AWP 203 Sen Et Al

1
A quantitative
assessment of economic
impact of trade wars and
the ‘Make in India’
program
Badri Narayan G.
Rahul Sen
Chidambaran Iyer
Sangeeta Khorana
Sadhana Srivastava
ASIA-PACIFIC RESEARCH AND TRAINING NETWORK ON TRADE
Working Paper
No. 203 | 2020
2
The Asia-Pacific Research and Training Network on Trade (ARTNeT) is an open

regional network of research and academic institutions specializing in international
trade policy and facilitation issues. ESCAP, WTO and UNCTAD, as key core
network partners, and a number of bilateral development partners, provide
substantive and/or financial support to the network. The Trade, Investment and
Innovation Division of ESCAP, the regional branch of the United Nations for Asia
and the Pacific, provides the Secretariat of the network and a direct regional link to
trade policymakers and other international organizations.
The ARTNeT Working Paper Series disseminates the findings of work in progress
to encourage the exchange of ideas about trade issues. An objective of the series
is to publish the findings quickly, even if the presentations are less than fully
polished. ARTNeT Working Papers are available online at www.artnetontrade.org.
All material in the Working Papers may be freely quoted or reprinted, but
acknowledgment is requested together with a copy of the publication containing the
quotation or reprint. The use of the Working Papers for any commercial purpose,
including resale, is prohibited.
Disclaimer:
The designations employed and the presentation of the material in this Working
Paper do not imply the expression of any opinion whatsoever on the part of the
Secretariat of the United Nations concerning the legal status of any country, territory,
city or area, or of its authorities, or concerning the delimitation of its frontiers or
boundaries. Where the designation “country or area” appears, it covers countries,
territories, cities or areas. Bibliographical and other references have, wherever
possible, been verified. The United Nations bears no responsibility for the availability
or functioning of URLs. The views expressed in this publication are those of the
author(s) and do not necessarily reflect the views of the United Nations. The
opinions, figures and estimates set forth in this publication are the responsibility of
the author(s) and should not necessarily be considered as reflecting the views or
carrying the endorsement of the United Nations. Any errors are the responsibility of
the author(s). The mention of firm names and commercial products does not imply
the endorsement of the United Nations.
© ARTNeT 2020
3
ASIA-PACIFIC RESEARCH AND TRAINING NETWORK ON TRADE
WORKING PAPER
A quantitative assessment of economic impact of trade wars and
the 'Make in India’ program
Badri Narayanan G.1
Rahul Sen2
Chidambaran Iyer3
Sangeeta Khorana4
Sadhana Srivastava5
Please cite this paper as:
G., Badri Narayan, Rahul Sen, Chidambaran Iyer, Sangeeta Khorana and Sadhana
Srivastava (2020). “A quantitative assessment of economic impact of trade wars and
tha ‘Make in India’ program”, ARTNeT Working Paper Series No. 203, December
2020, Bangkok: ESCAP.
Available at https://artnet.unescap.org
1 Senior Economist, University of Washington Seattle, GTAP Research Fellow and Director, Infinite
Sum Modelling (ISM), Inc., Seattle, USA e-mail: badrig@uw.edu
2 Senior Lecturer, School of Economics, Faculty of Business Economics and Law, AUT Business
School, Auckland, New Zealand, and Advisor, ISM, USA e-mail: rahul.sen@aut.ac.nz
3 Associate Professor, Centre for Development Studies (CDS), Thiruvananthapuram, Kerala, India e-
mail: chidambaran.iyer@gmail.com
4 Professor, Bournemouth University, UK, e-mail: skhorana@bournemouth.ac.uk
5 Lecturer, School of Economics, Faculty of Business Economics and Law, AUT Business School,
Auckland, New Zealand. (e-mail: sadhana.srivastava@aut.ac.nz);
The views expressed in this paper are author(s) only, the usual disclaimer applies. Authors are
grateful to the ARTNeT secretariat for assistance in disseminating of this work.
4
Abstract
In a unique attempt, our paper aims to provide a quantitative economic assessment of

the impact of “Make in India”, a flagship program for industrialization, launched by the
Government of India in 2014, combining it with the global trade war of 2017-18. We
analyze whether the expected favourable impact of the former was reversed due to its
reactive policies compared its pro-active policies, and whether it worsened due to the
trade war, whose effects continue to aggravate in a post-COVID recalibration of global
supply chains. The question assumes significance as Make in India program's
proactive measures to boost investment may have a favourable impact on the
industries at large in terms of output and employment. In contrast, its protectionist
measures involving tariff barriers may have an ambiguous effect on the same. We
utilize an applied general equilibrium analysis, exploring the impact of Make in India
and the global trade war in a combined way. Our results suggest that the combined
effects of both policies, while being beneficial for the Indian economy, yields negative
ramifications for exports, jobs, and investment growth. Specific sectors are also unable
to increase domestic output despite being a part of Make in India, such as the
Chemical, Rubber, and Plastics industries, and those that use it as raw materials.
Keywords: Make in India, GTAP model, Trade war, COVID-19 pandemic,

employment
JEL codes: F15, F61, O53
5
Contents
1. Introduction……………………………………………………………………………....6
2. Literature Review………………………………………………………………………..9
2.1 Make in India…………………………………………………………………...9
2.2 Trade Conflicts and Trade Wars……………………………………………10
3. Model, Data and Methodology…..…………………………………………………...13
3.1 Model……………………..……………………………………………………13
3.2 Make in India: Data and policy design…………………….……………….15
3.3 Global Trade war: Data and Policy design………………………………...18
4. Results………………………………………………………………………………….21
4.1 Make in India………………………………………………………………….21
4.1.1 Sectoral output effects………………………………………...…..23
4.1.2 Sectoral employment effects………………………………...……26
4.2 Global Trade War…………………………………………………………….29
4.2.1 Sectoral output effects…………………………………………….30
4.2.2 Sectoral employment effects……………………………………..33
4.3 Make in India and Trade War…………………………………………...….34
5. Policy Implications and Concluding Remarks………………………………….…..35
List of References…………………………………………………………………..……38
6
1. Introduction
India, the world's third-largest economy in purchasing power parity (PPP) terms as of
2018, has undergone an economic transformation over the past few decades. Since
economic liberalization in 1991, its economy has grown at an average of 6-7%
annually. Since 2014 except for 2017, India's economy has been the world's fastest-
growing major economy, surpassing China. Notably, this growth was achieved in the
presence of an increasing share of services as a % of India's GDP and declining share
of agriculture. Concomitantly, India’s manufacturing sector (% of GDP) ratio has been
almost stagnant at 16% on an average over 2000-2018 (figure 1).6
Figure 1
Composition of key sectors to India’s GDP
Source: The World Bank (2018)
6 Banga (2014) argues that while the manufacturing export share has declined, that of imports has
increased in India. This observation indicates evidence of the hollowing out of the manufacturing sector.
It suggests that there is an urgent need to enhance the value-added growth in manufacturing in India,
linking it into Global Value Chains (GVCs), as well as strengthening links between the manufacturing
and services sector.
7
To address this policy constraint, the Government of India conceptualized a 'Make in

India' initiative, its flagship industrialization strategy, since 2014. The aim of the
initiative was to attract investments from businesses around the world and develop
India as the next global manufacturing hub, focussing on investment, ease of doing
business, innovation, and skill development. The key objectives were to i) enhance
the share of India's manufacturing in gross domestic product from 16% to 25% by
2022, ii) creating 100 million jobs, besides boosting domestic and foreign investment,
iii) creating opportunities for skill development and innovation in this sector. The Make
in India initiative (MiI) has focussed on 25 sectors of the Indian economy for job
creation and skill enhancement.7
Unfortunately, two external shocks following this initiative delivered an unexpected

blow to the growth prospects of Indian economy. The first was the global trade war,
involving India’s bilateral tariff escalation with the US from 2017 onwards.8 The second
is the onset of the COVID-19 global pandemic since 2020, which dealt a further blow
to India’s growth trajectory, as it declined from around 8% in Q4 FY18 to a 4.5% in Q2
FY20 (Rajan and Gopalan, 2020). This has led the government of India to announce
the 'Atma-Nirbhar Bharat Abhiyan,' a mix of macroeconomic stabilization and
structural reform policies since June 20209. The announced structural reform policies
being supply-side in nature will help the Make in India initiative.
The initiative, as mentioned earlier, has two broad types of features. The first is
proactive and business-friendly to reduce transaction costs and improve doing
business in India through a range of policies that aims to foster innovation, skill, and
infrastructure development, improving institutional quality and governance and job
7 See https://www.peoplematters.in/article/jobs/is-the-lion-moving-backward-hits-and-misses-of-make-
in-india-program-18308 for a full list of the Make in India sectors.
8 While US and China were the main direct players in the global trade war, India was also affected
indirectly due to the fact that as of 2017, the United States accounted for US$51.6 billion (16% of total
Indian exports) and China accounted for US$16.4 billion (5.1%) respectively and was the 1st and 3rd
largest export destination respectively for India.
9 Mani et al., (2020) point out a contradiction that is evident in the call for self-reliance or 'Atma-Nirbhar
Bharat Abhiyan' and the announced structural reform policies. Most of the supply-side reforms
announced are either long-pending ones or been reported before. Pushing these measures in the
current context of demand slowdown in the Indian economy indicates that Indian policymakers
subscribe to the long-held belief that India is a supply-constrained economy.
8
creation. The second involves reactive protectionism against import competition for
domestic manufacturing firms. The reactive policies were shaped in the last couple of
years, in response to the trade wars triggered by the US tariff hikes on imports from
India in several commodities, some of them as recent as June 2019. Therefore, we
may observe a link between the global trade wars and Make in India, though both have
their effects separately on the Indian economy.
We note that empirical studies have not yet addressed a few important unanswered
questions in the above context. The first is the extent to which proactive or reactive
policies10 within MiI contributed to output growth and job creation opportunities in the
key sectors identified under this initiative. Second, since MiI was conceptualized in an
environment wherein a global trade war situation was non-existent, whether the overall
and sectoral impact of “Make in India” on its economy, was adverse due to the onset
of the global trade war from 2017. The empirical literature is scant, with ESCAP (2018)
being the only existing study that attempts to analyze the trade war impact broadly for
the Asia-Pacific region, but not specifically focussed on country and sector-specific
impacts on India.
In a unique attempt, our paper aims to provide a quantitative economic assessment of

whether the impact of Make in India was aggravated due to its own reactive policies
as well as the ongoing global trade war of 2017-18. We utilize an applied general
equilibrium (AGE)11 analysis, which is our preferred methodology here compared to
the gravity models of trade. The preference is also on the account of the fact that
gravity models are more appropriate while dealing with past trends related to the
impact of trade policy measures, and do not apply to an economy-wide context. Our
study analyses a futuristic impact of both MiI and trade war on the overall economy
10 As we discuss in the literature review, Nagaraj (2019) finds no impact of Make in India on the
industrial performance of the country.
11 It is standard practice to use applied general equilibrium (AGE) models to analyze the likely impact
of trade deals or conflicts. Due to the economy-wide nature of trade, it hardly makes sense to examine
any given sector in partial equilibrium isolation. Their explicit incorporation of bilateral trade flows, thus,
makes AGE models well-suited to analyzing the consequences of trade wars instead of any
econometric techniques. The neoclassical theoretical foundations of AGE models explain the analysis
of trade-off between greater openness on the one hand, and potential trade diversion on the other.
Compared with a simple equation econometric model or the partial equilibrium analysis method, the
GTAP model has the advantage of capturing the input-output relationship between industry and other
sectors in the open global economy scenario, thus improving the robustness of the results of the
estimates (Hertel, 1997).
9
and specific sectors, thereby generating tariff barriers that simulate both scenarios,
while concomitantly attempting to simulate the expected investment boost from Make
in India.
Since most general equilibrium studies that analyze trade policy impacts for India
utilize the Global Trade Analysis Project (GTAP) model and database, we follow a
similar approach, updating the model to 2017. Our study is, therefore, a unique attempt
on two counts; first, we put together the details relevant for global trade wars and Make
in India in a policy modelling exercise, which is a fresh attempt. Second, this is the first
time to capture all these contemporary policies in an economy-wide global modelling
framework, as all previous CGE studies on India have typically focussed on the impact
of one or more preferential trade agreements.12
We organize the remainder of the paper as follows. Section 2 presents a broad

overview of the relevant literature on MII, trade wars, and its expected impact on the
Indian economy. Section 3 analyzes the modelling framework and methodology.
Section 4 identifies the policy scenarios and details of the simulations. Section 5
analyzes the results, while the final section provides policy implications and concludes
the paper.
2. Literature review
2.1 Make in India
There are no specific quantitative assessment studies of the MiI initiative to the best
of our knowledge, partly because all MiI related policies are not very clearly laid out in
one document, but instead captured by a slew of policy measures and announcements
over the past years. Anand et al., (2015) observed that India’s manufacturing and
service exports hold huge potential for diversification, and that Make in India policies
that proactively encourage infrastructure development, innovation and foreign
investment will be beneficial in this aspect. They also note that less reactive policies
12These include Narayanan and others (2019), Gilbert and others (2018), Narayanan and Sharma
(2016) and Hiro and Itakura (2014).
10
that include trade policy reforms reducing trade restrictiveness, improving trade
facilitation and regional integration will also be crucial towards a structural
transformation in production and exports in the Indian economy through reallocation
of resources.
Nagaraj (2019) finds that until 2018, the Make in India (MiI) initiative had made little
progress since it is premised on the view that excessive regulations constrain factories
and firms; hence deregulation could augment investment and output. To achieve this,
the government benchmarked its regulatory reforms to the World Bank's Ease of Doing
Business Index; a higher rank will signal India's attractiveness to investors and will
help investment in the country to rise. India's rank in the index did go up from 142 in
2014 to 77 in 2018. However, improvement in rankings failed to improve industrial
performance in the country, as the share of manufacturing and the industrial sector in
India’s GDP remained stagnant during the period 1991-2018. The underlying reason
the paper identifies for this is that MiI lacked a strategic vision for industrialization and
failed to make the required investments in technology and organization. The study
does not evaluate reactive or proactive policies under MiI separately, and does not
provide a sectoral perspective, which we contribute to the literature in our analysis.
2.2 Trade conflicts and trade wars
Johnson (1953) presents an economic analysis of trade conflict, modelled as a two-

person non-cooperative game in which countries choose their optimal tariffs, knowing
that they would be subject to retaliation. The results show that a country can gain from
increasing its tariffs even if the action leads to retaliatory tariffs from its partners.
Although it was not possible to derive the general conditions under which the result
holds, in the particular case where the reciprocal demand curves have constant
elasticities, the model uses numerical methods to determine the values of the
elasticities under which one country will be better off in a trade conflict. The use of
numerical or computational methods to assess retaliatory non-tariffs has since been a
feature of the trade conflict literature. Abrego et al., (2006) and Baldwin and Clarke
(1987) did seminal work on this, focussing on the Tokyo round negotiations. Cronshaw
(1997) models trade conflict as a repeated game, while Deardorff and Stern (1987)
11
and Foreman-Peck et al., (2007) explain optimal tariffs during the inter-conflict years.
Other studies focusing on tariffs are by Hamilton and Whalley (1982), Harrison and
Rutstrom (1991), Markusen and Wigle (1989), and He et al., (2017), which discuss
optimal tariffs between Canada and the United States. Bagwell and Staiger (2002)
examine the trade conflict framework in which countries choose optimal political tariffs
which differ from standard multilateral applied tariffs. Grossman and Helpman (1995)
present the idea of politically optimal tariffs and suggest that governments do not
always maximize social welfare since they may receive contributions from interest
groups.
The recent trade war between the United States and China has spurred interest in
examining the likely magnitude of U.S. tariffs, and the retaliatory tariffs by its major
trading partners and comparing actual tariffs with the Nash (cooperative and agreed)
tariffs predicted by models of trade conflicts (Bouet and Laborde, 2018). More recently,
Nicita and others (2018a, 2018b) calculated politically optimal tariffs where multilateral
cooperation breaks down, and countries choose optimal tariffs. Since the optimal
tariffs depend on the inverse of the export supply elasticity, the study uses the
estimated elasticities from Kee et al., (2008) to calculate these optimal tariffs. The
findings are that the optimal tariffs would represent a 32-percentage point increase
over current levels of tariff protection faced by the average world exporter.
Studies by Ciuriak and Xiao (2018) and Bollen and Rojas-Romagosa (2018) apply a
computable general equilibrium model to examine the effects of increased
protectionism mainly on the United States and China, in terms of trade and welfare
reduction. Their analysis focused on economic effects in countries directly involved in
the trade war and other potential targets, generally developed countries. The countries
studied included the European Union, or those geographically close to the United
States of America (Canada and Mexico), with emphasis on those sectors that were
initially affected by the measures (steel and aluminium).
Bekkers and Teh (2019) employ the WTO Global Trade Model to project the medium-
run economic effects of global trade conflict and find that projected macroeconomic
effects in the medium run are considerable. The study finds that a global trade conflict
in 2019 would lead to a reduction in world GDP in 2022 of about 1.96% and a reduction
12
in world trade by about 17% compared to the baseline. Second, behind the single-digit
aggregate production effects there are much larger, double-digit sectoral production
effects in many countries, leading to a painful adjustment process. Third, the large
swings in sectoral production lead to substantial labour displacement. On average,
1.15% and 1.74% of high-skilled and low-skilled workers, respectively, would leave
their initial sector of employment.
Carvalho, Azevedo, and Massuquetti (2019) examine the effects of the US-China
trade war on both countries and some emerging economies. Results show that, on the
one hand, the trade war would lead to a reduction in the US trade deficit and an
increase in domestic production of those sectors affected by higher import tariffs, and
Chinese producers and consumers would bear the lion's share of the burden of the
trade war. However, both countries and the world would lose in terms of welfare, due
to the significant reduction in allocative efficiency, especially in the US, and the loss of
terms of trade in the Chinese case. With the increase in protectionism between the
two largest global economies, some critical emerging countries, not directly involved
in the trade war, would benefit by the shift in demand to sectors where they have
comparative advantages.
ESCAP (2018) summarizes the possible economy-wide effects from the perspective
of a trade war, that usually starts with two large economies, that can influence world
prices of their goods sold globally, escalating import tariff barriers as a reaction to each
other. At the outset, the scale and scope of the trade wars and policy uncertainties
created often determine the overall economy-wide outcome. Further, those directly
involved in tariff escalation in a trade war suffer the most, while positive or negative
spillovers may impact their trading partners (3rd party economies). Positive spillovers
for third party economies are generated due to market opportunities created by
redirection of trade and investment, for example, Brazil filling in the blocked import
demand for soybeans in China due to higher tariffs on the US import of soybeans into
China. Such redirection may generate terms of trade improvements for Brazil if the
loss of import demand because of trade wars decreases the global price level of their
imports more than their exports (ESCAP, 2018). However, as a trade war prolongs
and extends beyond the domain of tariffs into services and investment restrictions,
there is an increasing likelihood of negative spillovers on even third-party economies
13
due to a slowdown in global demand. The adverse impact is likely to be fuelled by

uncertainties that lead consumers to delay spending and businesses to hold on to their
investments. In the Indian context, the effect is expected to be a combination of i) a
direct hit due to tariff escalations with the US; and ii) an indirect effect due to the US-
China tariff escalations redirecting trade and investment flows between them. This
what we expect to find in our simulation results.
3. Model, data, and methodology
3.1 Model
We utilize an augmented version of the standard Global Trade Analysis Project

(GTAP) model and database (Corong, et al., 2017), that features sectoral and
economy-wide details for India, similar to ESCAP (2018). The database is updated to
2017, using World Bank macroeconomic data and the GTAP Adjust tool (Horridge,
2011). The updated model has three unique features. First, it draws upon McDougall
and Golub (2010) to compute region-specific CO2 emissions that links with various
economic activities. Second, the model estimates inequality by utilizing the differential
between the growth rates of unskilled and skilled labour. Third, we relax standard
closures assumptions of full employment or sticky real wages by introducing a 45-
degree labour supply elasticity curve, ensuring both labour supply (employment) and
real wages for India are endogenous in the model. The chosen closure is consistent
with the Monash model and is well supported by econometric literature on labour
supply elasticities, like ESCAP (2018).
The GTAP model13 uses a three-level structure in the specification of the production
function. At the first level, the production function assumes zero substitutability
between primary production factors and intermediate inputs (Leontief technology). As
a result, the optimal mix of primary factors is independent of prices of intermediate
inputs, while the optimal mix of intermediate inputs is invariant with respect to the price
of primary factors; at the second level, it involves a constant elasticity of substitution
13 The standard GTAP model is composed of equations based on microeconomic fundamentals that
portray the behaviour of families and firms belonging to each of the modelled regions, as well as
interregional flows, considering global transportation costs, with a typically neoclassical closure.
14
between inputs and between factors of production. Imported intermediates are

assumed to be separable from domestically produced intermediate inputs, that is to
say, that firms first determines the optimal mix of domestic and imported goods and
only then decide the sourcing of their imports (Armington assumption); and at the third
level, we assume a constant substitution elasticity between inputs imported from
different origins (Hertel, 1997).
In our model, the investment grows based on the rate of return, and this new
investment is added to the productive capital in the production process. While this
assumption is simplistic and different from the standard Dynamic GTAP model
(Ianchovichina and McDougall, 2000), it does offer more flexibility in terms of data
requirements and simulation processing time.14
To establish the impact of trade wars, we begin by developing a baseline to show what
the world economy would look like without trade war or any other policy scenario is
imposed. The baseline development gives us two time paths for each variable of
interest: firstly, a path that shows how the variable would change over time without the
free trade agreement, and secondly, a path that shows how the variable would change
with the free trade agreement. The difference between the two paths shows the effect
of trade wars. Typically, these differences are cumulated and then plotted against time
to illustrate the impact of trade wars on a given variable.
The baseline scenario used in this paper follows the approach of Chappuis and
Walmsley (2011) at the Center for Global Trade Analysis, based on input from the
World Bank and several other international organizations. It contains information on
macroeconomic variables as well as expected policy changes over the 2007- 2050
period. The macroeconomic variables in the baseline include observations or
projections for real gross domestic product, gross investment, capital stocks,
population, skilled and unskilled labour, and total labour.
14 Note that apart from this, our model does preserve all the standard features of GTAP -- perfect
competition, Armington trade flows, disaggregated import usage by activity, non-homothetic consumer
demands, and explicit modelling of international trade and transport -- while enhancing the investment
theory to incorporate international capital mobility and ownership.
15
We capture the economic impacts of Make in India and trade war policies through
deviations from the baseline for (a) gross domestic product (GDP), output and trade
flow for India; (b) demand for labour, which affects employment on a sectoral level,
and captures the social effect of these policies. As in ESCAP (2018), the model
assumes trade balance is endogenous, along with all prices and quantities. The only
exception is capital, land, and natural resources, which are all fixed and exogenous in
our model.
Our study simulates two policy modelling scenarios for Make in India (MiI) and the
trade war. The first step in this direction is designing the policy simulation scenario for
Make in India (from now on referred to as MiI). For analyzing such policies, CGE
models are much more relevant than standard econometric methods because of two
reasons. First, only CGE models capture detailed structural characteristics of the
economy and its linkages with multiple sectors together. Second, only CGE models
can model 'what if' scenarios for policies like these, which are still ongoing, while we
are interested in their futuristic impacts.
3.2 Make in India: Data and policy design
To ascertain the reactive policy impact of Make India involving protectionism on

imports, 14 Make in India sectors were first identified, which concorded with 20 GTAP
sectors. Note that since GTAP sectors are more disaggregated than those announced
under the MiI scheme, the tariff shocks in terms of Ad Valorem (AV) equivalent for one
MiI sector involves a corresponding tariff barrier on more than one GTAP sectors
(Table 1).
We then computed the escalated tariff for Make in India sectors, which is a unique and
complex exercise on the following counts. First, the Government of India announced
a list of 24 industries where it intended to implement the Make in India policy. There
are few sectors in this list – information technology and business process
management, construction, ports, tourism and hospitality, media and entertainment,
wellness, biotechnology, space, thermal power, and roads & highways – which do not
map onto the existing trade-related Harmonized System of Classification (HS) codes.
16
Second, some MiI sectors like automobiles, aviation, pharmaceuticals, electrical

machinery, railways, automobile components, renewable energy, and electronics
systems had one to one mapping with trade-related two-digit HS codes (in this case,
2012). Finally, the remaining sectors had one to many mappings with the trade-related
two-digit HS codes mapped onto GTAP. As an example, as can be seen in Table 1 for
the chemicals sector, 2 two-digit HS codes mapped to the chemicals sector. Then, we
computed the average tariff of four-digit HS codes within the two-digit HS code for
each HS code. In the chemical example, we calculate the average tariff for HS code
28 using the individual tariffs of the four-digit HS code from 2801 till 2853 (for the Indian
case).
Similarly, we computed the average tariff for HS code 29. Tariffs of HS code 28 and
29 were averaged to calculate the tariff for the chemicals sector. The Make in India
sector of textiles and garments had 14 two-digit HS codes mapping onto it. Tariffs for
2017-18 were obtained from the Central Board of Indirect Taxes 15 & Customs,
Department of Revenue, Ministry of Finance, Government of India.
The tariff shocks in our model are calculated as the power of tariff shocks for 20 GTAP
sectors for 46 trading partners, generating a total of 920 shock statements. As an
example, when modelling tariff impact due to MiI tariffs on automobile sector imports
from China, we first obtain the initial AV tariffs from tms (mvh, China, India) value from
GTAP database, which is 12.2%. Based on Table 1, the MiI tariffs on automobiles is
now 28.1%; this translates to a calculated tariff power shock in the model of 14.2. For
multiple MiI GTAP sectors, we take the average values of AV tariffs across each sector
before calculating the power shocks.
Table 1
Mapping of selected Make in India (MiI) sectors to the GTAP database
Make in India
sectors HS code 2012 Average tariff %) GTAP sector code
Automobiles 87 28.1 38
Aviation 88 8.3 39
15http://www.cbic.gov.in/htdocs-cbec/customs/cst1718-010718/cst1718-0107-idx. Accessed on 1st

May, 2019.
17
Chemicals 28,29 9.5 33

Pharmaceuticals 30 10.0 33
Defence
manufacturing 87,88,89,93 14.6 38,39,33,35,37,41
Electrical
machinery 85 8.8 41
16,17,18,19,20,2
Food processing 1,22 48.5 19,20,21,22,23,24,25,26
50,51,52,53,54,5
Textiles and 5,56,57,58,59,60,
garments 61,62,63 23.4 27,28
Leather 41,42,43 10.6 29
Mining 25,26,27 8.2 15,16,17,18
Railways 86 10.0 39
Automobile
components 87 28.1 38
Renewable
energy 85 8.8 41
Electronics
systems 85 8.8 40
Source: Customs tariff as on 01-07-18, Central Board of Indirect Taxes & Customs
Since investment promotion through Foreign Direct Investment (FDI) is one of the key
proactive policies of MiI, we also incorporate a policy shock of capital stock growth by
2% (based on the average growth of gross capital formation of 6.6% over 2014-2017
(Make in India period) compared to that over 2010-2013. The data source for this is
the World Bank (2018).
We demarcate the proactive and reactive impacts of MiI by using subtotals to identify
how much of output, trade, investment, job changes compared to the baseline, are
impacted by rising protectionism (reactive policy in MiI), compared to the investment
push (proactive policy in MiI).
3.3 Global trade war: Data and policy design
18
In this scenario, we attempt to model tariff hikes by the United States and retaliation
that have already occurred in 2018 (the "Implemented tariffs"), based on official
notifications to the WTO. More specifically, 33 GTAP sectors, 11 individual countries
(the United States of America, China, Japan, Republic of Korea, Indonesia, India, UK,
Turkey, Canada, Mexico, and France) raised their tariffs against each other, with tariff
escalation rates ranging from 10% to 140%.16 We also attempt to further model the
impact of all tariff escalations that include the above mentioned "implemented" as well
as threatened tariffs, said in the concerned economies' official communications, not
yet notified to WTO.17
The detailed data sources for all official communications that incorporate tariff
escalations as paper our policy scenario are provided in Kravchenko et al. (2019).
Specifically, for India, the tariff escalations are modelled on the 18 May 2018
notification to the WTO. For the US, the data comes from the USTR Documents,
including the September 2018 Press release on finalizing tariffs on the US $ 200 billion
worth of imports from China. The Ministry of Commerce, PRC September 2018
Announcement on Tariffs on Certain Goods Originating in the United States, is another
important data source to model tariff escalations from the Chinese perspective.
From India's perspective, we observe that tariff escalations as of 2018 involving the
US took place across several key manufacturing sectors, some of whom also
constitute MiI sectors. Table 2 provides the power tariff values of the escalations
across the key sectors. Note that there have been no tariff changes in imports from
China into India or vice-versa during this period. 4 GTAP sectors (33, 35, 37, and 39)
that also concord to MiI sectors Railways, Chemicals, Pharmaceuticals, and Defence
manufacturing are subject to these tariff escalations, specifically when imported from
the US. However, the highest tariff escalations are for non-MiI agricultural products.
Metal products, including Aluminium and articles thereof, Automobiles and Auto-parts
16Turkeyimposed this high an additional tariff on US America Beverages and Tobacco Products exports
to it.
17These include tariffs on cars and car parts, and other selected items by US imported from China
whose tariffs were increased from 10% to 25% as of 2019, as well as any potential retaliatory tariffs
from China on imports originating in the United States.
19
as well as Iron and Steel, are MiI sectors that face higher tariffs in the US due to the
trade war, which suggests that their exports to the US would decline.
Table 2
Summary of tariff escalations as part of a trade war involving India and the US
in 2018
Escalated
power of
The direction of escalation and tariffs
GTAP sector code sector description tms (%)
India's exports to the US
36 Metals, including Aluminium 50.0
38 Motor vehicles and parts 22.1
35 Iron & Steel 13.4
41 Machinery and equipment nec 5.5
40 Electronic equipment 4.9
30 Wood products 4.6
34 Mineral products nec 3.7
37 Metal products 3.3
33 Chemical, rubber, plastic prods 0.1
The US's exports to India
4 Vegetables, fruit, nuts 50.0
10 Animal products nec 50.0
35 Iron & Steel 9.4
39 Transport equipment nec 1.1
Source: Author's calculations based on policy simulations. The power of tariffs in the GTAP database
is likely to be higher or lower than the actual percent point increase in tariff escalations. Hence, a 50%
value of tms more likely represents a very high tariff escalation of 100% or beyond.
Based on the above, we analyze results for three scenarios. Scenario 1, a Make in
India implementation without the trade war, Scenario 2, which is the trade war itself,
and Scenario 3, which brings in the combined impact of MiI and the trade war. For
20
each of these three scenarios, from the baseline year of 2017, our model estimates
the overall economic impacts from each of these policy changes. The economic losses
or benefits, and any estimated sectoral effects on output and employment may not
happen instantaneously, as it is likely to take some time for the impact, with other
policy measures interacting with the above-mentioned combined effect that we
analyze.
In our model, similar to that in GTAP, any changes in tariffs (due to Make in India
and/or trade war) affect bilateral import prices and costs, insurance, freight (CIF) prices
of imports from the source country, assuming transportation prices do not change.
Equation (1) shows this relationship, wherein tms (i,r,s) and pcif (i,r,s) are percentage
changes in tariffs and CIF prices of bilateral imports of a commodity 'i' from region 'r'
to region's':
pms(i r, s) = tms( i,r,s )+ pcif ( i,r, s, )….(1)
Tariff induced changes in bilateral import prices affect export and import demand in
terms of trade creation (expansion effect) and trade diversion (substitution effect)
through equation (2)
qxs (i, r, s) = qim (i s) [Trade Creation]- ESUBM (i)* pms (i ,r, s)- pim (i,s) [Trade
Diversion] = - - (2)
Where, qxs(i,r,s) and pms(i,r,s) are percentage changes in quantities and prices of
bilateral imports of a commodity 'i' from region r to region s and qim (i,s) and pim (i,s)
are percentage changes in total quantities and prices of aggregate imports of a
commodity 'i' by region s, respectively. ESUBM (i) refers to the (Armington) elasticity
of substitution among imports from different sources for commodity 'i.'
Changes in qxs(i,r,s) in this model, affects domestic demand and import demand and
hence total output qo for industry i in region r through the following equation:
qo(i,r)= SHRDM(i,r) * qds(i,r)+ sum(s,REG, SHRXMD(i,r,s) * qxs(i,r,s)) +

tradslack(i,r) ….(3)
21
Wherein SHRDM (i.r) and SHRXMD (i, r, s) refers to share in domestic demand and
import demand respectively for good i in region r.
The employment effects are analyzed as follows. Changes in total output affect
sector demand for primary factor composite good j used in an industry i in region r
through the following equation in the model
qva(j,r) = -ava(j,r) + qo(j,r) - ao(j,r) - ESUBT(j) * [pva(j,r) - ava(j,r) - ps(j,r) - ao(j,r)] ---
(4)
The above changes in value added (qva) in use of factor j in region r affects
demands for endowment commodities (qfe) i for use in industry j in region r and
hence employment of factors of production in this model, through the following
equation:
qfe(i,j,r) = - afe (i,j,r)+ qva (j,r)- ESUBVA(j) * [pfe(i,j,r) - afe(i,j,r) - pva(j,r)]…(5)
4. Results
The estimated effects of Make in India, trade war, and the combined effects of both on
welfare, output, trade, investment, and employment and the reasons therein are
analyzed respectively, including a detailed analysis of the specific sectoral impacts on
production and trade under each scenario. All reported results are medium-term
estimates as we utilize a static CGE simulation in our modelling process.
4.1 Make in India
Table 3 presents the estimated effects of MiI on the Indian economy and confirms that
the investment push (proactive policies) contribute significantly to the overall positive
impact of the policy, contributing to about 1% in terms of additional real GDP and
investment growth , and about 1.2% in exports growth. Notably, and as expected by
theory, reactive policies of protectionism through tariff barriers hurts economic growth,
22
export growth and investment growth. The overall impact of Make in India policies
contributes to a US $ 4.2 billion gain in terms of welfare, translating to 0.25% in terms
of real GDP. In contrast, the reactive policies within MiI hurt the overall growth of
India’s trade, with exports growth estimated to decline by 1.5% and imports by 2.9%.
As tariff barriers also affect imported intermediate inputs growth, they also negatively
affect investment growth.
Table 3
Estimated effects of Make in India policies on the Indian economy
Real
Welfare GDP Import Terms
change (% Exports growth of Trade
(US $ chang growth (% (% Investment Trade balance (US
million) e) change) change) (% change) (tot) $ million)
Protectionism
(reactive) -15235.2 -0.75 -2.73 -3.63 -1.92 0.71 19483.44
Investment 19451.2
(proactive) 7 1.00 1.24 0.75 0.88 -0.29 -138.65
Overall 4216.18 0.25 -1.49 -2.88 -1.03 0.42 19344.77
Source: Author's calculations based on policy simulations.
Note: Welfare changes refer to the Equivalent Variation (EV) measure in our model that measures the
additional dollar of income that a regional household (India in this case) would need to obtain at the
new level of utility if goods were still to be valued at initial prices.
We analyze the above changes due to Make in India policies through the following
economic mechanisms that work in our CGE model. First, there are "allocative losses,"
where governments collect more tax revenues. Second, there is a large "endowment
gain" due to the investment push, due to which higher economic activities result,
leading to higher real GDP growth. Third, capital stock growth (due to FDI push in
Make India), substitutes for skilled and unskilled labour, and this technological change
impact adversely affect job growth, with growth in skilled and unskilled labour falling
by -0.43% and -0.64%, respectively. Finally, there are improvements in terms of trade
(for India, export prices rise more than import prices in response to reactive policies,
but the opposite happens due to the proactive investment push. As the two opposite
forces of protectionism and investment combine under Make in India, real net exports
23
growth increases, generating a favourable outcome of improving real trade balances

by US $ 19 billion.
It is therefore evident that MiI policies would have had a more favourable impact on
the Indian economy if reactive policies of protectionism are avoided, as that adversely
affect exporters, as imports grow faster than exports, reducing the trade surplus.
4.1.1 Sectoral output effects
Since MiI policies are aimed to enhance domestic output growth in the targeted
sectors, we next analyze the output changes in the top 10 sectors wherein output rises,
or falls due to this policy impact, based on the combined effects of protectionism and
investment shocks. We present these in Table 4.
Table 4
Summary of estimated sectoral output effects in top 10 GTAP sectors due to
Make in India
GTAP GTAP Output
Sector Output rises Sector falls by
code Sector by (%) code (%)
Leather
29 products 2.73 3 Cereal grains nec -0.01
Vegetable oils
21 and fats 2.53 36 Metals nec -0.18
Motor vehicles Gas manufacture,

38 and parts 2.52 44 distribution -0.23
Business
54 services nec 2.52 48 Transport nec -0.26
27 Textiles 2.05 Skilled Labour (fop) -0.43
Capital (fop) 2 50 Air transport -0.45
Transport
equipment Chemical,rubber,plastic
39 nec 1.97 33 prods -0.62
Metal
37 products 1.67 Unskilled labour (fop) -0.64
24
Wearing
28 apparel 1.6 46 Construction -0.86
16 Oil 1.54 Capital Goods -1.03
Source: Author's calculations based on policy simulations. We report these for the combined
proactive and reactive effects of the policy.
We note that 8 out of the top 10 sectors that experience an increase in domestic output
are all linked to MiI sectors (Table 1) and that Chemical Rubber and Plastic products
are the only MiI linked sectors to experience a negative output growth of -0.6%. As per
Table 1, a decline in output in this sector is likely to affect Chemicals, Pharmaceuticals
directly, and indirectly Defence manufacturing (that receives Chemical sector inputs)
among the MiI sectors.
The investment in capital stock due to MiI strongly contributes to the buoyant domestic
output growth compared to the reactive protectionism in two MII sectors, Textiles and
Garments, as well as the Defence manufacturing sector (in terms of inputs of transport
equipment and metal products) (figure 2). The top GTAP MiI related sectors that
experience domestic output growth benefit mostly from reactive protectionism policies
(these include Leather, Automobiles, and Food processing). We also observe reactive
elements of Make in India to be contributing to the decline in output of GTAP MiI
related sectors (most notably, Chemicals) (figure 2).
To ascertain whether MiI also affected the key industrial sectors that later experienced
a tariff escalation in the US market due to the trade war (Table 2), Figure 3 presents
the estimated impact on output and exports of these sectors.
25
Figure 2
Contribution of investment and protectionism shocks to domestic output
changes (Due to Make in India (%))
Figure 3
Impact of Make in India on selected Industrial sectors

26
On a sectoral basis, MiI hurts the Chemical Rubber and Plastics industry in terms of
falling output (Table 4), which reduced its global exports growth by - 6.5%, and even
specifically to China18. Mineral products also suffered a negative output growth of -
1.1%, reducing its exports to China, and the United States, by about -5%. We observe
a similar trend but at a smaller scale for the metals n.e.c sector. Iron and Steel (Ferrous
metals sector) does not witness an output decline, but its exports to China and the
United States fell by -2%. In the absence of a trade war, MiI sectors, including
Automobiles, Machinery, and Electronic equipment, as well as metal products,
including Aluminium, shows a domestic output growth, also translating to higher export
growth of these industries globally, and China and other major trading partners.19
These results are indicative of the fact that reactive protectionism in MiI has
contributed to lower potential output growth, and had it been avoided, proactive
investment push would have delivered a higher growth outcome.
4.1.2 Sectoral employment effects
Figure 4 presents the estimates for changes in unskilled and skilled labour use for Mii
sectors in India based on our policy experiment.20 These constitute both proactive and
reactive policy shock effects.
We observe that 9 out of 22 MiI related sectors suffer job losses in both skilled and
unskilled labour, which includes Chemical, rubber plastic products, Iron and Steel,
Food Processing, and Electronic equipment industries. The ones that gain jobs the
most are mining and Extraction (of Coal, Oil, and Gas), Automobiles and Transport
equipment, and Textile and Apparel industries.
18A similar decline was noted for India’s exports to the US in this sector.
19A similar trend is noted in these sectors for exports to the US.
20These are based on qfe variable in the GTAP model.
27
Figure 4
Sectoral Employment effects : Make in India (MiI) (%)
Source: Author's calculations based on policy simulations in GTAP
Notably, the sectors that experience the most significant decline in jobs due to this
policy are not MiI sectors but important Heavy manufacturing industries involving the
production of Petroleum, coal, and mineral products, as well as Gas manufacturing
and distribution services.21Figure 5 further disaggregates the contribution of
protectionism and investment shocks in unskilled labour employment in MII sectors.
The results confirm that reactive policy of protectionism contributes to overall job
losses in the 9 MiI sectors identified in figure 4 above, as well as job gains in other MiI
21Thesedo not constitute any extraction and mining activities, and are treated separately in the GTAP
database from those sectors.
28
sectors such as mining and extraction (of Coal, Oil, and Gas), Automobiles, and
Transport Equipment, and textile industries.
Figure 5
Contribution of Protectionism and Investment shock in MII sector unskilled
labour employment changes (%)
4
3
2
1
0
-1
-2
Chemical,rubber,plastic…
Meat:…
Machinery and…
Beverages and tobacco…
-3
Sugar
Textiles
Ferrous metals
Processed rice
Oil
Dairy products
Wearing apparel
Minerals nec
Meat products nec
Leather products
Gas
Coal
Metal products
Motor vehicles and parts

Electronic equipment
Transport equipment nec

Food products nec
Vegetable oils and fats
UnSkLab (Protectionism) UnSkLab (Investment)
There is also evidence of job losses across the service sector, with technological
changes due to capital infusion prompting substitution from labour to capital as a result
of MiI’s proactive policy of FDI attraction (figure 6). These results emphasize the
importance of skill development in the face of MiI related initiatives and technological
change associated with forces of globalization in the Indian economy.
Figure 6
Employment effects on the Services sector due to MiI (%)
29
4.2 Global trade War
Table 5 presents the estimated effects of the ongoing global trade war on the Indian
economy. The results from our policy simulations confirm that tariff escalations due to
the ongoing global trade war, has an overall positive impact on the Indian economy,
contributing to about 0.06% in terms of additional real GDP and investment growth
(0.7%), and a fall by -1.1% in exports growth. As expected by theory, reactive policies
of protectionism through tariff barriers in a trade war hurt export growth, increasing
imports, thereby improving the trade balance. The overall impact of the Trade War
contributes to a US $ 7.5 billion gain in terms of welfare, translating to 0.06% in terms
of real GDP.22
22This is based on September 2018 announced tariff escalation in the trade war, but even if further
“threatened” tariffs were modelled, results do not change substantially, e.g. welfare is now up by the
US $ 7.2 billion, and exports growth down by 1.03%.
30
Table 5
Estimated effects of Global Trade war on the Indian economy
Welfare Terms Trade
change Real Exports Import of balance
(US $ GDP (% growth (% growth (% Investment Trade (US $
Policy billion) change) change) change) (% change) (tot) billion)
Trade
war 7.5 0.06 -1.07 0.54 0.69 0.35 -11.6
We analyze the trade war effect through the following economic mechanisms that work
in our CGE model. First, there are "allocative losses" where Indian governments
collect more tax revenues on the US imports due to the specific tariff escalation
involving the US-India trade. Second, the "endowment gains'' result for higher
economic activities, which leads to higher income for both skilled and unskilled labour,
whose out. One of the channels of improved welfare and positive contribution to real
GDP is through the improved terms of trade. For India, export prices rise more than
import prices. We observe this due to two reasons. First, due to trade war, as exports
fall, producers in the United States and China are likely to experience oversupply (due
to blocked markets), and this will lead their export prices to third markets (India, in this
case) to decline. The implication is that import prices fall for India, benefitting both
consumers and intermediate producers there. Second, from India's perspective as an
exporter not blocked by increasing tariffs to all other markets except for the United
States, there's an increase in their export prices, as they fill in the gaps opened by the
exclusion of China and the United states in respective markets. These effects are
similar even if the "threatened" tariffs of 2019 were modelled.
4.2.1 Sectoral output effects
We expect the trade war to adversely affect export growth, as well as domestic output
growth, especially in sectors that have witnessed initial tariff escalation between India
and the United States (Table 2). We next analyze the output changes in those sectors
due to the global trade war, focusing on the initial tariff escalations in 2018, and
31
ascertain whether the decline in output also contributed to a decrease in their exports
to the United States. The results are presented in Table 6.
Table 6
Summary of estimated sectoral output effects selected sectors due to global
trade war
Growth in
GTAP sector Power of tariff Output changes exports (to the
code India to the US shocks (%) (%) US) (%)
36 Metals nec. 50.0 -0.46 -99.97
Motor vehicles and
38 parts 22.1 -0.30 -44.32
35 Ferrous metals 13.4 -0.29 -36.78
Machinery and
41 equipment nec. 5.5 -0.5 -6.64
40 Electronic equipment 4.9 -1.27 1.27

30 Wood products 4.6 0.44 23.07
Mineral products
34 nec. 3.7 0.41 1.47
37 Metal products 3.3 0.17 14.66
Chemical, rubber,
33 plastic products 0.1 0.17 5.765
The US to India
Vegetables, fruit,
4 nuts 50 0.21 -72.04
10 Animal products nec 50 0.11 -60.28

37 Metal products 32.4 0.17 -86.82
35 Ferrous metals 9.4 -0.29 -36.18
Chemical, rubber,
33 plastic products 4.7 0.17 -18.50
Transport equipment
39 nec 1.1 -0.53 -1.21
32
The top 5 sectors that involved tariff escalation from India to the US due to trade war
also suffers losses in domestic production, and except for electronic equipment and
parts, the domestic sector production losses also translate into decreased export
growth from India to the US. Ferrous metals (Iron and Steel) sector output falls as it
faces tariff escalation on both sides, but more on India to the US market than the other
way around. Chemical Rubber plastics, and Metal products both have higher tariff
barriers equivalent from the US to India, so protectionism leads to increased domestic
production in both these import-competing sectors and decreases exports growth to
the US. Wood and mineral products exports, which only experience a tariff escalation
in the US market, expand their domestic output by 0.4% and increases the growth of
their exports to the US market.
To ascertain whether trade war also affected export growth to China in the sectors that
witnessed the US-India tariff escalation, figure 7 presents the estimated impact on
output and exports from India to China in these sectors.
Figure 7
Estimated impact of trade war on India-China exports
Chemical,rubber,plastic prods
Mineral products nec
Ferrous metals
Metals nec
-6 -4 -2 0 2 4 6
Exports to China (%) Output changes (%)
Source: Author’s calculations based on policy simulations in GTAP
Mineral products, metals as well as motor vehicles and parts are the key industrial
sectors wherein bilateral exports between India and China grow despite a decline in
domestic production, suggesting improved terms of trade effect in these sectors vis-
a-vis China. Ferrous metals, as well as electronic equipment and parts exports to
33
China, do fall along with their output, these sectors affect the growth of India-China
exports growth adversely, despite no direct tariff escalation between the two countries.
Overall, as expected, the sectoral results are mixed, with no evidence to suggest
across that board that the global trade war adversely affected output growth and export
growth of key sectors that involved bilateral tariff escalation between India and the US.
We confirm this further in Appendix 1 that estimates the output changes in the top 20
GTAP sectors in India due to the global trade war. The top 10 industries wherein output
falls, as well as rises due to trade war, do not involve a direct tariff escalation based
on Table 2, but are vital inputs to some of those sectors, especially in services.
4.2.2 Sectoral employment effects
Figure 8 presents the estimates for changes in unskilled and skilled labour use to the
trade war based on our policy experiment.23
Figure 8
Sectoral employment effects: Trade war (%)
Construction
Sugar
Dwellings
Metals nec
Wearing apparel
-3.00 -2.00 -1.00 0.00 1.00 2.00
SkLab UnSkLab
23These are based on qfe variable in the GTAP model.

34
We observe that due to the trade war and tariff escalations involving India and the
United States, job losses in both skilled and unskilled labour result in Apparel, Textiles,
Automobiles, and parts, as well as services inputs that go in these sectors, including
business services, sea transport, insurance, etc. Those sectors that suffer the most
considerable output losses due to the trade war in Appendix 1 also happen to the ones
suffering the greatest job losses. The Capital goods sector benefits the most, followed
by agriculture and food processing industries in terms of job gains due to the trade
war, and these also happen to be the sectors that experience a domestic output growth
as per Appendix 1.
The sectors that experience the greatest decline in jobs due to the trade war are all
not subject to tariff escalation in the US market, except for electronic, transport, and
machinery equipment. Still, notably, these are also connected to intermediate goods
trade and services links involving global value chains (GVCs). There is, therefore,
emerging evidence of trade war adversely affecting trade in global value chains and
employment in these sectors for India.
4.3 Make in India and trade war
Table 7 presents the estimated effects of the combined impact of Make in India and
ongoing global trade war on the Indian economy and confirms that tariff escalations
both due to MiI policies and the ongoing global trade war, has had an overall positive
impact on the Indian economy, contributing to about 0.31% in terms of additional real
GDP, but a decline in investment growth (-0.35%), with exports growth sharply falling
by 2.6%. As expected by theory, reactive policies of protectionism through higher tariff
barriers due to MiI and the trade war hurt export growth severely, also reducing imports
growth but less than that of exports, resulting in an improved trade balance. The overall
combined impact of MiI policies and the trade war contribute to a US $ 11.7 billion gain
in terms of welfare, translating to 0.3% in terms of real GDP.24
24This is based on September 2018 announced tariff escalation in the trade war, but even if further
“threatened” tariffs were modelled, results do not change substantially.
35
Table 7
Estimated effects of Make in India and Trade war policies on the Indian
economy
Welfare Import Terms
change Real Exports growth of Trade
(US $ GDP (% growth (% (% Investment Trade balance (US
million) change) change) change) (% change) (tot) $ million)
Make in India &
Trade War 11703.08 0.31 -2.56 -2.34 -0.35 0.77 7780.67
Make in India
(proactive) & Trade
War 26938.28 1.06 0.17 1.29 1.57 0.06 -11703.00
The outcome of a combined effect of strong protectionism effects of a trade war and
Make in India seems to override the proactive impact of investment expansion through
the latter. An interesting result is that the unexpected event such as a trade war does
not reverse any macroeconomic outcome in the Make in India program; if anything, it
contributes positively to output growth, although there are clear negative sectoral
impacts for manufacturing exporters.
5. Policy implications and concluding remarks
Our paper was the first ever attempt to analyse economy wide and sectoral impacts
of Make in India program, extending it to incorporate the effects of the global trade
war. The simulation results suggest that Make in India programme, at its best, seems
to have had a marginal impact on the Indian economy. It confirms that proactive
policies of MiI through investment push generate higher growth benefits, compared to
a mix of proactive and reactive policies. Due to reactive protectionism as part of MiI,
output grows, but yields negative ramifications for exports, jobs, and investment
growth, with high tariffs affecting imported intermediate inputs and potential GVC
36
sectors. The only difference added by the unexpected trade war is the extra negative
impact on export growth of India, that leads to net import growth, instead of a net
exports growth. Specific manufacturing sectors are found to be unable to increase
domestic output despite being a part of Make in India, such as the Chemical, Rubber,
and Plastics industries, and those that use it as raw materials.
An important caveat is in order while interpreting these results. Demonetization of the

Indian rupee announced in November 2016, and the Goods and Services Tax
implemented in July 2017 changed the structure of the Indian economy, especially
unorganized manufacturing, which may not be reflected in the results of our static
model. Any impact on credit availability due to these policies that might have adversely
affected ability of manufacturing sector firms to increase production capacity or exports
is also therefore not captured, as our model does not include financial sector, and
doesn’t include firm-level data. Our model also does not evaluate any subsidy impacts
under MiI in this scenario (schemes that include a one-time capital subsidy for eligible
benchmarked machinery, Interest Equalization Scheme on Pre and Post Shipment
Rupee Export Credit, as well as sector-specific subsidies, investment allowances, and
duty drawback schemes. Further, we model reactive protectionism in MiI sectors only
in terms of tariff-barriers, and do not model any non-tariff barriers due to data
limitations.
Despite some obvious limitations as outlined above, there are some key lessons from
this study that informs Indian policymakers as it aims to recover along with the global
economy in 2021, from the covid-19 pandemic. First, as India aims to become self-
reliant but remain engaged globally by enhancing export capabilities post-COVID-19,
reactive protectionism by keeping tariff barriers are best avoided in the long run, as it
not only hurts export growth in key industries, but also directly affects job creation in
those industries. Second, proactive policies that involves investment push such as the
recently announced 10 sector Production linked incentive (PLI) scheme that focusses
on boosting manufacturing capabilities, and thereby exports, should be more
preferred, and properly implemented, avoiding any opportunities for tariff-jumping
foreign investments. Last, but not the least, demand and supply side constraints that
affect manufacturers need to be eased and infrastructural development should be a
priority.
37
It is obvious that our study is unable to capture any firm-specific impacts due to MiI in
these sectors, which would provide more insights into which kind of firms are more
likely to succeed in developing production and export capabilities in India’s
manufacturing sector. Future research in this area is therefore expected to utilize trade
and protection data based on firm heterogeneity and production data in a global
economic modelling framework, as and when it is available.25
25 Detailed firm level trade data is required for GTAP-HET modelling as per Akgul et. al.(2014), which
is a data constraint in the Indian context.
38
List of References
Abrego, Lisandro, Raymond Riezman and John Whalley. 2006. "How Reasonable are
Assumptions used in Theoretical Models? Computational Evidence on the Likelihood
of Trade Pattern Changes." Canadian Journal of Economics 39(3): 781-789.
Anand, R., Kochhar, K., & Mishra, S. (2015). Make in India: Which Exports Can Drive
the Next Wave of Growth?.
Akgul, Z., Villoria, N. B., & Hertel, T. W. (2014). Introducing firm heterogeneity into the
GTAP model with an illustration in the context of the Trans-Pacific Partnership
agreement. Mimeo, Department of Agricultural Economics, Purdue University.
Banga, R. (2014). Hollowing-Out Of India's Manufacturing Sector: Role of International

Trade.Retrieved from
http://www.esocialsciences.org/eSS_essay/Manufacturing/Hollowing%20Out.pdf
Bagwell, K., and R. W. Staiger (2002). The Economics of the World Trading System.
The MIT Press, Cambridge, MA.
Baldwin, R. E., and R. Clarke (1987). "Game-Modeling Multilateral Trade

Negotiations." Journal of Policy Modeling, Vol. 9, No. 2, pp. 257-284.
Bekkers, E., & Teh, R. (2019). Potential economic effects of a global trade conflict:
Projecting the medium-run effects with the WTO global trade model (No. ERSD-2019-
04). WTO Staff Working Paper.
Bollen, J. and H. R. Romagosa (2018). Trade Wars: Economic Impacts of the US Tariff
Increases and Retaliations. An International Perspective. CPB Netherlands Bureau for
Economic Policy Analysis. Available
online: https://www.cpb.nl/sites/default/files/omnidownload/CPB-Background-
Document-November2018-Trade-Wars-update.pdf
39
Bouët, A. and D. Laborde (2018). "The US Trade Wars in the Twenty-first Century with
Emerging Countries: Make America and its Partners Lose Again." The World
Economy, Vol. 41 No. 9, pp. 2276-2319.
Carvalho, Monique, André Azevedo, and Angélica Massuquetti. "Emerging Countries

and the Effects of the Trade War between US and China." Economies 7, no. 2 (2019):
45.
Chappuis, T., & Walmsley, T. L. (2011). Projections for World CGE Model Baselines
(GTAP Research Memorandum, Vol. 22). West Lafayette IN: Center for Global Trade
Analysis, Purdue University.
Ciuriak, D., and J. Xiao (2018). Quantifying the Impacts of the US Section 232 Steel
and Aluminium Tariffs. C.D. Howe Institute Working Paper. Available
online: https://www.cdhowe.org/sites/default/files/attachments/research_papers/mixe
d/Working%20Paper%200612web.pdf
Corong, E. L., Hertel, T. W., McDougall, R., Tsigas, M. E., & van der Mensbrugghe,
D. (2017). The standard GTAP model, version 7. Journal of Global Economic
Analysis, 2(1), 1-119.
Cronshaw, M. B. (1997). "Algorithms for Finding Repeated Game Equilibria."

Computational Economics, Vol. 10, pp. 139-168.
Deardorff, A. V., and R. M. Stern (1987). "Tariff and Defensive Responses: A

Computational Analysis." International Economic Journal, Vol. 1 No. 2, pp. 1-23.
Eddy, B. and R. The (2019). Potential Economic Effects of a Global Trade Conflict:
Projecting the medium-run effects with the WTO Global Trade Model. Staff Working
Paper ERSD-2019-04.
Economic and Social Commission for Asia and the Pacific (ESCAP) (2018). Asia-
Pacific Trade and Investment Report. Available at
40
https://www.unescap.org/publications/asia-pacific-trade-and-investment-report-
2018#
Foreman-Peck, J., A. Hallett, and Y. Ma (2007). "Trade Wars and the Slump."
European Review of Economic History, Vol. 11, pp. 73-98.
Gilbert, J., Furusawa, T., & Scollay, R. (2018). The economic impact of the Trans‐
Pacific Partnership: What have we learned from CGE simulation? The World
Economy, 41(3), 831-865.
Green, R. A. (2014). Can "Make in India" Make Jobs? The Challenges of

Manufacturing Growth and High-Quality Job Creation in India.
Grossman, G. M., and E. Helpman (1995). "Trade wars and Trade Talks." Journal of
Political Economy, Vol. 103, No. 4, pp. 675-708.
Hamilton, B., and J. Whalley (1983). "Optimal Tariff Calculations in Alternative Trade
Models and Some Possible Implications for Current World Trading Arrangements."
Journal of International Economics, Vol. 15, pp. 323-348.
Harrison, G. and E. E. Rutstrom (1991). "Trade Wars, Trade Negotiations, and Applied
Game Theory." The Economic Journal, Vol. 101, May, pp. 420-435.
He, C., C. Li, J. Wang, and J. Whalley (2017). "The Armington Assumption and the
Size of Optimal Tariffs." Economic Modelling, Vol. 66, pp. 214-222.
Hertel, T. W. (1997). Global trade analysis: modeling and applications. Cambridge

university press.
41
Hiro, L., &Itakura, K. (2014). TPP, RCEP, and Japan's agricultural policy reforms.
OSIPP Discussion Paper No. DP-2014-E-003. Osaka School of International Public
Policy, Osaka, Japan.
Johnson, Harry G. 1953. "Optimum Tariffs and Retaliation." Review of Economic

Studies 21(2): 142-153.
Kee, Hiau Looi, Alessandro Nicita, and Marcelo Olarreaga. "Import demand elasticities
and trade distortions." The Review of Economics and Statistics 90, no. 4 (2008): 666-
682.
Kravchenko, Alexey, Narayan Badri, and Yann Duval (2019). A computable general
equilibrium analysis of global trade tensions: An Asia-Pacific perspective. ESCAP TIID
Working Paper. Bangkok.
Lisandro, A., R, Riezman, and J. Whalley (2006). "How Reasonable are Assumptions
used in Theoretical Models? Computational Evidence on the Likelihood of Trade
Pattern Changes" Canadian Journal of Economics, Vol. 39, No. 3, pp. 781-789.
Markusen, J. R., & Wigle, R. M. (1989). Nash equilibrium tariffs for the United States
and Canada: The roles of country size, scale economies, and capital mobility. Journal
of political Economy, 97(2), 368-386.
Mani, S., Sheel, A., Nagaraj, R., Singh, S., Vijayshankar, P. S., Irudaya Rajan, S.,
Beena, P. L., Parameswaran, M., & Iyer, C. G. (2020). The Stimulus Package in Five
Installments: Does it make the economy more self-reliant?. Commentary on India's
Economy and Society Series - 15, Centre for Development Studies,
Thiruvananthapuram, India.
McDougall, R., & Ianchovichina, E. (2000). Incorporating dynamics and international

capital mobility into the GTAP model. GTAP Technical paper.
42
Monique, C., A. Azevedo, and A. Massuquetti (2018). "Emerging Countries and the
Effects of the Trade War between the US and China." Economies, Vol. 7, No. 2, pp.
45. https://doi.org/10.3390/economies7020045
Nagaraj, R (2019): "Make in India: Why Didn't the Lion Roar?" India Forum, available
at https://www.theindiaforum.in/article/make-india-why-didnt-lion-roar, last accessed
on 18 June 2020.
Narayanan, B., & Sharma, S. K. (2016). An analysis of tariff reductions in the Trans-
Pacific Partnership (TPP): Implications for the Indian economy. Margin: The Journal
of Applied Economic Research, 10(1), 1-34.
Narayanan, G Badri, and Sangeeta Khorana (2014). Tariff Escalation, Export Shares,
and Economy-wide Welfare: A Computable General Equilibrium Approach. Economic
Modelling, 41: 109-118.
Nicita, A., M. Olarreaga, and P. Silva (2018a). "Cooperation in WTO's Tariff Waters?"
Journal of Political Economy, Vol. 126, No. 3, pp. 1302-1338.
Nicita, A., M. Olarreaga, and P. Silva (2018b). A Trade War Will Increase Average
Tariffs by 32 Percentage Points. Available at: https://voxeu.org/article/trade-conflict-
will-increase-average-tariffs-32- percentage-points
Rajan, R. (2015). Make in India, Largely for India. Indian Journal of Industrial
Relations, 50(3), 361-372. Retrieved from http://www.jstor.org/stable/24549100
Soundhariya, S., 2016. "Make in India Scheme For Transforming India," Working
Papers id:11188, eSocialSciences, Retrieved from
http://www.esocialsciences.org/Articles/show_Article.aspx?acat=InstitutionalPapers&
aid=11188
43
Table 1
Mapping of selected Make in India (MiI) sectors to the GTAP database
Make in India
sectors HS code 2012 Average tariff %) GTAP sector code
Automobiles 87 28.1 38
Aviation 88 8.3 39
Chemicals 28,29 9.5 33
Pharmaceuticals 30 10.0 33
Defence
manufacturing 87,88,89,93 14.6 38,39,33,35,37,41
Electrical
machinery 85 8.8 41
16,17,18,19,20,2
Food processing 1,22 48.5 19,20,21,22,23,24,25,26
50,51,52,53,54,5
Textiles and 5,56,57,58,59,60,
garments 61,62,63 23.4 27,28
Leather 41,42,43 10.6 29
Mining 25,26,27 8.2 15,16,17,18
Railways 86 10.0 39
Automobile
components 87 28.1 38
Renewable
energy 85 8.8 41
44
Electronics
systems 85 8.8 40
Source: Customs tariff as on 01-07-18, Central Board of Indirect Taxes & Customs
Table 2
Summary of tariff escalations as part of a trade war involving India and the US
in 2018
Escalated
power of
The direction of escalation and tariffs
GTAP sector code sector description tms (%)
India's exports to the US
36 Metals, including Aluminium 50.0
38 Motor vehicles and parts 22.1
35 Iron & Steel 13.4
41 Machinery and equipment nec 5.5
40 Electronic equipment 4.9
30 Wood products 4.6
34 Mineral products nec 3.7
The US's exports to India
4 Vegetables, fruit, nuts 50.0
10 Animal products nec 50.0
35 Iron & Steel 9.4
39 Transport equipment nec 1.1
Source: Author's calculations based on policy simulations. The power of tariffs in the GTAP database
is likely to be higher or lower than the actual percent point increase in tariff escalations. Hence, a 50%
value of tms more likely represents a very high tariff escalation of 100% or beyond.
45
Table 3
Estimated effects of Make in India policies on the Indian economy
Real
Welfare GDP Import Terms
change (% Exports growth of Trade
(US $ chang growth (% (% Investment Trade balance (US
million) e) change) change) (% change) (tot) $ million)
Protectionism
(reactive) -15235.2 -0.75 -2.73 -3.63 -1.92 0.71 19483.44
Investment 19451.2
(proactive) 7 1.00 1.24 0.75 0.88 -0.29 -138.65
Overall 4216.18 0.25 -1.49 -2.88 -1.03 0.42 19344.77

Table 4
Summary of estimated sectoral output effects in top 10 GTAP sectors due to
Make in India
GTAP GTAP Output
Sector Output rises Sector falls by
code Sector by (%) code (%)
Leather
29 products 2.73 3 Cereal grains nec -0.01
Vegetable oils
21 and fats 2.53 36 Metals nec -0.18
46
Motor vehicles Gas manufacture,

38 and parts 2.52 44 distribution -0.23
Business
54 services nec 2.52 48 Transport nec -0.26
27 Textiles 2.05 Skilled Labour (fop) -0.43
Capital (fop) 2 50 Air transport -0.45
Transport
equipment Chemical,rubber,plastic
39 nec 1.97 33 prods -0.62
Metal
37 products 1.67 Unskilled labour (fop) -0.64
Wearing
28 apparel 1.6 46 Construction -0.86
16 Oil 1.54 Capital Goods -1.03
Source: Author's calculations based on policy simulations. We report these for the combined proactive
and reactive effects of the policy.
Table 5
Estimated effects of Global Trade war on the Indian economy
Welfare Terms Trade
change Real Exports Import of Balance
(US $ GDP (% growth (% growth (% Investment Trade (US $
Policy billion) change) change) change) (% change) (tot) billion)
Trade
war 7.5 0.06 -1.07 0.54 0.69 0.35 -11.6
47
Table 6
Summary of estimated sectoral output effects selected sectors due to Global
Trade war
Output Growth in
GTAP sector Power of tariff changes exports (to the
code India to the US shocks (%) (%) US) (%)
36 Metals nec. 50.0 -0.46 -99.97
Motor vehicles and
38 parts 22.1 -0.30 -44.32
35 Ferrous metals 13.4 -0.29 -36.78
Machinery and
41 equipment nec. 5.5 -0.5 -6.64
40 Electronic equipment 4.9 -1.27 1.27

30 Wood products 4.6 0.44 23.07
Mineral products
34 nec. 3.7 0.41 1.47
37 Metal products 3.3 0.17 14.66
Chemical, rubber,
33 plastic products 0.1 0.17 5.765
The US to India
Vegetables, fruit,
4 nuts 50 0.21 -72.04
10 Animal products nec 50 0.11 -60.28

37 Metal products 32.4 0.17 -86.82
35 Ferrous metals 9.4 -0.29 -36.18
48
Chemical, rubber,
33 plastic products 4.7 0.17 -18.50
Transport equipment
39 nec 1.1 -0.53 -1.21
Table 7
Estimated effects of Make in India and Trade war policies on the Indian
economy
Welfare Import Terms
change Real Exports growth of Trade
(US $ GDP (% growth (% (% Investment Trade Balance (US
million) change) change) change) (% change) (tot) $ million)
Make in India &
Trade War 11703.08 0.31 -2.56 -2.34 -0.35 0.77 7780.67
Make in India
(proactive) & Trade
War 26938.28 1.06 0.17 1.29 1.57 0.06 -11703.00

49
Figure 1
Composition of key sectors to India’s GDP
Source: The World Bank (2018)

50
Figure 2
Contribution of Investment and Protectionism shocks to domestic output
changes (Due to Make in India (%))

51
Figure 3
Impact of Make in India on selected Industrial sectors

52
Figure 4
Sectoral employment effects : Make in India (MiI) (%)

-3
-2
-1
0
1
3
4
2
Chemical,rubber,plastic…
Ferrous metals
Machinery and…
Beverages and tobacco…
Processed rice
Dairy products
Sugar
Food products nec
Wearing apparel
UnSkLab (Protectionism)
Figure 5
Metal products
Minerals nec

Meat:…
labour employment changes (%)
Textiles
Meat products nec
Vegetable oils and fats
UnSkLab (Investment)
Leather products
Gas
Coal
Contribution of protectionism and investment shock in MII sector unskilled
53
Oil
54
Figure 6
Employment effects on the services sector due to MiI (%)

55
Figure 7
Estimated impact of trade war on India-China exports
Chemical,rubber,plastic prods
Metal products
Wood products
Machinery and equipment nec
Ferrous metals
Metals nec
-5 -4 -3 -2 -1 0 1 2 3 4 5
Exports to China (%) Output changes (%)

56
Figure 8
Sectoral employment effects : Trade war (%)
Capital Goods
Plant-based fibers
Sugar
Cereal grains nec
Insurance
Textiles
Manufactures nec
Sea transport
Wearing apparel
-2.50 -2.00 -1.50 -1.00 -0.50 0.00 0.50 1.00 1.50
SkLab UnSkLab

57
Appendix 1
Top 20 GTAP sectors wherein output falls or rises in India due to the trade war
Sector Output Sector Output
No code Description ( %) fall code Description (%) rise
1 28 Wearing apparel -2.13 19 Meat: cattle,sheep,goats,horse 1.01
2 29 Leather products -1.9 NA Capital Goods 0.69
3 49 Sea transport -1.78 46 Construction 0.62
Electronic
4 40 equipment -1.27 24 Sugar 0.59
Manufactures
5 42 nec -1 6 Sugar cane, sugar beet 0.48
Business
6 54 services nec -0.89 7 Plant-based fibers 0.47
Transport
7 39 equipment nec -0.53 30 Wood products 0.44
Machinery and
8 41 equipment nec -0.5 34 Mineral products nec 0.41
9 27 Textiles -0.48 57 Dwellings 0.41
10 36 Metals nec -0.46 25 Food products nec 0.31
11 53 Insurance -0.44 56 PubAdmin/Defence/Health/Educat 0.31
12 51 Communication -0.39 3 Cereal grains nec 0.3
Motor vehicles
13 38 and parts -0.3 14 Fishing 0.23
Ferrous metals
14 35 (Iron and Steel) -0.29 2 Wheat 0.23
Recreation and
15 55 other services -0.17 26 Beverages and tobacco products 0.22
Financial
16 52 services nec -0.12 4 Vegetables, fruit, nuts 0.21
Paper products,
17 31 publishing -0.11 23 Processed rice 0.21
18 16 Oil -0.1 47 Trade 0.21
19 15 Coal -0.08 9 Cattle,sheep,goats,horses 0.19
20 50 Air transport -0.02 13 Forestry 0.18
58
The Asia-Pacific Research and Training Network on Trade -

ARTNeT - is an open network of research and academic
institutions and think-tanks in the Asia-Pacific region. Since its
inception, ARTNeT aims to increase the amount of high
quality, topical and applied research in the region by
harnessing existent research capacity and developing new
capacities. ARTNeT also focuses on communicating these
research outputs for policymaking in the region including
through the ARTNeT Working Paper Series which provide new
and policy–relevant research on topics related to trade,
investment and development. The views expressed in this
publication are those of the authors and do not necessarily
reflect the views of the United Nations and ARTNeT secretariat
or ARTNeT members.
Readers are encouraged to quote or reproduce material from

ARTNeT Working Papers for their own publications, but as the
copyright holder, ARTNeT requests due acknowledgement and
a copy of the publication.
This and other ARTNeT publications are available at

artnet.unescap.org
ARTNeT Secretariat, United Nations ESCAP
Rajadamnern Nok Avenue
Bangkok 10200, Thailand
Tel: +66(0) 22881410
Fax: +66(0) 22881027

AWP 203 Sen Et Al

Uploaded by

Copyright:

Available Formats

AWP 203 Sen Et Al

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

AWP 203 Sen Et Al

Uploaded by

Copyright:

Available Formats

1

ASIA-PACIFIC RESEARCH AND TRAINING NETWORK ON TRADE

The Asia-Pacific Research and Training Network on Trade (ARTNeT) is an open

ASIA-PACIFIC RESEARCH AND TRAINING NETWORK ON TRADE

A quantitative assessment of economic impact of trade wars and

the 'Make in India’ program

Badri Narayanan G.1

Please cite this paper as:

Auckland, New Zealand. (e-mail: sadhana.srivastava@aut.ac.nz);

In a unique attempt, our paper aims to provide a quantitative economic assessment of

Keywords: Make in India, GTAP model, Trade war, COVID-19 pandemic,

Source: The World Bank (2018)

To address this policy constraint, the Government of India conceptualized a 'Make in

Unfortunately, two external shocks following this initiative delivered an unexpected

In a unique attempt, our paper aims to provide a quantitative economic assessment of

We organize the remainder of the paper as follows. Section 2 presents a broad

2.1 Make in India

2.2 Trade conflicts and trade wars

Johnson (1953) presents an economic analysis of trade conflict, modelled as a two-

due to a slowdown in global demand. The adverse impact is likely to be fuelled by

3. Model, data, and methodology

We utilize an augmented version of the standard Global Trade Analysis Project

between inputs and between factors of production. Imported intermediates are

3.2 Make in India: Data and policy design

To ascertain the reactive policy impact of Make India involving protectionism on

Second, some MiI sectors like automobiles, aviation, pharmaceuticals, electrical

15http://www.cbic.gov.in/htdocs-cbec/customs/cst1718-010718/cst1718-0107-idx. Accessed on 1st

Chemicals 28,29 9.5 33

pms(i r, s) = tms( i,r,s )+ pcif ( i,r, s, )….(1)

qo(i,r)= SHRDM(i,r) * qds(i,r)+ sum(s,REG, SHRXMD(i,r,s) * qxs(i,r,s)) +

qfe(i,j,r) = - afe (i,j,r)+ qva (j,r)- ESUBVA(j) * [pfe(i,j,r) - afe(i,j,r) - pva(j,r)]…(5)

4.1 Make in India

growth increases, generating a favourable outcome of improving real trade balances

4.1.1 Sectoral output effects

Motor vehicles Gas manufacture,

Source: Author's calculations based on policy simulations.

Source: Author's calculations based on policy simulations.

4.1.2 Sectoral employment effects

Source: Author's calculations based on policy simulations in GTAP

Meat products nec

Motor vehicles and parts

Transport equipment nec

Vegetable oils and fats

UnSkLab (Protectionism) UnSkLab (Investment)

Source: Author's calculations based on policy simulations in GTAP

Source: Author's calculations based on policy simulations in GTAP

4.2 Global trade War

4.2.1 Sectoral output effects

40 Electronic equipment 4.9 -1.27 1.27

10 Animal products nec 50 0.11 -60.28

Mineral products nec

Exports to China (%) Output changes (%)

Source: Author’s calculations based on policy simulations in GTAP

4.2.2 Sectoral employment effects

Source: Author’s calculations based on policy simulations in GTAP

23These are based on qfe variable in the GTAP model.

4.3 Make in India and trade war

5. Policy implications and concluding remarks

An important caveat is in order while interpreting these results. Demonetization of the