The Cost and Composition of Indian Exports

Abstract

India has a long history of export promotion policies amounting to a drive for export maximization. These policies have been applied without regard to comparative advantage and this study indicates the high cost of India's disregard for economic efficiency. Using the domestic resource cost concept as the criterion for measuring relative export efficiency, the present structure of Indian exports is examined on both the sectoral and product level. The results show not only an unacceptably wide divergence in the DRC of exports on the margin--indicating a misallocation of resources in the export sector--but also an export incentive system which fails to select India's most efficient exports.