2011 Reports

Variety In, Variety Out: Imported Input and Product Scope Expansion in India

Goldberg, Pinelopi K.; Khandelwal, Amit K.; Pavcnik, Nina

This chapter discusses and extends the findings of recent research which examines the role of imported inputs in fostering domestic product growth in India. India's trade liberalization during the 1990s resulted in substantial increases in the volume and variety of imported inputs. This period also witnessed an expansion of product lines by Indian firms. We explore the causal relationship between increased access to imported inputs through lower input tariffs and the subsequent increase in firms' product mix. Our analysis suggests that lower input tariffs accounted for at least 8 percent of overall manufacturing growth. We examine firm-level imported input use in detail, and explore heterogeneity of the impact across industries and states, as well as examine the robustness to other policy reforms implemented during this period.