Article

India's Trade and Exchange-Rate Policies: Understanding the Bop Crisis and the Reforms Thereafter

Rajat Acharyya

in The Oxford Handbook of the Indian Economy

Published in print March 2012 | ISBN: 9780199734580
Published online November 2012 | | DOI: http://dx.doi.org/10.1093/oxfordhb/9780199734580.013.0024

Series: Oxford Handbooks

India's Trade and Exchange-Rate Policies: Understanding the Bop Crisis and the Reforms Thereafter

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  • Economic Development and Growth
  • Econometric and Statistical Methods and Methodology: General

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This article provides an analytical discussion of the sources of the 1991 BOP crisis and the trade and exchange rate reforms that followed thereafter. The BOP crisis offers a natural experiment to study policy complementarities in the Indian context. This article hopes to encourage more formal modern macrowork in this area. The article argues that exchange controls (along with the pegged regime), implemented partly through import quotas, lead to a black market for foreign exchange and encouraged underinvoicing of exports, thereby, aggravating the BOP crisis. It discusses what exchange rate reforms were intended to come out of the crisis, and to what extent these have been effective in lowering the black market premium on foreign exchange and improving India's trade balance.

Keywords: BOP Crisis; economic reforms; Indian economy; trade balance; black market; exchange rate reforms

Article.  11440 words. 

Subjects: Economics ; Economic Development and Growth ; Econometric and Statistical Methods and Methodology: General

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