Measurement of Protection to Indian Industries and Its Implications

Measurement of Protection to Indian Industries and Its Implications Alok Ray Introduction TWO most notable studies on the structure of protection in Indian industries are the well-known works of Bhagawati-Desai (1970) (henceforth referred to as B-D) and Bhagawati- Srinivasan (1975) (henceforth referred to as B-S). The central message of these studies is that the extensive controls on trade and investment (which they call the QR-Regime) in India .have led to an enormously wide range of effective rates of protection (ERP) between different industries with no definite pattern and no sound economic rationale; that some of the ERPs tore enormously high in absolute values; and that the ERP structure is highly unstable and unpredictible over time.1 But a recent article by R G Nambiar in has apparently produced evidence to suggest that "tariffs and quantitative restrictions in general have no major distortional effects''. In view of these "conflicting" results which have important policy implications one is tempted to ask: (a) to what extent are the results really conflicting? (b) in cases of conflicts, what could be the source of the contradictions? and (c) what are the implications of the results?