Impact of Domestic Terms of Trade on Industrial Sector in India

Abstract

Indian economy have become the third largest economy of the world after adopting policies of liberalization, privatization and globalization in the year 1991. In the primary, secondary and tertiary sectors of the Indian economy, Income and employment are two major issues which have been facing heavy public outrage. More than half of the total population of the Indian economy is dependent on agriculture for their livelihood and employment. Therefore, to ensure rapid development of the agricultural sector many types of price and non-price incentives is provided to agricultural sector by government of India. To keep Domestic Terms of Trade favourable to agriculture is a major factor of price incentives provided to agriculture by the government.But amongst economists, impact of Domestic Terms of Trade on not agricultural sector only but industry and Indian economy also is a debatable matter. Some economists like as; Raj (1976), Rangrajan (1982) found that favourable shift in Domestic Terms of Trade to agriculture affects negatively agricultural sector and industry both. Some economists like as; Mishra & Hazell (1996), Gulati & Bhatla (2001) found that favourable shift in Domestic Terms of Trade to any sector affects positively that sector. Other hands some economists like as; Thamarajakshi (1969), Krishna (1982), Desai & DSouza (1999) found that shift in Domestic Terms of Trade doesnt affect significantly to any sector.