Wto and Indian Economy
Wto and Indian Economy
Wto and Indian Economy
(AGRICULTURAL IMPLICATIONS)
BY:
RAYNAH FERNANDES 13
SRUSHTI GANGAN 14
NEHA GAONKAR 15
INDEX
1. WORLD TRADE ORGANISATION
GATT
Principles of WTO
3. INDIAN ECONOMY
4. INDIAN AGRICULTURE
Agricultural Trade
5. AGREEMENT ON AGRICULTURE
India’s Commitment
8. SUGGESTIONS
9. BIBLIOGRPHY
ACKNOWLEGEMENT
We would like to acknowledge and express our sincerest gratitude for the efforts
and timely guidance of our professor Mrs. Neelam Shetty of Managerial
Economics for providing us the opportunity to study the impact of WTO
agreements on the Indian economy especially focused on the agricultural sector.
We would also like to thanks and express our gratitude towards professor Mr.
Agnelo Menezes of economics from the Bachelors of Arts faculty and his
student from XRCVC Master Prashant Lindayat.
Each and every team member gave in his best to make sure that this report has
all the necessary inputs and is completed on time. We definitely had a
knowledgeful and enriching experience.
WORLD TRADE ORGANISATION
Over the past 60 years, the WTO, which was established in 1995, and its
predecessor organization the GATT have helped to create a strong and
prosperous international trading system, thereby contributing to unprecedented
global economic growth. The WTO currently has 153 members, of which
117 are developing countries or separate customs territories. WTO activities are
supported by a Secretariat of some 700 staff, led by the WTO Director-General.
The Secretariat is located in Geneva, Switzerland, and has an annual budget of
approximately CHF 200 million ($180 million, €130 million). The three official
languages of the WTO are English, French and Spanish.
Basic Details
One of the most dramatic events that have taken place in later part of
20th century was culmination of GATT 1947 into WTO (The world Trade
organization), which came into being on 1st January 2005. As an organization it
has vast powers and functions than what its ancestor GATT (General Agreement
on Tariffs and Trade) had, the objectives and goals of both being broadly the
same. GATT came into existence in the year 1948, after long negotiations to
form an organization called ITO immediately after the Second World War did
not materialize. The ITO was supposed to be the third international organization
in the "Golden Triangle" that was supposed to come into existence, the first two
being IMF and World Bank.
On the other front, the internal and domestic economic problems and
fluctuations made some economies to go back to increase the levels of
protection and increase trade barriers to enable faster domestic growth and
recovery. The problem was not just a deteriorating trade policy environment, but
some other serious issues. GATT negotiations did not include services and
agricultural trade in its gamut. As the world trade grew in size, the share of
services trade along with that of merchandise started to increase leading to the
insufficiency of the GATT principles to cover the expanding aspects of ever
evolving global trade. As a result, these loopholes were taken as advantage by
many trading countries, resulting in a lopsided development of world trade.
These and other factors convinced GATT members that a new effort to reinforce
and extend the multilateral system should be attempted. That effort resulted in
the Uruguay Round, the Marrakesh Declaration, and the creation of the WTO.
PRINCIPLES OF WTO
The agreements of WTO cover everything from trade in goods, services and
agricultural products, these agreements are quite complex to understand,
however all these agreements are based on some simple principles;
Non-Discrimination
Reciprocity
Transparency
Thus, these principles were primarily to serve the purpose of freer and fair trade
and also to encourage competitive environment in the global market. This was
further supposed to enhance development and Economic reforms in the
developing countries over a period of time in a phased manner.
The overriding objective of the World Trade Organization is to help trade flow
smoothly, freely, fairly and predictably; to meet its objective WTO performs the
following functions
• Administering W.T.O Trade Agreements.
• Acting as a Forum for trade negotiations.
• Settling and Handling Trade disputes
• Monitoring and reviewing national trade policies,
• Assisting the member in trade policies through technical assistance and
training programs
• Technical assistance and training for developing countries.
• Co-operation with other International Organization
The goals behind these functions are set out in the preamble to the Marrakech
Agreement. These include:
These objectives are to be achieved while allowing for the optimal use of the
world's resources in accordance with the objective of sustainable development,
and while seeking to protect and preserve the environment. The preamble also
specifically mentions the need to assist developing countries, especially the least
developed countries, secure a growing share of international trade.
India is one of the founding members of WTO along with 134 other countries.
Various trade disputes of India with other nations have been settled through
WTO.
India has also played an important part in the effective formulation of major
trade policies. By being a member of WTO several countries, are now trading
with India, thus giving a boost to production, employment, standard of living
and an opportunity to maximize the use of the world resources. It is expected
that reduction in export subsidy and domestic support to the agricultural sector
by the developed countries may lead to a decrease in production in those
countries and, therefore, will give scope for expansion of exports from the
developing countries.
India, with its cheap labour, diverse agro climatic conditions and large
agricultural sector can definitely gain through expansion of international trade in
agricultural products. However, the concerns relating to quality of products for
seeking markets in the advanced countries needs to be addressed on an urgent
basis.(Source : Ministry of Agriculture)
INDIAN ECONOMY
The economy of India is the fourth largest in the world, and is the tenth largest
in the world Growth in the Indian economy has steadily increased since 1979,
averaging 5.7% per year in the 23-year growth record.
Indian economy has posted an excellent average GDP growth of 6.8% since
1994. India has emerged the global leader in software and business process
outsourcing services, raking in revenues of US$12.5 billion in the year that
ended March 2004.
Reserve money growth had doubled to 18.3% in 2003-04 from 9.2 in 2002-03,
driven entirely by the increase in the net foreign exchange assets of the RBI.
Reserve money growth declined to 6.4% in the current year to January 28, 2005.
During the current financial year 2004-05, broad money stock (M3) (up to
December 10, 2004) increased by 7.4 per cent (exclusive of conversion of non-
banking entity into banking entity, 7.3 per cent)Economics
experts and various studies conducted across the globe envisage India and China
to rule the world in the 21st century.
Industry
Index of industrial production which measures the overall industrial growth rate
was 10.1% in October 2004 as compared to 6.2% in October 2003. The largest
sector here holds the textile industry. Automobile sector has also demonstrated
the inherent strength of Indian labor and capital. The three main sub sectors of
industry viz Mining & quarrying, manufacturing, and electricity, gas & water
supply recorded growths of 5%, 8.8% and 7.1% respectively.
Services
The service sector is the fastest growing sector. It has the largest share in the
GDP accounting for about 48% in 2000. Business services, communication
services, financial services, community services, hotels and restaurants and
trade services are among the fastest growing sectors.
INDIAN AGRICULTURE
Indian agriculture was backward in every respect on the eve of Independence in
1947. It was characterised by feudal land relations, primitive technology, and
the resultant low productivity per hectare.
The First Five year Plan (1951-56) accorded the highest priority to the
agricultural sector to tide over the difficult food problem created by the partition
of the country. Since then, agriculture has occupied an important place in every
successive plan. The nation has invested huge resources for the development of
agriculture under various plans. Two major components of agricultural
development strategy have been:
• subsidies on inputs and
• Minimum support price for output.
Agricultural sector occupies a key position in the Indian economy. It
provides employment to about 65 per cent of the working population of India.
Around one-quarter of India's national income originates from the agricultural
sector.
Agricultural products like cereals (mainly rice), tea, coffee cashew, spices,
tobacco and leather are important items of India's exports and hence foreign
exchange earnings. Agriculture is also the source of raw material for agro-based
industries including textiles, cigarettes, jute, sugar, paper, processed foodstuffs
and vanaspati. Moreover, agricultural sector provides market for capital goods
(tractors, pump sets and other agricultural machinery), inputs (fertilisers,
insecticides), and light consumer goods.
Development of the agricultural sector depends, to a large extent, on such
core industries as power, petroleum, fertilizers and machine tools. Thus, there is
a degree of inter-dependence between agriculture and industry.
Needs of India
(a) To protect its food and livelihood security concerns and to protect all
domestic policy measures taken for poverty improvement, rural development
and rural employment.
Cropping Pattern
Cropping pattern refers to the distribution of cultivated land among different
crops grown in a country. Cropping pattern reveals the nature of agricultural
operations, e.g. the importance of food crops vis-À-vis cash crops.
Cropping pattern is influenced by a host of factors which can be broadly
classified into two categories: (a) physical factors and (b) economic factors.
Among the physical factors, the important ones are soil conditions, extent of
rainfall and type of climate. The economic factors include relative prices of
agricultural commodities, size of the farms, availability of inputs, demand
conditions, system of land holding and government policy regarding exports and
imports, taxes and subsidies.
There are two main agricultural seasons in India: (a) kharifunder which
crops are planted at the onset of the Southwest monsoon in June-July and
harvested in September-October, (b) rabi under which crops are planted usually
between October and December and harvested between March and May
India is a large country with diverse climatic, soil and terrain conditions. A
wide variety of crops are grown in different parts of the country.
The pressure of population along with some social and economic factors has
decreased the size of agricultural holdings in India.
Low Productivity
Indian agriculture was backward and stagnant at the time of Independence.
Ever since the launching of the First Five Year Plan (1951-56), agricultural
sector has received the prime attention of the Government in the overall strategy
economic development. As a result, farm productivity has increased over years
and the country has achieved high degree of self-sufficiency in terms of' food
grains and raw material for agro-based industries.
Although per hectare yield of major crops has increased over the last four
decades yet it is far below the international levels.
Need for agricultural credit arises because modern farm technology is costly
and the personal resources of the farmers are inadequate. Provision of
agricultural credit, as an input, is essential for widespread use of improved
agricultural methods.
Credit requirements of the farmers may be classified (a) on the basis of
propose, and (b) on the basis of time. They need credit for productive as well as
for unproductive purposes. Productive purposes include all such activities which
help in the improvement of agricultural productivity such as purchase of inputs
and permanent improvements in land. Unproductive credit needs include
celebration of marriages and other social and religious functions and litigation.
Classification based on time period has three categories. Farmers need credit
for short period (up to 15 months) for the purchase of seeds, fertilisers, fodder
for livestock etc. They need credit for medium term (15 months to 5 years) for
the purchase of agricultural tools and implements, cattle, and digging and
repairing of wells. They also require long-term loans (more than 5 years) for the
purchase of heavy farm machinery like tractors and harvesters.
Exports
India has been both an importer and exporter of agricultural commodities for a
very long-time. An examination of trends in exports of various commodities
during recent years suggest that many commodities like rice, meat products,
processed foods, fish, fruits and vegetables registered very high growth rates
during the nineties. On the other hand some traditional exports like tea, cotton
were not able to sustain their growth rates after the liberalisation. Marine
products were the largest export earner while oil meals were also a major item
in early 1990s. Recently oil meal exports have suffered and cotton exports have
collapsed.
Imports
In fact the gaps between agricultural exports and imports have been narrowing
down in recent years. Although India abolished its QR’s in 2001, this has not
resulted in any surge of agricultural imports. There is an increase in growth but
this is mainly because of large imports of edible oils. Recently there has also
been a sharp increase in imports of cotton, raw wool and rubber.
Import policies refer essentially to border protection through trade barriers such
as quantitative restrictions, quotas and tariffs on imports which in the process
create a wedge between domestic and world market prices.
Export policies include those that either promotes exports (through instruments
like subsidies and marketing arrangements that make exportable of a country
more competitive) or those policies that constrain exports (often through
canalization and restriction of exports and export taxes etc). Usually however
import policies etc are discussed in the context of
Input Subsidies
The major components of input subsidy are: power, irrigation water and
fertilizers .Subsidy -on both irrigation and power – is defined as the difference
between the cost of providing the service and the charge levied for the service
for the total quantum of that particular input used. In case of power therefore it
includes that difference between the unit cost of power supply to all sectors
combined and the average tariff rate charged from agricultural users for each
unit of power and multiplied by the quantity of power supposedly supplied to
agriculture. Irrigation subsidy is defined as the difference between the cost of
supplying water to farmers for irrigation and charges levied on water .Viewed in
terms of pure domestic economy, the input subsidies have often been accused of
causing most harmful effect in terms of reduced public investment in agriculture
on account of the erosion of investible resources, and wasteful use of scarce
resources like water and power. Further, apart from causing unsustainable fiscal
deficits , these subsidies by encouraging the intensive use of inputs in limited
pockets have led to lowering of productivity of inputs, reducing employment
elasticity of output through the substitution of capital for labour and
environmental degradation such as water logging and salinity .It is therefore
imperative to reduce these subsidies for stepping up public investment in
agricultural research and extension, canal irrigation and rural electrification. The
reduction in subsidies would also have a favourable impact on the efficiency of
input use, equity and environment. While subsidy reduction is one way to find
resources for increasing public investment in agriculture, current and capital that
lead to distortions and deleterious effects on natural resources and cropping
pattern. In fact, there is scope for significant reduction in the cost of subsidy
through better designing of the programmes and delivery mechanism. Further
merely rolling back subsidies and diverting these to agricultural investment
cannot solve all the problems of agriculture (Government of India: 2005).
Export Subsidies
The export subsidies can be given in the form of transport assistance for export,
providing common infrastructure for common use by small and medium
producers, quality building and assurance measures, credit guarantee and
insurance to exporters at better terms etc. The export subsidy is being given in
the form of exemption of export profit from income tax and subsidies on cost of
freight on export shipments of certain products like fruits, vegetables, and
floriculture products.
OVERVIEW
Yields per unit area of all crops have grown since 1950 due to application of
modern agricultural practices and provision of agricultural credit and subsidies
since Green revolution in India. However, international comparisons reveal that
the average yield in India is generally 30% to 50% of the highest average yield
in the world.
PROBLEMS
The average size of land holdings is very small due to land ceiling acts and in
some cases, family disputes.
AGREEMENT ON AGRICULTURE
Introduction
1. Tariffication.
2. Market access.
3. Export Competition.
TARIFFICATION
It means conversion of all non tariffs on trade such as import quota into tariffs.
Tariff bindings are to be reduced under this agreement. That is to say, non-tariff
barriers such as quantitative restrictions and export and import licensing etc. are
to be replaced by tariffs to provide the same level of protection. Least developed
countries are exempted from tariff reductions, whereas developed and
developing countries are to reduce tariffs over a period of time. India has
already reserved the right to impose high levels of import duties of 100%, 150%
and 300% on primary products, processed products and edible oils respectively.
The Quantitative Restrictions can easily be replaced with high import tariffs in
case there is need to restrict import of these commodities for ensuring welfare of
our farmers. Therefore, ability to restrict import of any commodity is not
constrained in any manner by the provisions of the Agreement.
MARKET ACCESS
Where tariff bindings are too high, current market access has to be maintained
as the amount of exports to other countries at preferential tariff rates. However,
market access provisions do not apply when the commodity in question is a
traditional staple in the diet of a developing country.
• Tariffication means that all non-tariff barriers such as... 1.Quotas. 2. Variable
levies. 3. Minimum import prices. 4. Discretionary licensing. 5. State trading
measures.
ii) The second element relates to setting up of a minimum level for imports of
agricultural products by member countries as a share of domestic consumption.
Countries are required to maintain current levels (1986-88) of access for each
individual product. Where the current level of import is negligible, the minimum
access should not be less than 3% of the domestic consumption, during the base
period and tariff quotas are to be established when imports constitute less than
3% of domestic consumption. This minimum level is to rise to 5%by 2004 in
the case of developing countries. However, special Safeguards Provisions allow
for the application of additional duties when shipments are made at prices below
certain reference levels or when there is a sudden import surge. The market
access provision, however, does not apply when the commodity in question is a
‘traditional staple’ of a developing country.
DOMESTIC SUPPORT
Some countries say they would like to review the domestic subsidies listed in
the green box because they believe that some of these, in certain circumstances,
could have an influence on production or prices. Some others have said that the
green box should not be changed because it is already satisfactory. Some say the
green box should be expanded to cover additional types of subsidies.
These supports are subject to limits: “de minimis” minimal supports are allowed
(5% of agricultural production for developed countries, 10% for developing
countries); the 30 WTO members that had larger subsidies than the de minimis
levels at the beginning of the post-Uruguay Round reform period are committed
to reduce these subsidies.
The reduction commitments are expressed in terms of a “Total Aggregate
Measurement of Support” (Total AMS) which includes all supports for specified
products together with supports that are not for specific products, in one single
figure. In the current negotiations, various proposals deal with how much further
these subsidies should be reduced, and whether limits should be set for specific
products rather than continuing with the single overall “aggregate” limits. In the
Agriculture Agreement, AMS is defined in Article 1 and Annexes 3 and 4.
The blue box is an exemption from the general rule that all
subsidies linked to production must be reduced or kept
within defined minimal levels. It covers payments directly
linked to acreage or animal numbers, but under schemes
which also limit production by imposing production quotas
or requiring farmers to set aside part of their land. Countries
using these subsidies (and there are only a handful) say they
distort trade less than alternative amber box subsidies. Currently, the only
members notifying the WTO that they are using or have used the blue box are:
the EU, Iceland, Norway, Japan, the Slovak Republic and Slovenia
At the moment, the blue box is a permanent provision of the agreement. Some
countries want it scrapped because the payments are only partly decoupled from
production, or they are proposing commitments to reduce the use of these
subsidies. Others say the blue box is an important tool for supporting and
reforming agriculture, and for achieving certain “non-trade” objectives, and
argue that it should not be restricted as it distorts trade less than other types of
support. The EU says it is ready to negotiate additional reductions in amber box
support so long as the concepts of the blue and green boxes are maintained.
1. Measures which have a minimum impact on trade and which meet the basic
and policy specific criteria set out in the Agreement ( the Green Box
measures in the terminology of WTO). These measures include Government
assistance on general services like (i) research, pest and disease control,
training, and advisory services; (ii) public stock holding for food security
purposes; (iii) domestic food aid (iv) direct payment to producers like
governmental financial participation in income insurance and safety nets, relief
from natural disasters, and payments under environmental assistance
programmes .
2. Developing countries like India which meet the criteria set out in paragraph 2
of Article 6 of the Agreement (‘Special and Differential Treatment’). Examples
of these are (i) investment subsidies and (ii) agricultural input services generally
available to low income Farmers
EXPORT SUBSIDIES
Product coverage
The Agreement covers not only basic agricultural products such as wheat, milk
and live animals, but the products derived from them such as bread, butter, other
dairy products and meat, as well as all processed agricultural products such as
chocolates and sausages. The coverage includes wines, spirits and tobacco
products, fibers such as cotton, wool and silk, and raw animal skins destined for
leather production. Fish and fish products are not included nor are forestry
products.
The demand projections for food grains need to take in to account the
possibility of a further fall in per capita demand on account of the likely
development of rural infrastructure and mechanization. Further since the rural-
urban differential in per capita consumption of food grains is quite high even
now, one should expect a significant decline in average per capita consumption
of food grains in the country with increasing urbanization. On account of all
these factors it would not be unreasonable to expect a further decline in per
capita consumption of food grains say by 2020 at the same rate as witnessed
over the last two decades.
Implications of the Agreement
Indian agriculture is characterised by majority of small and marginal farmers
holding less than two hectares of land, less than 35.7% of the land, is under any
assured irrigation system and for the large majority of farmers, the gains from
the application of the science & technology in agriculture are yet to be realised.
Farmers, therefore, require support in terms of development of infrastructure as
well as improved technologies and provisions of requisite inputs at reasonable
cost. India’s share of world’s agricultural trade is of the order of 1%. There is no
doubt that during the last 30 years, Indian agriculture has grown at a reasonable
pace, but with stagnant and declining net cropped area it is indeed going to be a
difficult task to maintain the growth in agricultural production. The implications
of the Agreement would thus have to be examined in the light of the food
demand and supply situation. The size of the country, the level of overall
development, balance of payments position, realistic future outlook for
agricultural development, structure of land holdings etc. are the other relevant
factors that would have a bearing on India’s trade policy in agriculture.
In India, for the present, the minimum support price provided to commodities is
less than the fixed external reference price determined under the Agreement.
Therefore, the AMS is negative. Theoretically, therefore, we could increase the
product-specific support up to 10%.
The agriculture sector has a typical lag lead relationship between the prices and
the produce. This acts as a deterrent. Whenever prices collapse, the farmers
reduce the area under a particular crop and in turn, the prices increase during the
next season/year. This cobweb phenomenon leads to equilibrium only in a close
sector assumption. It will be quite ambitious to assume a certain level of price
elasticity of demand / supply, income elasticity of demand, the production
growth rates, resource allocations and finally, the farmers’ response to the
market environment
Implications - Long Term
As mentioned earlier, for a large majority of farmers in different parts of the
country, the gains from the application of science and technology in agriculture
are yet to be realised which would require infrastructural support, improved
technologies and provision of inputs at reasonable cost. The Agreement on
Agriculture thus recognised this and developing countries have been given the
freedom to implement such policies.
Indian agriculture enjoys the advantage of cheap labour. Therefore, despite the
lower productivity, a comparison with world prices of agricultural commodities
would reveal that domestic prices in India are considerably less with the
exceptions of a few commodities (notably oilseeds). Hence, imports to India
would not be attractive in the case of rice, tea, sunflower oil and cotton. On the
whole, large scale import of agricultural commodities as a result of trade
liberalisation is ruled out. Even the exports of those food grains which are
cheaper in the domestic market, but are sensitive from the point of view of
consumption by the economically weaker sections are not likely to rise to
unacceptable levels because of high inland transportation cost and inadequate
export infrastructure in India. Through proper Tariffication, however, we will
have to strike a balance between the competing interest of 10% farmers who
generate marketable surpluses and consumers belonging to the economically
poor sections of the society.
INDIA’S COMMITMENT
• India does not provide any product specific support other than market price
support.
(a) Exemption of export profit from income tax under section 80-HHC of the
Income Tax
The most important things for India to address are speed up internal reforms in
building up world-class infrastructure like roads, ports and electricity supply.
India should also focus on original knowledge generation in important fields
like Pharmaceutical molecules, textiles, IT high end products, processed food,
installation of cold chain and agricultural logistics to tap opportunities of
globalization under WTO regime.
Our tariffs are still high compared to Developed countries and there will be
pressure to reduce them further and faster.
India has solid strength, at least for mid term (5-7 years) in services sector
primarily in IT sector, which should be tapped and further strengthened.
The petroleum sector has to be boosted to tap crude oil and gas resources within
Indian boundaries and entering into multinational contracts to source oil
reserves.
The performance of India in attracting major FDI has also been poor and
certainly needs boost up, if India has to develop globally competitive
infrastructure and facilities in its sectors of interest for world trade.
The trade regime of India prior to 1990 can be categorised as a restrictive trade
regime. In the export trends the structural breaks can be located at 1990 and
1995. The breaks in the exports can be attributed to policy changes during those
two years. Rice other than Basmati, which constitutes about 44 per cent of total
quantity and 20 percent of total value of the exports, dominated the agricultural
exports during the years 1998- 97 and 1999-2000. Oil meals constitute about 35
per cent in total quantity and about 40 per cent of the total value of exports.
When the trade performance viewed in relative terms, during the years 1994-96,
the share of India’s imports in the world imports stayed only at 0.50 per cent
level and that of exports hovered around 1 per cent. An important observation
emerges here that even with the process of liberalisation there has not been any
significant breakthrough in India’s trade performance. The trade ratios for
India’s agricultural sector indicate that it was a consistently net exporting sector
from 1983 to 96 except during 1988. It is interesting that the trade ratios were in
favour of exports in the agricultural sector. Larger share of imports as well as
exports was accounted by the basic products rather than the processed products.
Among the two, imports were dominated by processed products. This indicates
that we could increase the processing facilities to increase the exports of
processed agricultural products. In the recent modifications to QR there are a
large number of processed products that are likely to get a fresh impetus in the
processing industry. Among the imports linseed oil, jute fibres, silk and milk
and cream (dry), wheat and meslin cotton (lint) and coconut oil are the dominant
import commodities with high rates of growth. But not all of them had high
share in the total value of imports. In fact, jute and fibres, linseed oil and
coconut oil showed high rates of growth but claimed only a small share in
aggregate imports. These commodities with low share of import but high growth
are likely to record a steep increase in the imports. One can feel that the imports
of meat and meat products, dairy products, fish and crustaceans, baby foods,
soya bean, rapeseed and other oils, and Fruit preparations (including preserved
fruits and juices) will increase in their import share.
On the other side, the export trends are positive except in the case of tea, citrus
fruits, soya beans, and canned meat and jute fibres. Out of these commodities in
the case of soybeans, canned meat and jute fibres, we have no history of large
exportable surplus and moreover the elasticity of export demand of these
commodities has also not been very high. But the case of tea and citrus fruits is
different. It is necessary to trace the reasons for the failure in increasing the
exports. The inconsistency in aggregate trade is one of the major problems of
the sector.
With a declining import share and the export share rising since 1988, the
possibility of any import surges can be ruled out provided the tariff policy is
managed properly. Their analysis of prices of agri-commodities indicated the
crops viz., tobacco, jute, pepper, wheat, rice, sugar must have higher level of
prices due to the removal of QR’s. The import of the commodities viz., cereals,
milk and milk products, silk, pulses, rubber, lint cotton and vegetable oils may
increase. But, the possibility of surges in imports could be dealt with proper
tariff structure while the price level can also be managed through proper policy
mix.
National Level
(i) The imports of these commodities may experience a sudden spurt with the
removal of Quantitative Restrictions; and (ii) exports will go down significantly
because of the price disadvantages. It is in this context that we have to take
advantage of the commodities which can withstand such pressure. As far as the
variations in world prices and Indian wholesale prices are concerned, we find
that the Indian wholesale prices fluctuate more violently as compared to the
world prices. Such instability in the Indian wholesale prices may cause spurts in
imports and create disincentives to the producers. It is, therefore, essential to
watch the price fluctuations at least in a short-term perspective. The Food and
Agriculture Organisation (FAO) has projected that the world trade from
countries to the developed countries is likely to have lower growth rates as
compared to the trade between developing countries. Therefore, it is necessary
for us to concentrate more on the trade with developing countries where the
emerging market is quite strong.
A STUDY: Reasons for farmers grievances
The point wise discussion of all these aspects is being discussed one by one in
the following paragraphs.
1) Illiteracy
Table -1 show that 29.6 percent of the farmers have knowledge of WTO/AOA
and rest of the farmers was not even aware of WTO/AOA. This implies that our
farming community is unaware and illiterate and we have to undertake
awareness programmes to educate the farming community about WTO and
especially AOA, so that they can reap the benefits from WTO/AOA.
Size of land holding has a significant bearing upon the income level of the
farmers. Moreover, big farmers keep themselves aware of the policy measures
taken at the national and international level. To explore this issue empirically, a
nationwide survey of about 5000 rural households was conducted. They were
interviewed by National Council of Applied Economic Research (NCAER) in
both 1982 and 1999 to assess the extent to which cumulative land reform
legislation and/or implementation at the state level affected changes in the
accumulation of human and physical capital and income levels for the same
households over the 17 year period spanned by the data. The strong association
was found in the land holding and the income of the farmers.
The same issue has been addressed empirically in the present study constituting
a sample of 409 farmers in this case. Hypothesis was tested by applying chi-
square test to ascertain the association between size of land holding and income
of the farmers. The results of the same are depicted in the Table -3 depicts that
the size of holding directly varies with the income of the farmers. The calculated
value of chi-square was found to be 172.337, which was highly significant at
one percent level of significance, depicting significant association between level
of income and size of land holding.
4)WTO/AOA and Suicide of the Farmers
The ratio of suicide by the farmers is increasing day in day out. The issue of
suicide and WTO/AOA has been linked by the media and NGOs. The present
study shows that about 31.3 percent of theses pendent farmers believed that
WTO is responsible for the suicide of farmers (see the Table-4). Further, 33.5
percent said that WTO is not responsible for the same and another 35.2 percent
were found to be neutral. From the primary survey it is difficult to conclude
whether WTO/AOA is responsible for the suicide of the farmers or not. In this
regard, other researchers opined that the major cause of suicide of the farmers is
debt. WTO/AOA and suicides of the farmer is still a pending issue because we
have not still realized the implications of WTO/AOA fully and moreover the
research only on this aspect is desperately required.
5) Farming in the Era of Globalization
Wheat and rice are the two main crops grown in the northern India for the last
four decades. In case of farmers, they are specialized in the cultivation of these
crops in their respective regions. The prices of food-grain in the international
market are highly depressed (distorted) by the Organization for Economic
Cooperation and Development (OECD) countries with high doses of subsidies
given by these countries to their farmers but Indian government is unable to
afford so much resources which can be diverted to the farm sector (Rao, 2003).
Table -5 explains the perception of farming community about competitiveness
of wheat and rice in the international market. The views of the farmers are
depicted in Table-5.
The above table clearly shows that majority of the farmers (81.66 percent) in
this region believe that they are not in a position to compete in the world market
till the government take concrete steps toward this direction. This implies that
Indian farmers are not having a fair access in the international market.
This wheat-rice cropping pattern is prevalent for last four decades in Indian
agriculture because of the Minimum Support Price (MSP) and availability of
marketing facilities. But the same facilities for other crops are not readily
available. Food Corporation of India (FCI) is the main agency for procuring the
cereals apart from certain state agencies which are also procuring both cereals
from the market.
The Chief Minister's Advisory Committee on Agriculture Policy and
Restructuring (Punjab, October 2002) realized that all efforts made so far to
introduce alternatives to these crops have failed on the market front. It is,
therefore, essential the market clearance through minimum support price and
procurement system must be assured, if the production of alternative crops,
especially the oil seeds and pulse crops, is to be sustained on a medium to long
term basis. The marketing of agricultural crops are becoming a major issue
among farmers, which has been raised in the primary study. The result of the
study is given in Table-6. It also shows that 76.2 percent of the farmers were of
the opinion that there is no marketing facility for other than wheat and rice but
23.7 percent of the farmers believed that market for other than wheat and rice is
available. There is a need to provide marketing facilities for other commodities
like pulses, grams oilseeds etc. If this is ensured, the prices of these
commodities will tend to decline. This will also result in saving of huge foreign
exchange reserves of the country.
Depleting water table, stagnant income of the farmers, low productivity level are
amongst few serious problems being faced by the Indian farmers. Apart from
this, the marketing facilities are mainly available for wheat and rice to the
farmers though for certain other corps like cotton and sugar cane the facilities
are also available. Many researchers like Swaminathan (2001), Shiva (2002)
laid more stress on diversification in the cropping pattern from wheat and rice to
other cash crops to ease the situation. The Table -9 depicts the views of the
farmers regarding diversification.
The survey shows that farmers in the region are more interested to adopt wheat
and rice in their fields (Table -7 shows). The percentage of such farmers is 68.9
percent and rests of the farmers are cultivating other crops in addition to wheat
and rice in their fields.
8) Inadequate Supply of Electricity
Electricity is the main input used in the agricultural sector and this sector
depends heavily on adequate and incessant supply of electricity. The quality of
electricity is inadequate at the time of agricultural operation in the field and at
peak hours supply is not available and its highly irregular one. The farmers are
forced to use diesel for propelling pump sets, which further enhances the
capital-output ration in the agriculture sector. This ultimately diminishes the
returns of the farmers. Under such circumstances, there is a strong need to
analyze this issue from the point of view of farming community.
The field survey shows that about 80 percent of the farm community believes
that supply of electricity is not adequate at the time of sowing, whereas 12.2
percent believe that it is adequate. Thus, there is a need to improve the quality
and quantity of electricity supplied to agriculture sector especially during the
sowing season.
Table-8a highlights that the electricity subsidy is most preferred by the Indian
farmers. The second, most preferred subsidy is urea, third one is the credit and
the least preferred subsidy to the farmers is canal subsidy. The basic point that
emerged from the stud is that the electricity subsidy is of prime importance. It
may be because it is the only subsidy which is readily available to the farmers.
Hence, in the light of the above empirical analysis certain important conclusions
are emerged with are discussed in the following paragraphs.
It emerged from the study that the size of land holding is continuously
declining. More importantly, it was also established that the size of land holding
and income are directly related. Another significant conclusion of the study
points out towards a positive relationship between income and education level
of the farmers. All the above relationship was tested with the help of Chi-square
test technique and was found to be significant at one percent level. Further,
regarding the marketing access it was found that the
SUGGESTIONS
1. The Indian economy is predominantly an agrarian economy and its
prosperity depends upon the progress of agriculture. Agriculture sector is
considered as the backbone of our economy and a majority of farmers
depend upon it for sustaining their livelihoods. They should be give
additional incentives and provision of electricity, irrigation facilities and
infrastructural support, improved technologies and provision of inputs at
reasonable cost.
2. In the Pharma sector there is need for major investments in R &D and
mergers and restructuring of companies to make them world class to take
advantage. India has already an amended patent Act and both product and
Process are now patented in India. However, the large number of patents
going off in USA recently, gives the Indian Drug companies windfall
opportunities, if tapped intelligently. Some companies in India have
organized themselves for this.
3. The most important things for India to address are speed up internal reforms
in building up world-class infrastructure like roads, ports and electricity
supply. India should also focus on original knowledge generation in
important fields like Pharmaceutical molecules, textiles, IT high end
products, processed food, installation of cold chain and agricultural logistics
to tap opportunities of globalization under WTO regime.
4. India should expand its exports of agricultural products in which it has
tremendous comparative advantage. The provisions of W.T.O offered ample
opportunities to India to expand its export market. Export prospects are
brighter with soybeans, oilseeds, oil meal and cake, fruits and vegetables,
and fruit preparations. Thus, high export prospects are seen with high value
products, horticultural products, and processed products, marine products
.India need not be extremely defensive and inward looking, as Indian
agriculture has demonstrated strength which needs to be appropriately used
to compete in the global market, otherwise it will become a case of missed
opportunity.
5. The Government should improve the livelihood pattern of small & marginal
farmers by enhancing their access to appropriate and affordable technologies,
market related information and linkages.
6. Sustainability of extension services and expert advice through capacity
building exercises effectively bridging the rural-urban divide.
7. Associate all professionals’ involved in different aspects of agriculture and
rural development through national and international networks.
8. Promote financial sector inclusion for farmers and small & medium
enterprises in agri-sector through access to market capital and risk
management tools.
9. India would do well to reorganize its Protective Agricultural policy in name
of rural poverty and Food security and try to capitalize on globalization of
agriculture markets. It should rather focus on Textile industry modernization
and developing international Marketing muscle and expertise, developing of
Brand India image, use its traditional arts and designs intelligently to give
competitive edge, capitalize on drug sector opportunities, and develop
selective engineering sector industries like automobiles & forgings &
castings, processed foods industry and the high end outsourcing services.
10.Biotechnological inventions are increasingly affecting agricultural
production and trade. New genetically engineered varieties of crops have
increased productivity and are more pest resistant. Therefore it is important,
as it helps in increasing productivity which is of central concern to India. The
Government should support the use of biotechnology in agriculture.
11.India blessed with its cheap labour, land, diverse agro climatic conditions
and large agricultural sector can definitely gain through expansion of
international trade in agricultural products.
12.India has a large potential to increase its agricultural exports in a liberalized
world by diversifying, a significant part of its agriculture in to high value
crops and in agro-processing.
13.For countries like India, multi functionality of agriculture is best shown
through its growth in areas such as food security, employment and the
elimination of poverty in rural areas. Moreover, these issues are neither
emotive nor undefined but are practical and harsh realities which decision
makers have to confront when addressing issues of agricultural policies. The
need to provide employment opportunities in pre-dominantly rural agrarian
areas is one of the main Non Trade Concern which we would like to see
addressed.
BIBLIOGRAPHY
BOOKS:
1. Indian Economy in 21st century – M.M. Sury
WEBSITES:
1. http://www.wto.org/
2. http://www.cii.in/
3. http://indiainfoline.com/
4. http://naas.org/
5. http://gtad.wto.org/
6. http://www.isapindia.org/
GUIDELINES:
Professor Agnelo Menezes