Trade Liberalization and the Poor: A Framework for Poverty Reduction Policies With Special Reference to Some Asian Countries including India

The paper examines the impact of trade liberalization on the poor through its impact on prices and incomes .A simple framework is given which traces the impact of trade liberalization on the poor. There is unambiguous empirical evidence from economies around the globe and for some of the Asian economies included in our sample that trade openness promotes economic growth. Raising economic growth in a sustained manner reduces poverty. Further, for cross section of fourteen Asian economies included in our study no significant relationship could be found between changes in inequality and poverty, and inequality of incomes with economic growth rates and trade openness .However, most of the poor in the developing economies are in the agricultural sector, therefore raising growth in the agricultural sector is essential ingredient for making the reform process successful. The paper closely examines the benefits of the globalization process as manifested by the unilateral trade liberalization efforts of some South Asian countries included in our study. Some guidelines are given for making trade work for the poor after identifying how the trade regime works. These provide a benchmark against which to judge the prevailing trade regime and provide guidance for the direction of reforms for the poor in future. 1 Lecturer-Department of Economics, Jamia Millia Islamia,New Delhi-25 ,India .Email:[email protected] .Thanks are due to Dr M.S.Bhat ,Professor Naushad Ali Azad and Dr Abusaleh Shariff for discussion on the theme of the paper.This is abridged version of the paper presented in the national seminar on poverty organized by the department of economics,JMI in collaboration with ICSSR,New Delhi,2003.All caveats apply to the paper.