1

SUMMARY

Since the establishment of WTO, many studies have been undertaken on various

aspects of agriculture in developing nations. Anderson and Tyre (1993) forecasted the

likely impact of complete liberalization of food markets in industrial and developing

countries by employing the general equilibrium computable model. Bhatia (1994)

compared the domestic and international prices of agricultural commodities and

calculated the aggregate measurement of support to study the issues related to

agricultural marketing, prices and international trade under the changed economic

environment and the new GATT. He finds that India is at an advantageous position to

export the wheat, rice, maize, cotton, jute, tea, coffee, rubber, tobacco, pepper and oil

cakes and horticultural products like potato, mango and banana. Gulati and Sharma

(1994) have also worked out the AMS for Indian agriculture by following the AOA

tactic. In another study Gulati and Sharma (1997) worked out the comparative

advantage of agricultural commodities by estimating the DRC, NPC, Effective

Protection Coefficient (EPC) and Effective Subsidies Coefficient (ESC) and found

that India had comparative advantage in producing food grains and had no

comparative advantage in producing oilseeds. Bhatia (1999) estimated functional

relationship between index of infrastructure and the per hectare yield of food grains

and value of output from agriculture in the Indian states by using a simple linear

regression model. He discovers a strong relationship between rural infrastructural

development and level of per hectare yield of food grains as well of value of output

from agriculture. Hirashima (2000) applied the rental value and land price ratio

measures for analyzing the role of public investment in agriculture and land market

development in the context of economic reforms and globalization. Tran, Hossain and

Janaiah (2000) captured the relationship between the infrastructure development and

rice productivity by using the tabular analysis and regression model. They discover:

(i) the adoption of modern rice varieties under irrigated conditions have substantially

increased rice yield and reduced the unit cost of production, but the profit and income

effect has been insignificant when they are cultivated under rain fed conditions, (ii)

The development of infrastructure contributes significantly to alleviation of severity

of poverty. Mathur and Kashyap (2000) discussed the changes in cropping pattern,

land and labour productivity and input use over pre and post-green revolution

agriculture in Gujarat by applying the log linear regression model and tabular

2

analysis. They find that cropping pattern has been shifting in favour of non-traditional

non-food crops. Gujarat needs investment in infrastructure and strategies for

sustainable resource use to improve productivity in agriculture. Naik (2001) assessed

the competitiveness of Indian wheat by using the standard tools, namely NPC and

DRC. He finds that Indian wheat is un-competitive; to encourage wheat production in

relatively disadvantaged areas a bound price of 30 per cent may be negotiated. Singh

and Asokan (2001) studied the impact of AOA on edible oilseeds sector by applying

various standard tools, namely NPC, EPC, ESC and DRC. They find that signing on

AOA is unfavorable for Indian oilseeds sector and there is a need for re-negotiation at

WTO. Sharma and Dutta (2001) assessed competitiveness of Indian dairy products by

using various standards tools namely NPC, EPC, ESC and DRC. They fond that

Indian dairy products were price un-competitive and there was a strong need for re-

negotiate India's bound rates of duty for all dairy products, to about 30-35 per cent.

Jha (2001) assessed the Reveled Comparative Advantage of Indian agriculture by

using the Balassa index and also estimated DRC and NPC indexes to assess the

competitiveness of selected crops. He finds that India has no advantage in producing

coarse cereals like maize and sorghum. Das (2001) assessed the impact of

globalization at India's farm export trade by using the tabular analysis. He concludes:

(i) In India, the farm products constitute a sizeable component of foreign trade despite

a steady decline in their share over time, (ii) India's share in world agricultural exports

remains almost constant at a very low level in respect of a number of items despite

inherent strength of Indian agriculture, (iii) the largest contribution to the agricultural

export is made by fish and fish preparations, followed by rice and oil cakes. Prasad

(2001) assessed the impact of structural adjustment programmes on Indian

agricultural trade by employing the tabular analysis. Patibandla (2002) assessed the

implications of high tariff rates on the import of food products by using the

geometrical analysis. He finds that high tariffs can be used to convert the developed

countries agricultural subsidies into tariff revenue of the Indian government without

disturbing the domestic consumer surplus. Desai (2002) theoretically examined the

India's agricultural trade policy in WTO regime. He concludes that there is no short

cut to agricultural growth and poverty alleviation. World Bank (2002) forecasted the

welfare gain to developing countries from removing barriers to trade in goods by

applying the general equilibrium computable model. Bhalla and Hazell (2003) used

the mathematical model for estimating the employment elasticity with respect to

3

output of various sector of the economy to study the likely scenarios regarding

employment and income growth in agriculture and non-agriculture in rural and urban

areas. They conclude: to accelerate agricultural growth in rain fed areas special

emphasis should be given to the development of irrigation and other infrastructure

through large-scale public investment in some of the currently under-developed and

predominantly rain fed states. Ghosh (2003) analyzed the competitiveness of Indian

fertilizer and non-basmati rice for the year 1998-99 by comparing their import parity

prices and farm gate domestic sale prices. She finds: (i) Indian fertilizer sector is net

subsidized, (ii) during the year 1998-99 non-basmati rice was un-protected in most of

states except Haryana and West Bengal. Puskur, Bouma and Scott (2004) analyzed

the impact of watershed development programmes on sustainable livestock

production in semi-arid watersheds by using tabular analysis and pie charts. They find

that additional equitable benefits of watershed development programmes may be

achieved through inclusion of the crucial dimensions of livelihood dependence of

poor on the livestock sector and the value of livestock assets in poverty reduction

(especially small ruminants) in the watershed development strategy of the

government.Aksoy (2005) examined the global agricultural trade policies by using the

tabular analysis. He finds that average agricultural tariffs in industrial countries, when

they can be measured, are two to four times higher than average manufacturing tariffs.

Incho and Nash (2005) used the tabular analysis to identify the stake for developing

countries interests in Doha development round. They find: (i) domestic policy

distortions and support remain high in many OECD countries, (ii) high tariff barriers

and tariff escalation on agricultural and agro industrial products remain in many

countries, reflecting current levels of support, (iii) agricultural tariffs remain

extremely high, despite of the reduction introduced with the URAA, (iv) high levels

of export subsidies continue to distort world market for agricultural commodities.

The above described existing relevant literature observed that the issue of impact of

WTO on world trade in agriculture has however not received as much attention as it

deserves. The findings of most of these studies are contradictory in nature, and there

is a lack of systematic, comprehensive analysis to assess the full implications of WTO

for Indian agriculture and quantifying the impact objectively. The exiting research

work has failed to suggest the optimal strategies for meeting challenges and grab the

4

opportunity thrown by AOA in Indian case. The present study is a humble attempt to

fill up this gap in the literature.

OBJECTIVES OF THE STUDY

The specific objectives of this study are as under:

(i) To examine the patterns of world trade in agricultural commodities and

compare the relative performance of agricultural trade of developed,

developing and least developed countries.

(ii) To analyse the export performance of Indian agriculture in WTO era.

(iii) To work out the product specific support, non-product specific support and

aggregate measurement of support for Indian agriculture.

(iv) To assess the export competitiveness of India’s major agriculture commodities

in the emerging liberalized farm trade order.

(v) To analyze the implications of TRIPS and SPS measures for Indian

agriculture.

(vi) To identify problems of agriculture exports and to design suitable policy

measures for enhancing India’s agricultural exports.

HYPOTHESES OF THE STUDY

The following hypotheses have been taken for the present study.

(i) AOA of the WTO has enhanced world trade in agriculture.

(ii) Indian agriculture is highly subsidized.

(iii) AOA of the WTO obligates India to abolish its agricultural supports and

protective measures.

(iv) Indian agriculture cannot survive in a free import regime.

(v) TRIPS regime will jeopardize the accessibility of good quality seeds for

Indian farmers.

(vi) SPS measures are hurdles in the way India's agricultural exports.

5

CHAPTER SCHEME

1. INTRODUCTION; which contains the development in Indian agriculture

sector in historical perspective.

2. RESEARCH DESIGN; which charts out the literature review, objectives,

hypotheses and data analysis techniques used in the study.

3. WORLD TRADE IN AGRICULTURE; which describes the agricultural trade

in the whole world besides comparing the performance of developed and

developing economies.

4. WTO AND INDIAN AGRICULTURE EXPORTS; which examines the

implications of WTO regime for Indian agriculture exports.

5. FINDINGS AND POLICY IMPLICATIONS; which summarizes the study.

DATA SOURCES

The present study is based on the secondary sources of data. The main sources of data

are:

- Agricultural Statistics at a Glance: Various issues, Ministry of Agriculture and

Cooperation, Government of India, New Delhi

- Economic Survey, Ministry of Finance, Economic Division: Various issues,

Government of India, New Delhi

- Monthly Statistics of Foreign Trade: Various issues, Director General of

Commercial Intelligence and Statistics (DGCIS), Government of India,

Calcutta.

- Reports of the Commission for Agricultural Costs and Prices: Various issues,

Department pf Agriculture and Cooperation, Directorate of Economics and

Statistics, Ministry of Agriculture, Government of India, New Delhi.

- Centre for Monitoring Indian Economy (CMIE) publications.

- Handbook of Statistics on Indian Economy, Reserve Bank of India, Mumbai.

- FAO Trade Year Book, Rome, Italy.

- International Financial Statistics Tearbook.

6

DATA ANALYSIS

To analyze the collected data, various mathematical, statistical and econometric

techniques have been used in the study. To analyses the impact of AOA on world

trade in agriculture, and on India's agricultural trade performance, regression analysis

is used. To work out the quantum of input, output and export subsides; the methods

provided by AOA are used. For assessing the competitiveness of Indian agriculture

different types of measures and coefficients are used. A brief description of these

techniques is as under.

5.1 Compound Growth Rate

To estimate the trend in the data following semi log-linear regression model is used

log Y= log A + log B T

Where,

Y : Dependent variable,

B : 1+g; g = compound growth rate,

T : Time.

The values of parameters log A and log B in the model are estimated by using

Ordinary Least Square (OLS) method. The compound annual growth rate (CAGR) is

computed by using the formula:

CAGR = [Antilog (log B)-l] 100

5.2 Nominal Growth Rate

Let f1 be the ratio of the world agricultural imports in last year to the first year of the

period under consideration. Thus f1 measures the growth due to expansion of world

market for the country's agricultural exports, which will be called 'passive expansion'.

Let f2 be the ratio of the country's share of world trade in the agricultural exports at

the end of the period to its share at the beginning of the period. Thus f2 measures the

7

growth due to expansion of market share in the world agricultural exports, which will

be called 'active expansion'.

Let f3 be the trade diversification factor defined as reciprocal of the change in the

share of the agricultural exports from the beginning to the end of the period. Thus f3

captures the growth in exports due to diversification into non-agricultural exports.

The nominal export growth rate is now defined as the product of the f1, f2 and f3, i.e,

G = f1f2 f3

Where,

G : Nominal growth rate

f1 = W1/W0; W1 = World agricultural imports in last year, W0 - World agricultural

imports in first year,

f2 = (T1/T0)/ (W1/W0); T1= Country's agricultural exports in last year, T0= Country's

agricultural exports in first year,

f3 = (T0/X0)/(T1/X1); X0 = Country's total exports in first year, X1= Country's total

exports in last year.

It is being noted that individual values of f1, f2 and f3 identify the sources of the

nominal

export growth.

5.3 Net Terms of Trade

The net terms of agricultural trade is computed as:

100P m

P xNT

Where,

NT : Net terms of trade,

8

(Px): Value index of agricultural exports,

(Pm): Value index of agricultural imports.

5.4 Specialisation in Agricultural Trade

The specialization in agricultural trade is assessed by following measure:

IE

IEST

Where,

ST : Specialization in agricultural trade,

E : Value of agricultural exports,

I : Value of agricultural imports.

5.5 Subsidy to Agriculture Sector

To workout the quantum of various types of subsidies prevalent into Indian

agriculture following measures are used.

(i) Market Price Support: Market price support is measured on a product by product

basis as the gap between domestic support price and a fixed external reference price

times the quantity of that product, which is eligible to get such domestic support price.

It is defined as:

MPS = red

W

Off

d PPQ

Where,

MPS : Market price support,

Q : Quantity eligible to receive applied price,

Off

dP : Applied price/official price,

ref

wP : Fixed external reference price based on 1986-88.i

9

Now, product specific support as, percentage of value of agricultural output of the

concerned commodity (PVA) is defined as:

100

QP

PPQPVA

Off

d

red

W

Off

d

The fixed external reference price based on the year 1986-88 is the per unit FOB price

for the net exported agricultural product and per unit CIF price for the net imported

agricultural product during the base period (1986-88). The reference price is adjusted

for quality differences. The applied price is the government procurement price and

quantity eligible to receive support is the total output of that product.

(ii) Fertilizer Subsidy: The fertilizer subsidy is computed as the gap between import

parity price and farm gate sale price of fertilizer times the quantity of fertilizer utilized

by agriculture sector.ii It is defined as:

Fs = Qf(Pi-Pf)

Where,

Fs : Fertilizer subsidy,

Qf : Quantity of fertilizer utilized by agriculture sector,

Pi : Import parity price, i.e., CIF price + dealer margin + pool handling expenses,

Pf : Farm gate sale price of fertilizer.

(iii) Power Subsidy: Power subsidy is computed as the gap between unit cost of

power supply to all sector and per unit tariff charged from agriculture sector times the

numbers of units utilized by agriculture sector. Accordingly,

Ps = NC(CS-TA)

Where,

Ps : Power subsidy,

Nc : Number of units utilized by agriculture sector,

10

Cs : Per unit cost of power supply to all sectors.

TA : Per unit tariff for agriculture sector.

(iv) Irrigation Subsidy: The irrigation subsidy is calculated as the gap between

operational and maintenance expenditure (excluding interest payment) on major,

medium and minor irrigation projects and gross receipts received from these projects.

It is defined as:

Is = Oi,-Ri,

Where,

Is : Irrigation subsidy,

Qi : Operation and maintenance expenditure,

Ri : Gross receipt received from major, medium and minor irrigation projects.

(v) Credit Subsidy: The credit subsidy is measured as the differential rates of interest

between the market lending rate of interest on advances and the rate charged from the

farmers for their short-term loans which are used for production purpose times the

amount of short-term loans to agriculture sector.

CS = AL(RB-RA)

Where,

CS : Credit Subsidy,

AL Amount of short-term loans to agriculture sector,

RB : Maximum lending rate of commercial banks,

RA : Average lending rate by primary agricultural credit societies (PACs) for short-

term loans.

(vi) Seed Subsidy: The seeds subsidy is measured as the gap between the annual

income and expenditure of the National Seeds Corporation Limited, i.e., the amount

of revenue foregone for the provision of seeds. It is defined as:

11

Si = Yi - Ei

Where,

Sj : Seed subsidy in the ith year,

Y; : Income of the National Seed Corporation in the ith year,

Ej : Expenditure of the National Seed Corporation in the ith year.

5.6 Methods for Assessing the Competitiveness of Agriculture

The Competitiveness of Indian agriculture is assessed by employing following

measures-

(i) Nominal Protection Coefficient (NPC): The NPC is the ratio of domestic to world

reference price of the commodity under consideration. NPC helps in measuring

divergence of domestic price from the world reference price and thus determine the

degree of domestic protection/un-protection of the commodity in question. It is

defined as:

W

i

d

ii

P

PNPC

Where,

NPCi : Nominal protection coefficient or the commodity i,

d

iP : Domestic price of the commodity i, adjusted for transportation, handling and

marketing expenses,

W

iP : World reference price of the commodity i, adjusted for transportation, handling

and marketing expenses.

If the Nominal Protection Coefficient (NPC) is greater (lesser) than unity, then the

commodity is protected (un-protected) compared to free trade scenario.

(ii) Effective Protection Coefficient (EPC): The EPC is the ratio of the value addition

of commodity at domestic prices to the value addition at world reference prices, EPC

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is an improvement over NPC to the extent that it takes care of the distortions in

domestic and world prices of tradable inputs. It is defined as:

W

i

d

ii

V

VEPC

Where,

EPC, : Effective Protection Coefficient of the commodity i,

d

iV : Value added at domestic prices, i.e., domestic price of a commodity minus the

domestic value of all tradable inputs required to produce a unit of that commodity,

W

iV : Value added at world prices, i.e., world price equivalent minus value of all

tradable inputs at border prices adjusted for transport, handling and marketing

expenses.

A more specific expression of EPC is:

W

j

K

1j

b

i

d

j

K

1j

d

i

i

AijPP

AijPP

EP C

Where,

Aij : Quantity of the jth input used to produce one unit of the ith commodity,

d

iP : Domestic price of the jth tradable input adjusted for transportation, handling

and marketing expenses,

W

jP : World price of the jth tradable input adjusted for transportation, handling and

marketing expenses,

k : All tradable inputs.

If the value of EPC is greater than unity (EPC>1), it indicates that the protection in

input and output market provides incentive to produce the commodity and vice versa.

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(iii) Effective Subsidy Coefficient (ESC): The ESC is an improvement over EPC as it

corrects the latter by adjusting it for the subsidies on non-tradable inputs in domestic

economy. It is defined as the ratio of value added at domestic prices adjusted for net

subsidies-subsidy minus tax-on all inputs to the value added at border prices. It is

defined as:

W

dd

iVA

)NS(VAESC

Where.

ESCj : Effective Subsidy Coefficient for the commodity i,

VAd : Value added at the domestic prices,

VAw : Value added at the world prices,

NSd : Net subsidy on non-tradable inputs in domestic economy.

The whole expression may be defined as:

W

j

K

1j

b

i

jij

n

1kj

jij

n

1kj

d

jij

K

1j

d

i

i

AijPP

TASAPAP

ESC

Where,

Sj : Subsidy on the jth non-tradable input.

Tj : Tax on the jth non-tradable input.

jij

n

1kj

jij

n

1kj

TASA : Net subsidy on non-tradable inputs.

While the others expressions are same as discussed for EPQ.

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If the value of ESC is greater than unity (ESC>1), it indicates that protection is

accorded to the commodity in question and less than unity (ESC<1) means, that the

commodity in question is competitive in the world market,

(iv) Domestic Resources Cost (DRC): The DRC is defined, as the value of factors of

production needed to earn a unit of foreign exchange through export or save a unit of

foreign exchange through import substitution by production of commodity under

consideration. In the other words, DRC is the ratio of the cost of domestic non-

tradable resources (evaluated at shadow prices) to net foreign exchange earnings -

value of output minus value of tradable inputs. Accordingly,

W

jij

K

1j

W

i

d

jij

n

1kj

i

PAP

PA

DRC

Where,

DRCi : Domestic Resources Cost of the ith commodity,

Aij : Requirement of the jlh input to produce one unit of the ith commodity,

S

jP : Showed price of the j non-tradable input,

WPi : World reference price of the ith commodity adjusted for the value of

by-product,

W

jP : World reference price of the jlh tradable input adjusted for

transportation, handling and marketing expenses.

If the value of DRC is greater than unity (DROl), it means that the domestic resources

can be put to better use in an alternative way, and if less than unity (DRC<1), then

producing the commodity in question is a relatively sound use of resources.

(v) Export Performance Ratio (EPR): The EPR is defined as the ratio of the share

of a particular commodity in the country's total exports to the share of that

commodity in the world total exports. The export performance ratio of ith

commodity may be defined as:

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Wi/We

Ei/CeEP Ri

Where,

EPRj : Export Performance Ratio of the ith commodity.

Ei : Export of ith commodity from the country,

Ce : Total exports of the country in reference year,

Wj : World total exports of the ith commodity,

We : World total exports in the reference year.

If the value of EPR is greater than unity (EPR>1), it indicates that country has

comparative advantage in the exports of commodity and vice versa.

FINDINGS AND SUGGESTIONS

The major findings and suggestions of the study are as under:

1. The growth rates of the world agricultural trade indicates that under the WTO

regime, the average annual growth rate of world total agricultural exports has

come down, and reduced to 2.36 per cent during 1996-2008 in relation to 4.27

per cent during 1990-95. As a result the share of the world agricultural exports

in world total merchandise exports has been declining continuously in the

period following the entry into effect of the WTO.

2. Under the WTO regime, the share of developed countries in world agricultural

exports has slightly come down from 67.05 per cent during 1994-95 to 65.92

per cent during 2007-08. But this decrease has come through decrease in the

share in world agricultural imports rather than through agricultural exports.

The share of developing countries has increased from 31.56 per cent during

1994-95 to 32.97 per cent in 2007-08. The share of LDCs in world agricultural

trade has also decreased from 1.15 per cent to .97 per cent during same period.

But this decrease has dominated by the increase in agricultural imports rather

than agricultural exports.

3. The average annual growth rates of agricultural exports of all developed,

developing and least developed countries have declined in post WTO phase.

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The overall agricultural exports from developing countries have grown faster

than other origins but the difference in average annual growth rate has

narrowed in the WTO regime. As a result the share of developing countries in

world agricultural exports has increased only up to 32.97 per cent during

2007-08 in comparison to 31.71 per cent during 1994-95. However, their share

in the total agricultural imports of developed countries has been reduced in the

WTO regime. The share of developed countries in world agricultural imports

has increased to 64.12 per cent in 2007-08 from 66.99 per cent during 1994-

95.

4. In the WTO regime, the share of developed countries in both world

agricultural exports and imports has declined, but the decrease has been higher

for agricultural imports. As a result the share of developed countries in world

agricultural exports remains higher than that of imports despite the WTO

regime. Thus, developed countries are still agricultural net exporters.

5. In the WTO regime, the share of developing countries in world agricultural

import has increased. The share of developing countries in world agricultural

exports has been less than that of for imports. Thus, these countries are still

agricultural net importers.

6. During the WTO regime, developed countries have largely dominated the

farm trade. During the year 2007-08, among the first ten leading agricultural

exporters all were developed countries, which together accounted for 57 per

cent of the world total agricultural exports. Similarly, among the first ten

leading importers of agricultural products China was the only developing

country, while other nine were developed countries. During 2007-08, these

first ten leading agricultural importers have 57.19 per cent share in world

agricultural imports.

7. In the post WTO period, the average annual growth rates of India's agricultural

exports and imports have decreased but the decrease has been higher for

agricultural exports. As a result the agricultural net exports have declined in

value term in post WTO period and self-reliance in agriculture has worsened.

8. Under the WTO regime, the net term of trade has become unfavorable for

India's agricultural trade. It has come down from 0.26 during 1994-95 to 0.23

during 2007-08. The share of India's agricultural exports required to finance

17

agricultural imports has increased. It has reached to 84.56 per cent in 2007-08

in relation of 31.1 per cent during 1993-94.

9. It is very much clear from the study that in post WTO phase, India's

agricultural exports as a percentage of GDP agriculture has increased to 8.02

per cent in 2007-08 in relation to 3.97 per cent during 1994-95. Here it may be

noted that this increase has been come through growth of imports rather than

through exports. As a result India's agricultural net exports as percentage of

GDP agriculture have been declining under the WTO regime. It indicates that

India's agricultural foreign trade has grown faster than value of agricultural

output but the growth has been dominated by agricultural imports.

10. The nominal growth rate of India's agricultural exports in pre and post WTO

period reflects that India's agricultural exports during the pre WTO period

(1990-95) have grown by 59 per cent and during the post WTO period (1996-

2008) by 73 per cent. The decomposition of growth of India's agricultural

exports reveals that the bulk of India's overall export growth during the period

1990-2004 was due to expansion of world market for the country's agricultural

exports products and active expansion of market share of its agricultural

exports.

11. Under the WTO regime, the importance of commercial crops like sugar,

sesame seed, onion groundnut and cereals like rice in India's agricultural

exports basket has increased while the share of traditional items like tea,

coffee, castor oil and tobacco has declined.

12. During the post WTO phase, among the agricultural imports the share of fruits

and nuts and cashew nuts has declined while edible oil, pluses and raw cotton

have emerged as India's major agricultural imports. Increased in the imports of

edible oil, pulse and raw cotton may be because of deceleration in their

domestic production and increased in their demand on account of higher

growth rate of population.

13. India has basically only one type of product specific support in operation that

is market price support, any other product specific support, namely non-

exempted direct payment and equivalent measurement of support do not

constitute a significant portion of domestic support for Indian agriculture.

14. Since during the base period (1986-88), India was net importer of wheat,

maize, tur, gram, urad, moong, rapeseed/mustard, jute and sugar, so fixed

18

external reference prices for these products are per unit CIF prices. On the

other hand, India was net exporter of tobacco, cotton, rice, groundnut,

soybean, bajra, jowar and barley so fixed reference prices for these

commodities are per unit FOB prices of the base period.

15. It is clear that product specific support for all the commodities (except

rapeseed/mustard and sugar) has been negative since base period (1986-88). It

means that applied prices of various agricultural commodities have been still

much below than their based period external reference prices. It indicates that

Indian farmers have not been received fair prices for their produce. It indicates

the exploitation of Indian cultivators.

16. Clearly for two agricultural commodities, namely rapeseed/mustard (34.94 per

cent) and sugar (20.98 per cent) product specific support has been positive.

For all commodities (except soyabean and tobacco), the product specific

support (negative) as percentage of value of total output of the concerned

commodity have been downward trend over the period 1986-88 to 2008-09. It

reveals that in monetary term applied prices of various agricultural

commodities have slightly raised in comparison of their base period level. In

case of tobacco and soyabean, their administered prices have been falling in

comparison of their base period level.

17. The time profile of the commodity wise product specific support in value term

and total product specific AMS in term of value, and as percentage of the

value of total agricultural output shows that product specific AMS for Indian

agriculture has been negative since the base period (1986-88).

18. The agriculture in developed countries is highly subsidized despite the WTO

regime. It is evident by the facts that for the year 2004-05, on an average, the

agricultural prices received by farmers in Island, Norway, Switzerland, Japan,

Turkey, Korea, EU, Canada and USA were 203, 141,136, 125, 120, 30, 29, 13

and 11 per cent higher than the world market prices respectively. The total

farm receipts of their farmers were 223, 20, 216, 167, 128, 36, 49, 27 and 22

per cent higher than what they would have been at the world market prices

without any support respectively (OECD, 2005).

19. In India, non-product specific support is in operation in the form of supply of

subsidized inputs viz. fertilizers, electricity, canal irrigation, seed and credit

etc. to agricultural producers. According to the AOA, input subsidy is to be

19

measured either by using government budgetary outlays or by the gap between

the price of subsidized input and representative market price for similar input

times the quantity of subsidized input.

20. Due to higher growth rate of domestic prices than that of world market prices

per ton subsidy on phosphatic became negative during 1992-93 to 1996-97.

On account of both increase in domestic prices and decrease in world prices of

phosphatic fertilizer per ton subsidy has again become negative during 2000-

01 to 2009-10. During the same period its consumption has also decreased.

21. During 1986-87 to 1994-95 per ton subsidy, consumption and total subsidy ort

potassic fertilizer registered a whopping growth of 98.60, 98.35 and 99.42 per

cent per year, respectively. Due to higher increase in domestic prices of

potassic fertilizer than that of for world prices, per ton subsidy on potassic

fertilizer became negative during 1996-97. Its consumption also declined from

1360.60 thousand ton in 1991-92 to 883.9 thousand ton in 1992-93. It

indicates a negative relationship between prices and consumption of potassic

fertilizer. Due to higher growth of domestic prices of potassic fertilizer than

that of world prices, per ton subsidy on potassic fertilizer has decreased at a

rate of 21.89 per cent per year during 2003-04 to 2009-10.

22. It is found that on account of both higher per ton subsidy and consumption

nitrogenous fertilizer has been a major chunk in total fertilizer subsidy. It is

clear that in 1986-87 fertilizers subsidy was negative (Rs 304.74 crore). In

1987-88 it became positive, i.e., Rs 433.78 crore, it touched to Rs 11364.96

crore in 2002-03 and during 2009-10, it was Rs 13664 crore. The study shows

that fertilizer subsidy has an upward trend.

23. The estimates of power subsidy for Indian agriculture are presented in the

study which shows that power subsidy has grown rapidly. It may be noted that

growth of power subsidy is higher than that of for number of units utilized for

Indian agriculture. It may be primarily because of increase in the cost of power

generation. It indicates the inefficiency in power plants. Currently not only the

share but also the number of units of power utilization for Indian agriculture

has also decreased.

24. The yearly estimates of irrigation subsidy for the period 1987-2000 shows that

the amount of irrigation subsidy increased from Rs 1249.20 crore during 1986-

87 to Rs 3926.50 crore in 1999-2k and in 2002-03 it touched a peak of Rs

20

5781.19 crore. During the period under investigation it has registered a

whopping annual average compound growth rate of 149.97 per cent. However,

during the same period the growth in net area under canal irrigation has not

been significant. The share of small and marginal farmer in total irrigation

subsidy has 24 per cent less than that of for total operational holdings.

25. The estimates of the credit subsidy over the period 1986-87 to 2009-10 shows

that the total credit subsidy amounted to Rs 111.39 crore and in 1996-97, it

touched a peak of Rs 302.73 crore. During 2003-04 to 2005-06, the credit

subsidy was negative but in 2009-10 it became Rs 780 crore. During the same

period, the amount short-term credit to agriculture sector has increased by an

annual average compound growth rate of 165 per cent. During 2003-04 to

2005-06, credit subsidy became negative, i.e., on an average the interest rate

for short-term credit to agricultural sector was higher than that of for other

proposes.

26. The total non-product specific support that is, input subsidies, were positive in

the base period and their after, but it had not exceeded the, de-minimis level

individually or in the aggregate. The total non-product specific support has

increased over the period under analysis. During 2007-08, it has reached to Rs

22500 crore from Rs 4559 crore in 1986-87.

27. Export subsidies of kind listed in the AOA, which required reduction

commitment are not prevalent in India. Also like other developing countries,

during the implementation period, India is free to provide subsidies for

internal and international transport, freight charges and reduction of export

marketing costs. India is making use of these subsidies in certain schemes of

APED A, especially for facilitation export of fruits, vegetables, rice, wheat

and floriculture products, India also provides income tax exemption for profits

from agricultural exports under section 80-HHC of the Income tax Act (1961)

and is not a listed subsidy. In 2000, the government decided to phase out these

benefits over a period of five years starting from 2000-2001, making profits

completely taxable by 2004-2005.There are other export incentive schemes

like- Export Promotion Capital Goods Scheme, Duty Exemption scheme, Duty

Entitlement Pass Book Schemes, Duty Draw Back Scheme, Vishesh Krishi

Upaj Yogna, Assistance to States for Infrastructure Development Export

Market Access Initiative, Marketing Development Assistance, Meeting Legal

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Expenses for Trade Related Matters and Town of Export Excellence, but AOA

has not any provision that prohibit any of these export incentives. It means that

in terms of export subsidies, India is not provided any subsidy to agricultural

exporters, which is prohibited by AOA provisions. It implies that, to comply

with the AOA obligation, India is completely free to undertake any measures

to encourage agricultural exports such as establishment of agricultural export

zones and air transportation facilities for perishable agricultural commodities.

28. Because of loopholes in the SPS agreement Indian agricultural exports are

suffering from the disguise protectionist policy of other countries. Indian

products which have been particularly affected by SPS measures include:

mango pulp, sugar, marine products, and groundnut and egg powder. In case

of fresh fruits: South African fruits are allowed in Kenya, while Indian fruits

and vegetables are not allowed. In case of rice: while importing non-basmati

rice, Indonesia allows up to 25 per cent broken rice from countries like

Thailand, China, and Vietnam, while it allows only 15 per cent in the case of

Indian rice. In case of groundnuts: EU has refused to buy Indian groundnuts

due to the fear of aflatoxin which is found in groundnuts produced in parts of a

state of India, i.e., Gujarat. Furthermore, Malaysia and Australia do not

approve the Indian standards for SPS, even though the hygienic conditions of

egg processing plants in India are well above or at least as good as

international standards. In the case of marine products, the EU imposed a

comprehensive ban on all fish exports from India in 1997 after some

consignments were found to be contaminated with Salmonella and Vibrio

cholera bacteria. The differences in the application of rules regarding such

restrictions are evident from the fact that marine products were being exported

to the United States throughout the period when there was a ban imposed by

the EU. These cases brought into focus several issues including lack of

awareness and the problem of consistency of domestic SPS standards with the

standards of the importing countries. To handle the problems originating from

these cases, the Government of India also set up a National Codex Committee

under the Department of Health, Ministry of Health and Family Welfare. The

Export Inspection Council and its agencies under the Ministry of Commerce,

such as APEDA, have started framing standards for the products and

packaging of meat, poultry, dairy and honey, grading and packing standards

22

for spices, walnuts, vegetables, fruits and flowers. The State Departments of

Animal Husbandry & Dairying under the respective state governments have

set standards for meat and meat products, poultry, milk and milk products. The

commodity boards such as the Spices Board, Tea Board, Coffee Board,

Tobacco Board and Cashew Export Promotion Council are independently

involved in framing and implementation of standards for their mandated

products. It may be argued that the SPS measure has emerged as a major

constraint in enhancing the agricultural exports from India.

29. It has been revealed that 96 per cent of home grown seed used in gram and 90

per cent of home grown seed used in wheat. Similarly, in paddy, tur,

groundnut, soybean and rapeseed-mustard, their use accounted for 91, 85, 90,

91 and 67 per cent respectively. Indian farmers exchange a large percentage of

seeds among themselves. Thus, the farmers need largely meet by the inter-

farmers sales. Under TRIPS regime farmers are completely free to exchange

their seed and sell his surplus seed as unbranded seed in case of protected

variety. Thus farmers will meet their needs by exchange and by marketing of

seed without brand name. The above examination reveals that WTO regime

will provide an opportunity for the Indian farmers to get high yielding

varieties and hybrids seed although at little high price. It may be argued that

TRIPS regime will increase the growth rate of agricultural production in the

country, which has shown slow down in the recent past. All these evidences

support the hypothesis that the TRIPS regime will not jeopardize the

accessibility of good quality seeds for Indian farmers.