The role of price in international trade continues to be a favorite field of investigation by researchers. The debate on the appropriateness of the use of the single-stage least-squares regression method also continues to draw attention. The present paper, however, makes use of this method and reports some results with respect to certain merchandise items of the Indian foreign trade. It thus claims to minimize errors due to aggregative studies relating to total exports and imports of an economy. MORE THAN one effort has been made to measure the role of price in international trade. What follows are the results of some further tests, based on a study relating to certain individual commodities in which India trades with the world at large. More precisely, this paper reports some results with respect to world demand for Indian tea and Indian import demand for iron and steel, machinery, chemicals, and raw cotton. I have reported elsewhere [2] that the ratio of relative prices between home and world markets has not been found to be significant in explaining India's import demand in the contemporary period, 1950-1961. Nor was the variable found to be significant in explaining world demand for Indian exports during the same time period except in the case of Indian exports to the limited area outside the Sterling, Dollar and OECD countries. I have also reported some results [3] with respect to import demand of India for the historical period, 1900-1946. The relative price variable based on the ratio of home and world price levels was found significant only in the case of intermediate goods, but insignificant with respect to import demand for both consumer goods and investment goods. However, in each case there was room for suspicion that the price effect is often subsumed under the overall income effect in an aggregative import/export function. The levels of disaggregation achieved in each of these studies were not completely satisfactory. It is hoped that the present analysis, being at the level of individual commodities or commodity groups, will help elicit further information in this respect. The selection of individual items of trade for this study is rather arbitrary. On

T HIS paper reports the results of a study on the import structure of India. To be more precise, the study refers to the territory which was known as British India and covers the time period from 1900 through 1946. The study of aggregate import demand has been done for the two time periods (1) 19001936, a period of 37 years (covering British India inclusive of Burma), and (2) 1900-1946, a period of 47 years (on the basis of the netof-Burma trade data as constructed for the present study). The variable to be explained is net retained private merchandise imports. Gross imports have been adjusted for re-exports and imports on government accounts. Imports in current rupee sums have been deflated by an index of import prices, and a series of net retained merchandise imports in 1939 import rupees has been obtained. Next, the total retained merchandise imports on private account in 1939 import rupees (m) have been disaggregated into three major economic categories: import of consumption goods (mi), import of intermediate goods (mi,,) and import of investment goods (mi). Each subgroup has been deflated by an appropriate price index. The results of this disaggregation, however, conform to the following identity: m 3 me + mi,ft + mi (all in 1939 import rupees). Economic theory teaches us that national income and relative prices are the two major economic variables to be used in explaining variations in the import demand of a country. Unfortunately, there is no official national income series for India for this period. Private researchers have made sporadic efforts to conc+riirt ciir.h cpritc. and la rpcent studvy has been completed for the purpose of constructing a series of national income figures for the entire period of the present study. The overall national income figures would not be expected to give good estimates. Adjustment of the available national income estimates for urban-nonurban effects, or for that matter, construction of a series on urban national income might be helpful. Not many imported goods were consumed in the rural agricultural sector of the Indian economy. Most imports were used either directly for industrial use, or indirectly for the use of the urbanized industrial sector of the economy, the income of which varied positively with the variations in the index of industrial output. Unfortunately, there is no index of industrial output for the period which could be used as a surrogate for national income. Again, there are secondary estimates,2 indices constructed by individual researchers on the basis of overall industrial activity. No index of industrial output as such was available. Activity indices have often given undue weights to financial and other quasi-industrial activities3 which may have no meaningful correlation with the import demand of the country. One approach to this problem is to make use of export earnings of the country as a proxy for national income. Ultimately, each country must be able to pay for imports by export earnings unless it has a perennial capital inflow and/or exports gold as an item of merchandise. In the particular case of India, neither exportation of gold nor such importation of capital was ever a possible course of action. As a matter of fact, over this period, India enjoyed a surplus

In the 1990's and beyond, the search for an optimum framework for studies in international economics is in order. The dynamics of two sets of economic events, one in Europe, (the emergence of a single economic region, the European Community [EC] and the other in Asia (Japan's economic achievement plus the industrialization and economic growth of certain Asia-Pacific economies) suggests that a new multipolar world economy is emerging. In this global context the EC paradigm of economic regionalization, providing a macroeconomic core for microeconomic optimization, warrants attention.