Validating Prediction of a CGE Model of India: An Introspection

Although computable general equilibrium (CGE) models have been used extensively to evaluate the potential impact of economic reforms, few efforts have been made to assess the predictive power of the models. This paper attempts to test the performance of one such model, viz., Chadha, Pohit, Deardorff and Stern’s study of India’s unilateral trade/domestic policy reforms in the 1990s. Our model does not incorporate many of the rigidities/features of the Indian economy. Nevertheless, our model can perform quite well at simulating, if not forecasting, actual changes in sectoral output and exports