The concept of effective rate of assistance (ERA) employed in this study is an extension of the conventional measure of effective rate of protection (ERP). The ERP accounts only for trade assistance. The ERA treats both trade and domestic assistance. Concomitantly, in the calculation of ERAs, the assistance to both material inputs (to which the ERP has been limited) and primary inputs has been taken into account.

According to the theory of policy, controllable instruments, namely statutory ERAs in the present case (as distinguished from endogenously determined realized ERAs) are to be related to the objectives of policies. A meaningful relationship between instruments and objectives can be tested essentially in a dynamic context. Accordingly, a 14-year time-series of ERAs at the four-digit industry level was prepared.

The findings reveal that, paradoxically, instead of a decline in ERAs after the New Industrial Policy 1982 (NIP82), for a bulk of commodities ERAs actually increased. Possible reasons for the increase are discussed. ERAs vary a lot across industry types. The differences of ERAs as between small and large industries are insignificant (one of the main factors offsetting favorable fiscal gains to large industries being the labor code). There is little evidence to show that the highly assisted industries have reaped relative gains in expansion, scale economies, or productivity.