ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Domestic Resource Costs and Evaluation of Trade Policies-A Reply

 Domestic Resource Costs and Evaluation of Trade Policies A Reply Vijay L Kelkar K M Raipuria AFZAL ALI in his note (1979) agrees with Kelkar (1977) on the need for "the use of more elaborate techniques in evaluating the social costs of any given trade policy", Ali also agrees that more disaggregated studies are needed to determine uneconomic units in a particular sector, and in general "more rather than fewer studies" are needed to determine, India's long-run comparative advantage. Ali, however, finds it difficult to conclude that the existing studies of evaluation of foreign trade policy in India do not indicate that the right choice of industries have not been made in keeping with India's long-run comparative advantage. He claims to have shown that "the three simplifying assumptions leading to the use of one point import premia, infinite elasticity of export demand and import supply, and the use of market rather than shadow prices are unlikely to influence the magnitude ranking and range of export DRCs [Domestic Resource Costs] calculated so greatly as to vitiate the results".

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