In this chapter, we discuss and extend the findings of our recent research agenda that examines product mix adjustments by Indian firms during the 1990s. During this period, a large fraction of Indians added products to their product mix suggesting that these constraints felt by Mitter twenty years after his article appeared in press had been to some extent eased.
This period of firm-level scope expansion coincided with India's large-scale trade liberalization. Through reforms that began gradually during the mid-1980s and subsequently picked up speed in 1991, the Indian government removed many of the constraints that restricted industrial production. The reforms during the 1980s began to dismantle the licensing requirements and the major feature of the 1991 reform was a massive restructuring of India's trade policy. Our research shows that India's trade liberalization substantially increased firms' access to intermediate inputs from abroad in both volume and variety terms. Leveraging these new imported inputs, firms subsequently introduced new products into the domestic market. The trade reform therefore enabled firms to expand their product scope in part due to lower tariffs on imported inputs.
Goldberg, Penny, Amit Khandelwal, and Nina Pavcnik. "Variety In, Variety Out: Imported Input and Product Scope Expansion in India." In Reforms and Economic Transformation in India. Ed. J. Bhagwati and A. Panagariya. Oxford: Oxford University Press, 2012.
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