Introduction

I. Introduction | |
Developing countries embark on economic liberalization to close the gap between their potential and actual economic performances. Liberalization measures are aimed at eliminating structural and institutional rigidities which are a drag on economic performance, promoting export growth and attracting greater flows of FDI. Success induces further structural change through technology transfer, and sustains the overall economic performance of an economy. The outstanding example of this is the case of China.
Trade liberalization refers to the removal of government incentives and restrictions from trade between nations. Rapidly increasing flows of goods and services across national borders have been the most visible aspect of the increasing integration of the global economy in recent decades. There is a vast body of literature which shows that trade is good for economic growth which in turn is also good for poverty reduction. The economic theory suggests that trade liberalization may raise labour productivity in the developing economies but it also has differential impact on their wages and employment. Higher trade has mostly been associated with higher employment but lower wages. In this context the impact of trade liberalization on employment is of particular significance. The present study has examined the changes in the employment scenario of India following the pursuance of the trade liberalization strategy and the possible effects of further trade liberalization.
India has been following a highly protective industrial and foreign trade regime since 1951. The liberalization of Indian economy started gradually in the 1980's and major economic liberalizations’ (structural adjustment programs) began from 1991. The protective regime controlled not only entry into industry and capacity expansion but also technology, output mix and import content. Import control and tariff provided high protection to domestic industry. There was increasing...