Trade Policy Reforms in India: What Is Missing in Recent Literature?

IntroductionTrade makes a country more productive by allowing it to produce the things it is good at producing and then to sell them to other countries in return for things it is not as good at producing within the country. From this perspective, trade is like a form of technology. Although trade does not literally convert one good into another in the way that a piece of technology such as loom converts yarn into cloth, the effect is essentially the same (Weil, 2009). The advantages of international trade follows from the fact that it benefits the national economy by enabling a country to specialize in the production of those goods and services which is best suited to produce looking to its endowments of natural resources, labour and capital.Few advantages of trade are as follows: monetary gains to the respective country indulging in trade, more variety and better quality of goods, competition both at the international level as well as domestic level, closer ties between nations, exchange of technical know- how, producers will try to improve the quality of domestic products, increase in domestic employment. Economist do argued the disadvantage of trade. Few disadvantages argued are as follows: domestic production may suffer, domestic industries may be overshadowed by their international competitors, rich countries may influence political matters in other countries and gain control over weaker nations, ideological differences may emerge between nations with regards to the procedures in trade practices. But the benefits of international trade were so high that in 1995 around 140 countries were members of international trade. Country can't trade without a proper policy.Trade PolicyTrade policy is a collection of rules and regulations which pertain to trade. Every nation has some form of trade policy in place, which is most appropriate for country. The purpose of trade policy is to help a nation's international trade run more smoothly, by setting clear standards and goals which can be understood by potential trading partners. In many regions, groups of nations work together to create mutually beneficial trade policies.Rules like tariffs, inspection regulations, and quotas can all be part of a nation's trade policy. Nations attempt to protect their local industries placing a heavy burden on import, allowing domestic producers to get ahead through subsidies and tax holiday/tax reduction. Others eschew trade barriers, promoting free trade, in which domestic producers are given no special treatment, and international producers are free to bring in their products.Different nations have different regulations about product safety, and when goods are imported into a country with stiff standards, representatives of that nation may demand the right to inspect the goods, to confirm to the product safety standards. Security is also a tool, with nations wanting to protect themselves from potential threats while maintaining good foreign relations with frequent trading partners.When nations trade with each other regularly, they often establish trade agreements. Trade agreements smooth the way for trading, spelling out the desires of both sides to create a stronger, more effective trading relationship. Many trade agreements are designed to accommodate a desire for free trade, with signatories to such agreements making certain concessions to each other to establish a good trading relationship. Regular meetings may also be held to discuss changes in the financial climate, and to make adjustments to trade policy accordingly.Trade/ Free Trade in Theoretical FrameworkKrugman and Obstfeld (2009) studied Trade Policy Reformsin developing countries and reported that trade policy in developing countries is concerned with two objectives viz promoting industrialization and coping with the uneven development of the domestic economy. There was asymmetry growth over the past 50 years; this is because government has consistently favoured industry over agriculture, through both protectionism and subsidies. …