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

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Welfare Costs of Import Protection

Despite India's continued trade liberalisation policies, no estimates of welfare loss due to trade restrictions - or gain due to trade liberalisation - are available. Using trade and tariff data mostly from the DGCIS, this paper estimates these for a selected number of commodity groups for years 1993-94 to 1997-98. For the case of constant price elasticity of import demand, a formula for the deadweight loss is derived, which requires information on the magnitude of the elasticity, the tariff rate and total expenditure on imports, not on the import volume. It is shown that in some sectors, the welfare losses have remained persistently high, e g, iron and steel, and, in others, it has come down substantially, e g, machinery. At the absolute level, however, the losses remain high at least in some sectors.

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