The Industrial and Trade Control Regime and Product Designs in India.

Numerous studies have concluded that the restrictive industrial and trade control regimes adopted by many semi-industrial countries have been responsible for inefficient allocation of resources. These studies typically have been concerned with cases where the control regimes led to production of goods in which developing countries do not have a comparative advantage or raised the cost of production above the minimum attainable. This paper discusses a closely related but nonetheless distinct cost of one such control regime: the designs of many engineering goods produced in India during the 1960s were not the most efficient ones available for the products concerned. Producer goods were manufactured to designs which were technologically obsolete or economically inefficient. Similarly, consumer goods were produced to designs which were inefficient for the tastes and incomes prevailing in India. The first section of the paper examines design deficiencies of a number of Indian engineering goods. The second section discusses the role of government industrial and trade policies in explaining why goods with inefficient designs were produced. The concluding section considers the possibility that the industrial and trade control regime not only led to inefficient resource allocation but also reduced the rate of technological change. It also discusses the implications of the study for semi-industrial countries which are attempting to make a transition from import substitution to export in the case of new manufactured goods. [ABSTRACT FROM AUTHOR]