This study examines the effect of trade liberalization on poverty in India through regression analysis by using data for the period from 1980-81 to 2007-08. In 1991, India adopted trade reform policy to overcome the balance of payment crisis and achieve a stable and sustainable development. After trade reform, the growth rate of output increased significantly, inflation rate declined, foreign exchange reserves rose substantially and there was a sharp reduction in poverty. This study analyzes the changing characteristics of national, rural and urban poverty measured in terms of Head Count Ratio (HCR) and absolute poverty. It also focuses on the per capita income generated from exports of products of various sectors as the driving force for poverty reduction at national and state level. It tries to build a linkage between export orientation of India and poverty.

In the last few decades, openness of an economy and globalization have turned out to be the most popular and inevitable concern of all developing countries. Since the 1980s, most of the developing nations concentrated on trade reform policies. As the theoretical idea, ‘Trade accelerates growth’, does not hold true for all countries in practice, the impact of trade on poverty is also quite ambiguous. In China, poverty reduced drastically after trade reform, while some of the Latin American countries witnessed contrary results. Similarly, there are imbalances in effect of trade reform on urban and rural poverty. Hence, while analyzing such a contrastive phenomenon, it would be an economically rewarding engagement to study the mechanism and effects of trade liberalization on developing countries like India.

Applied Economics Journal, Trade Liberalization, Head Count Ratio (HCR), Poverty Scenario in India, Head Count Ratio (HCR), Poverty Gap Ratio (PGR).