Jagdish Bhagwati and T. N. Srinivasan’s book Foreign Trade Regimes and Economic Development: India (1975) is an insightful empirical analysis of the impact of India’s foreign trade regime on its economic development.
The authors critically examined the import-substitution industrialization strategy, which had been widely implemented in the postcolonial era, in the context of India. They challenged the idea that protectionism and other inward-looking economic policies are the most suitable ways to achieve economic development. The central thesis is that development is not merely a function of capital accumulation but also profoundly influenced by the foreign trade regime.
Bhagwati and Srinivasan contended that India’s restrictive trade policies, characterized by high tariff barriers and complex import controls, did more economic harm than good. They argued that these policies fostered inefficiency, limited competition, and hindered development. They suggested moving toward more open trade policies to reverse those effects.
The book’s arguments helped shape the discourse around economic reform and the need for liberalization, which would come about in 1991. It was instrumental in the shift from a state-dominated economy to a more market-oriented one, which ultimately contributed to India’s economic transformation.
Bhagwati and Srinivasan’s insights continue to be relevant even today.