. The only theoretical chapter in this section, the 11th chapter, attempts to identify a suitable probability distribution for the computation of a risk measure. The author finds that the family of generalised hyperbolic distributions is more appropriate than the normal distribution for describing Sensex’s return series. The last chapter of this section studies the impact of macroeconomic variables on the stock market from 1993 to 2019. The findings from the study show that macroeconomic factors have a significant impact on the Indian stock market.
Increased globalisation and international trade have contributed significantly towards economic growth and development, especially in the case of emerging economies. Against this backdrop, the third section, ‘Trade and Development Interface: Implications for India and Emerging Economies’ studies the impact of trade on various development indicators such as employment, poverty reduction and overall economic growth. This section comprises of five chapters, each focussing on the impact of international trade on key development indictors, such as firm-level analysis to examine the impact of trade on employment generation due to a rise in exports, the relationship between trade liberalisation and poverty alleviation, complementary role of educational institutions and the impact of trade liberalisation on the per capita income levels in India. Given that the COVID-19 driven disruptions have dramatically affected international trade, these chapters can have a significant contribution in the post-pandemic era, wherein trade can once again be the engine of global economic growth and development.
The last section of the book, ‘Analysis of Sector Level Growth and Development in India’, comprises four chapters. This section deals with an analysis of trends in four different sectors in India, namely electronics, telecommunications, metals and aviation. The first chapter attempts to evaluate the success of the ‘Make in India’ scheme on the electronic sector. However, no significant results could be drawn. The author highlights that the inconclusive result could be due to the short lag available post the policy initiative. Going forward, with more data points, a more conclusive study can be conducted on the same theme. The second chapter in this section analyses the causal linkage between financial inclusion and telecommunication for the Indian states of Kerala and Bihar, using the primary survey data. The author finds that there exists a causality between telecommunications and financial inclusion variables. The author calls for cooperation between financial institutions and telecom companies, which can act as a win-win for both. The next chapter studies the impact of trade on the environment, using data from the pollution-intensive metal sector. The findings of the study suggest that there exists a positive role of trade in environmental efficiency in the case of metal firms. The last chapter of the book evaluates the prospects for air services in Indonesia by India under the Modified General Agreement on Trade in Services. The author uses the World Input-Output Table and the National Input-Output Table (NIOT) database to evaluate Indonesia’s outlook in air services.
The book is a collection of selected papers presented at the international conference held at the Indian Institute of Foreign Trade. The editors have been successful in picking up the papers that are of contemporary relevance and importance in the pre- and post-COVID-19 period. The chapters are well-articulated and easily readable. The key issues discussed in the book assume great significance for not only India but also for other emerging and developed economies. The varied econometric techniques used in different chapters in the book and the overall empirical analysis will be useful for students, policymakers, economists and any general reader interested in the recent developments in international trade. Overall, it is a highly recommended book.