Linkages between Trade,
Development & Poverty
Reduction
Prashmita Ghosh
N C Pahariya
CUTS CITEE
Structure of the presentation
Theory behind TDP
 Why campaign kit?
 Indian economy highlights
 Agriculture
 Manufacturing
 Services
 Employment and poverty figures
 Conclusion
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About the
project
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International trade involves exchange of goods
and services
Trade takes place when there is surplus
production of goods and services
Growth rate increases with increase in
international trade
Increased economic development leads to
poverty reduction
Lack of empirical evidence of T-D-P linkage
T-D-P linkage
International Trade Policy
Domestic policy
mix
Increased
Economic
Growth
Poverty
reduction
Increased
Employment
Increased per
Capita
income
Why Campaign kit
National advocacy tool
 To provide more information about T-D-P
linkage
 To clear some conceptions on trade
liberalisation vis-à-vis globalisation
 Directed at stakeholders

Indian Economic Performance
Average annual growth rate in GDP (in percent)
Indicators
1981-82
/1990-91
5.6
1992-93
/2002-03
5.9
1997-98
/2002-03
5.3
Agriculture
3.8
2.7
2.0
Industry
Services
7.0
6.7
6.4
7.8
4.6
8.1
GDP
Source: India Development Report 2004-05
Agriculture
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Mainstay of around 60 percent of population
Share of agricultural trade in GDP increased
from 16 % (90’s) to 20% (99-00)
Majority of farmers have small, fragmented
landholdings and practice subsistence farming
Agriculture still a part of the unorganised sector
Stagnation of employment in agriculture
Share of agri. in total employment : 60 %(93-94),
57 %(99-00) (Raghbendra Jha)
Agriculture (contd.)
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Problems
Small, fragmented land
holdings
Lack of extension services
Middlemen, trader community
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Poor warehousing, storage
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Irrigation issue
Price fluctuation
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Recommendations
Focus on land reforms
Network of extension services
with private participation
This remains a difficult task;
farmers awareness
Expansion of storage facilities
with private participation
Efficient use of existing
irrigation facilities, efficient use
of groundwater, water user
charges
MSP, Government
procurement, Commodity
future market regulation,
strengthening PDS
Industry
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Growth rates were high just after reforms; but fell
sharply in 2001-02 though picked up
subsequently
Growth driven by manufacturing and
construction sector
Merchandise exports growing at more than 20 %
since 2002-03
Major exports- textiles, gems, engineering
goods, petroleum products, chemicals etc.
Current growth rate of manufacturing sector not
sufficient for poverty alleviation
Industry (contd.)
Develop comparative advantage in lowvalue added manufacturing goods
production; generate employment
 Effect of indirect taxes, higher cost of
utilities-power, transport, cost of finance
 Industrial growth imperative to absorb
surplus rural unskilled, uneducated, semiliterate labour
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Services
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High Indian economic growth driven by services
industry
IT, ITES, Financial and allied services growth
has been impressive; White collared jobs;
Increased labour productivity
Retail, constructions, road transport service
employs around 36 % of service sector labour
force
Retail, construction-largely informal sector;
employing low skilled labour
Services –some findings
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Share of software, financial services increased
in export basket
Share of travel and transport service has
decreased
IT, Financial sectors have been opened up while
retail and other sectors have not been exposed
to sufficient domestic and foreign competition
Services sector growth concentrated in pockets
around urban centres- increasing regional
inequality
Employment
Annual growth (per cent)
Sector
Agriculture
Manufacturing
Construction
Trade, hotels
Financial etc.
Community, social
1987-88 to
1993-94
2.57
1.23
-1.38
2.99
4.50
1993-94 to
1999-2000
0.02
2.58
5.21
5.72
5.40
4.06
-2.08
Source: Raghbendra Jha(2005)
Trade Openness for India
Indicators (p.c.)
1980
1990
2000
2005
Exports/GDP
4.6
5.8
9.8
11.8
Imports/GDP
8.7
8.8
13.0
17.1
Exports of goods
& services/GDP
Imports of goods
& services/GDP
6.2
7.3
14.0
20.22
9.7
9.9
16.6
22.4
Source:World Development Indicators
Poverty Figures
Poverty ratio (per cent)
Year
Rural
Urban
Combined
1987-88
39.1
38.2
38.9
1993-94
37.3
32.4
36.0
1999-00
27.1
23.6
26.1
2007*
21.1
15.1
19.3
•*Poverty projection for 2007
•Source:Tenth Five Year Plan, Planning Commission, Government of India
Conclusion
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Post reforms significant acceleration in growth
rate
Growth is services driven- leading to lopsided
growth
For all inclusive growth, agricultural,
infrastructure, reforms are a must
Provision of basic services- access to education,
water, food, shelter,clothing to the deprived ,
backward community
Above will then ensure trickling down of benefits
of growth to all