Impact of Dumping & Subsidies

) if it causes or threatens to cause material injury to a domestic industry in the importing country. The term has a negative connotation, as advocates of competitive markets see "dumping" as a form of protectionism. Furthermore, advocates for workers and labours believe that safeguarding businesses against predatory practices, such as dumping, help alleviate some of the harsher consequences of such practices between economies at different stages of development (see protectionism). The Bolkestein directive, for example, was accused in Europe of being a form of "social dumping," as it favored competition between workers, Why Does Dumping Occur? Though the principles are straightforward, dumping is complex, with multiple definitions, different causes, and a range of expressions. It can be motivated by over-production (i.e. a distress move) or the desire to dominate a foreign market (i.e. predatory). It can be sporadic or persistent, and dumping can be attributed to individual companies, government action (e.g. export subsidies) or brought about

Impact of Dumping & Subsidies

by macroeconomic factors such as exchange rate manipulation. What matters though is the effect of dumping actions rather than their causes omplexity: Though dumping is in principle simple, in practice it is anything but. Assessing true production cost is very difficult, relying on a range of assumptions, conventions and value judgements. Recent accounting scandals are testament to the degree to which commercial performance is a matter of opinion rather than objective mathematics. Moreover, it may require a company by

company approach as gross country estimates can obscure wide-ranging individual performances. Alternative simpler definitions of dumping have accordingly been. India imposed its first anti-dumping duty in 1992:

Narayanan (2006) explains the lack of earlier use of anti-dumping by the highly protectionist trade regime in effect from independence in 1947 through 1991. On the customs tariff side, the import-weighted average tariff for all imports was as high as 87 percent for consumer goods as high as 153percent, and for manufactured goods 92 percent (p. 1084). Combined with restrictive licensing and quantitative restrictions, there was no need for anti-dumping. However, with declining protection via tariffs and quotas has come dramatically increased use of
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antidumping by India. Figure 1 demonstrates the very strong uptrend in Indian AD cases from early 1990s through 2002 (peaking at about 80 cases the latter year); after dropping for two years (though still 20 cases in 2004) there was a strong upswing through2008 (over 50 cases that year) before dropping some in 2009.

1. Comparative analysis ofdumpingbyDeveloped &Developing Countries: a. Dumping by Developing Countries: As a wide range of cheap Chinese products flooded the Indian market, some local industries were adversely affected, while others benefitted by using these products as raw materials. Discuss the advantages and disadvantages of allowing Chinese products into India. Providing trade data, give examples of industries that benefit

Impact of Dumping & Subsidies

and those that are affected by Chinese imports. How can the Indian industries that are threatened by cheap Chinese imports deal with the threat? It is never less than a challenge to attempt to understand the cultural factors which influence a nations conduct in the international arena. When that nation is China and the subject of introspection is its relations with India, such an endeavour can at best be fraught with far too many variables. The two have had the longest uninterrupted existence as nations. Their combined size and population makes them the largest geographical and human resource mass on the planet. India and China have had cultural, religious and trade links going back centuries in history. They also came into being as nation states almost simultaneously in this century, They also share a past of colonial and imperialist subjugation from which freedom had to be won with a major struggle, Paradoxically enough, the two countries fought a war with each other over disputed frontiers. That conflict episode, the continuing border dispute between the two countries and Chinas rapid growth in military power, not unsurprisingly create anxieties about the future relationship. Chinas aggressive foreign policy postures also do not encourage a benign view of it. There are enough strategic thinkers in India who reckon China to be the major future threat to India. Basic Reason behind sudden increase in trade(History)

Impact of Dumping & Subsidies

China has become the manufacturing hub of the world. Substantial part of the economy of China depends on international trade. The advantages it gives for other countries to setup manufacturing plants in China is its strong government support for FDIs, Infrastructure development, cheap labor, weak environment and labor laws, new strong market reach which includes China, India, Japan, Russia, Korea, Thailand, Vietnam, Indonesia, Malaysia etc, access to cheap Chinese supplier base, thus larger sales and profits, seasonality of product supply and demand can be managed. The large quantities of goods that are manufactured at a cheap price are sold in the markets with a great competition and where the local goods are sold at a cost higher than the Chinese goods. The result is that some local industries who produce the same goods are affected. Take for example the following industries that are majorly affected. According to the press release by the Associated Chambers of Commerce and Industry of India (ASSOCHAM) on the 18th of December 2005, Chinas trade with India increased by a whopping 521% from the year 1999 to the year 2005. As per the statistics by the ASSOCHAM, Indias total trade with China, stood at $1.8 billion in 1999-2000, and shot up to $11.35 billion during 2005.

Impact of Dumping & Subsidies

In the year 2000, the sudden flood of imports consisted of a large volume of consumer goods (which were under import curbs earlier) and this led to high visibility in the marketplace. Imported consumer goods started getting 'showcased', while imports in prior to that period comprised primarily of raw material and intermediates. According to the statistics provided to the house by then Minister of State for Commerce. Dr. Raman Singh, there was a rise of 28% in the import of electronic goods and a rise of 45% in the import of machinery from China in the year 2000 alone. During the period 2003-04 to 2008-09, goods trade between the two countries increased from $6.9 billion to$ 40.6 billion at an annual rate of growth of 44%. But there was a reason for concern. The trade between India and China was not balanced. From the Indian perspective, the trade deficit with China accounts for almost a fifth of its total goods trade deficit. Given the remarkable rate of increase in Indo-China trade, there are concerns that future expansion in trade will further accentuate the imbalance. According to the Directorate-General of Commercial Intelligence and Statistics, Indias exports to China in 2008 -09 amounted to $9.3 billion, against $10.8 billion in 2007-08, marking a decline of 14.39 per cent. Indias imports from China touched a staggering $31.3 billion last fiscal against $27.1 billion in 2007-08, showing a robust growth of 16 percent. Indian industrys perceptions on Chinese imports belong to two distinct categories:6

Impact of Dumping & Subsidies

The first is shared by producers benefiting from cheaper Chinese imports. These producers have been obtaining considerable efficiency gains from cheaper Chinese raw materials and intermediates, and are positively inclined to such imports. The second category of perceptions is adversely disposed towards Chinese imports. This is the category that has dominated the public discourse on Chinese imports. This segment of the Indian industry feels that influx of Chinese imports is adversely affecting indigenous producers of similar items. Much of the concerns emanate from producers of consumer goods. Indeed, fears expressed by this lobby have led to mounting concerns over Chinese imports and the exacerbating trade imbalance. Such fears and concomitant pressures on the government to take remedial action have resulted in an increase in anti-dumping actions on Chinese imports in recent times. The same pressures have also successfully resisted proactive moves on pushing a bilateral trade pact between China and India. To elaborate my point, let us consider some of the industries that fall under the two categories and how and in what sense have they been affected or benefitted. b. Dumping by Developed Countries: Dumping is not only visible in Developing and poor countries, but also in developed nations like United States. USA has evolved many Anti-Dumping policies to protect their domestic producers but there are still other ways where the
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importers try other methods to avoid these duties. For countervailing duties to be invoked it must be shown that prices are lower in the importing country than in the exporting country and that producers in the importing country are being directly harmed by the dumping. A report by the US Department of Agriculture indicated that levels of dumping by the United States hover around 40 percent on wheat and between 25 and 30 percent for corn, and levels for soybeans have risen steadily over the past four years to nearly 30 percent. These percentages for example mean that wheat is selling up to 40 percent below the cost of production. For cotton, the level of dumping for 2001 rose to a remarkable 57 per cent and for rice it has stabilized at around 20 percent. The study indicated that these commodities are being dumped onto international markets by the United States in violation of WTO rules. The report found that may years of accepting agricultural dumping a few countries have begun to respond by investigating whether some US agricultural exports are dumped. Brazil is considering a case against US cotton before the WTO. In 2001 Canada briefly imposed both countervailing and antidumping duties on US corn imports the United States did the same for Chinese apple juice concentrate. As a wide range of cheap Chinese products flooded the Indian market, some local industries were adversely affected, while others benefitted by using these products as raw materials. Discuss the advantages and disadvantages of allowing Chinese
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products into India. Providing trade data, give examples of industries that benefit and those that are affected by Chinese imports. How can the Indian industries that are threatened by cheap Chinese imports deal with the threat?

2. Impact of Dumping:

Dumping effected on consumers and producers. While on the one hand, dumping is in the benefit of foreign exporters who practice it, as well as consumers, on the other hand, it harms domestic producers whose products have been dumped. Foreign exporters may rely on dumping when they create a new product and would like to promote it, so they export it with a price which is lower than its marginal

Impact of Dumping & Subsidies

cost. In some other circumstances, foreign exporters are obliged to sell their product with a price which is cheaper than its marginal cost due to changes in market conditions or exchange rates. Unquestionably, in both cases consumers benefit from the low priced foreign products (Trebilcock&Howse 2005). Undoubtedly, dumping is detrimental for domestic producers. Predatory pricing (as previously defined) may result in bankrupting many domestic producers or even driving them out of the market by closing their industries and terminating their businesses and consequently, raise the problem of un-laboured workers of such industries, as well as intermittent dumping which harms domestic producers in that, after the occurrence of such type of dumping (for certain period of time), consumers will substitute their products by those foreign products with the cheaper price. Furthermore, after the lapse of this period, domestic producers will have to readjust their price with a higher one in order to recover the loss incurred. The adjustment and readjustment of price harms domestic producers welfare. It is worthy to note that consumers might as well be harmed by the said adjustment and readjustment as they may end up purchasing a long term product with a higher price. According to Jacob Viner, intermittent dumping harms both the domestic producer and the consumer. In his view, it harms the former in that it takes enough time to injure him, the latter in that he will not be provided with a stabilized supply of long-run products. Dumping can harm the domestic industry by reducing its
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sales volume and market shares, as well as its sales prices. This in turn can result in decline in profitability, job losses and, in the worst case, in the domestic industry going out of business. Often, dumping is mistaken and simplified to mean cheap or low priced imports. However, it is a misunderstanding of the term. On the other hand, dumping, in its legal sense, means export of goods by a country to another country at a price lower than its normal value. Thus, dumping implies low priced imports only in the relative sense (relative to the normal value), and not in absolute sense. Today, tighter government enforcement of dumping legislation is causing international marketers to seek new routes around such legislation. Assembly in the importing country is a way companies attempt to lower prices and avoid dumping charges. However, the screwdriver plants, as they are often called, are subject to dumping charges if the price differentials reflect more than the cost savings that result from assembly in the importing country. Another subterfuge is to alter the product so that the technical description will fit a lower duty category. To circumvent a 16.9 per cent countervailing duty imposed on Chinese gas filled non-refillable pocket flint lighters, the manufacturer attached a useless valve to the lighters so that they fell under the non-disposable category thus avoiding the duty. Countries do see through many such subterfuges and impose taxes. For example, the European union imposed a $27 to $58 dumping per unit on a Japanese firm that
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assembled and sold electronic typewriters in the European Union. The firm was charged with valuing imported parts for assembly below costs. a. Industry Affected in India because of Chinese Dumping:

The influx of Chinese imports has adversely affected indigenous producers of similar items in the Indian markets. Due to the cheap Chinese products available in the market, the indigenous industry could not hold or increase its prices in line with increase in the cost of production, resulting in financial losses. Some of the industries that were affected are : Toys: The rise in demand and sudden popularity of Chinese toys, which are available at cheaper prices, is giving nightmares to the Indian industry to the extent that they have started sticking Made in China stickers on their products to boost their sales. According to commerce ministry data, toys worth more than $24 million (or Rs 120 crore) were imported in April-June 2008-09. The huge number of imports forced the Indian government to impose a ban of 6 months on the import of Chinese toys in India in the best interest of the domestic toy producers.

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Moreover, the toys that were sold, were sold on the streets and in the street shops, thus targeting the larger section of the population, and capturing 2/3rd of the toy market in India. Electronics: The major electronic items that are imported are air-conditioners, generator sets, textile embroidery machines and cellular phones. Take for example of Chinese made handsets that are available in the Indian markets. The Chinese handsets are priced nearly 50% less than the local company handsets with similar features. These mobile sets come without unique identity code numbers. Approximately eight lakhs mobile phones without International Mobile Equipment Identity (IMEI) number are being imported from China every month. Without the IMEI number these phones are tough to track. Silk & satin: India is currently accusing China of dumping silk and satin into the Indian market. Since China is exporting superior bivolitine silk at cheaper costs, several Indian weavers have switched over to Chinese silk, pushing the Indian sericulture farmers (who produce inferior multivoltine silk) into red. Crackers:
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Since the year 2006, China made crackers are sold in the Indian market during Diwali. The crackers are available at a much cheaper rate than the Indian crackers and are thus hugely attracting the illiterate crowd who care more about money than the environment issues. I will elaborate on this point at a later stage of the presentation.(Disadvantages) Energy-intensive imports: Chinese imports contributed to the expansion of Indias manufacturing. Energyintensive importscoking and steam coal, kerosene and petroleum cokehelped in mitigating energy needs of the Indian domestic industry. Others: Items that are included in this category are inorganic and organic chemicals (silicon, phosphorus, calcium carbide, saturated acids, citric acid, paracetamols, penicillins, antibiotics), fertilisers (urea, ammonium phosphate), iron & steel (flatrolled coils and plates, precision tubes) and pearls & precious stones.

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3. Examples of industries being affected and antidumping cases being registered: Apar Polymers Ltd

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M/S GujratApar Polymers Ltd Mumbai has filed a petition in accordance with Customs Tariff Ad, 1975 as emended in 1995 and Customs Tariff Rules, 1995 before the Designated Authority alleging dumping of Acrylonitrile Butadiene Rubber also known as Nit rite Rubber (NBR) from Taiwan and requested for a nil dumping investigations and levy of Anti-dumping duty. The various economic indicators relating to domestic industry such as increase in imports, undercutting the prices, profit/loss etc. collectively and cumulatively, indicate that the domestic industry has suffered injury. There is sufficient evidence that the imports of the product under consideration have caused injury to the domestic industry. Ball and Roller Bearing Manufacturers: Ball and Roller Bearing Manufacturers Association of India, New Delhi through its members M/s. FAG Bearings India Ltd., Vadodara, M/s. NRB Bearings Ltd., Mumbai, M/s. SKF Bearings India Ltd., Mumbai, M/s. National Engineering Industries Ltd., Jaipur, M/s. Tata Iron and Steel Company Ltd., (Bearing Division), Kharagpur filed a petition alleging dumping of Ball Bearings and parts and components thereof (up to 50 mm bore dia) originating in or exported from China PR, Poland, Russia and Romania and requested for Anti-Dumping investigations and levy of anti-dumping duties.

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Parameters such as increase in volume of imports, loss in market share, price under-cutting, price under-selling, low return on investments, decreased profits in the manufacturing of subject goods prima-facie indicate collectively and cumulatively that the Domestic Industry has suffered material injury on account of dumping. Other anti-Dumping Cases: Just to mention a few others, the cases of Anti-dumping have been registered by the Indian industries affected in the following area: Chemicals like sodium nitrite, Sodium ferrocynide, Thermal Sensitive Paper Sports shoes Plastic processing machinery etc.

4. People benefitted:

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Chinese imports provided Indian industry access to cheap intermediates and raw materials. Let us have a look at the industries that have benefitted from the imports from the Chinese markets. Clothing industry: Industry gets cheap raw material to produce clothes. Take raw silk, for example. India produces around 15,000 tonnes of silk a year but this is of an inferior variety called multivoltine silk. Our imports from China of about 7,000 tonnes a year are of the vastly superior bivoltine variety which we do not produce. No wonder silk weavers are happy with imports-which illustrates a more general point that while dumping may be bad from a local producer's point of view, it may well offer benefits to local consumers and users. Customers: Consumers are paying less for products coming from China. Toys industry: The toys producers in India have come up with a strategy of boosting the sales. A lot toys found on the streets with the Made in China label are locally manufactured. The cost of these toys is also a bit higher than that of the local toys. Thus some of the toy manufacturers in India have found a way to boost their sales inspite of the increasing competition.

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5. Advantages:

The two countries still have room to expand trade as China has an industrial base and India has a broader service base. Luxury brands; gems and jewellery; media and entertainment; health and wellness; and tourism are some of the sectors where India and China can collaborate. Trade theory tells us that, in an increasingly flat world, trade between two countries should be a multiplicative function of their GDPs. Since it is almost certain that, by 2050, China and India will be the two largest economies in the world, it is inevitable that bilateral trade between them will become the most important economic relationship in the world.

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6. Disadvantage: Compromise in quality: The Chinese goods, while being cheaper in cost, compromise on the quality. Below are certain examples that are highlighted. Though the examples are not explicitly from India, the quality of the Chinese items is clearly indicated by these examples. Harmful to health: The FDA recently found that several low-priced toothpastes imported from China contained diethylene glycol, which poisons the liver and kidneys and depresses the central nervous system. Tri Star International recently recalled a made-in-China childrens stationary, which contained a dangerous razor blade. Loss of Domestic Business: The trade deficit of India with China has jumped from $1.08 billion in 2001-02 to $ 22.05 billion on 2008-09. Harmful to Society: The Chinese mobile phones that come without the IMEI numbers as mentioned earlier are favoured for use by people indulging in criminal and terrorist activities.

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7. Overcome Dumping Impact: a. Industries effort required: The manufacturers in India could come up with new varieties products. Small manufacturers in India could team up to set up association. This association can together set up some marketing strategy to boost sales of the toys which are locally manufactured. Silk Manufacture of India can try to produce the superior quality bivoltine silk in India. The Silk manufacturers association can negotiate with the cloth manufacturers associations and agree for a settlement for boosting sales of the silk as well as ensuring that the cloth manufacturers are not put to a loss by the same. Strong marketing strategy like highlighting the drawbacks of the Chinese mobiles will help enhance the sale of the Chinese handsets. Eg : Highlighting feature of the absence of IMEI number and making the public aware of the terror aspect to it will automatically lead to the fall in the sale of Chinese mobile phones, which in turn will lead to boost of sales of Indian mobile phones.

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b. Governments Input: In the year 2000, the then government had taken both tariff and non-tariff measures to protect the domestic industries. The import duties on a number of items were increased. For example. The duty on areca-nut and poultry products had been increased from 35 per cent to l00 per cent, wheat from zero to 50 per cent on skimmed milk powder from zero to 60 per cent and rice from zero per cent to 80 per cent. Also, import of 131 products was also subject to compliance of the mandatory Indian quality standards as applicable to domestic goods. In order to comply with this statutory requirement of the government, all manufacturers and exporters of the products to India are now required to register themselves with the Bureau of Indian Standards. In March 2009, the countrys safeguards office recommended imposition of provisional safeguards duty on imports of aluminium flat-rolled products and aluminium foils from China. The safeguards duty of 21 per cent on imports of aluminium flat-rolled products, the duty for aluminium foils was 35 per cent was applied. The action was carried out in response to the petition filed by the Aluminium Association of India before the Director General of SafeGuards office.

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In September 2008, India had imposed the ban for three months after milk and products originating from China were found to contain traces of melamine. Melamine is described as being "Harmful if swallowed, inhaled or absorbed through the skin. Chronic exposure may cause cancer or reproductive damage. Eye, skin and respiratory irritant. 8. Subsidy: A subsidy is assistance paid to a business or economic sector. Most subsidies are made by the government to producers or distributed as subventions in an industry to prevent the decline of that industry (e.g., as a result of continuous unprofitable operations) or an increase in the prices of its products or simply to encourage it to hire more labour (as in the case of a wage subsidy). Examples are subsidies to encourage the sale of exports; subsidies on some foods to keep down the cost of living, especially in urban areas; and subsidies to encourage the expansion of farm production and achieve self-reliance in food production. Subsidy has been used by economists with different meanings and connotations in different contexts. The dictionary [Concise Oxford] defines it as "money granted by state, public body, etc., to keep down the prices of commodities, etc.. Environmental economis ts define subsidies as uncompensated environmental damage arising from any flow of goods and services. In a budgetary context, it may be defined as unrecovered costs in the public provision of private goods.
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Impact of Dumping & Subsidies

Subsidies are often regarded as a form of protectionism or trade barrier by making domestic goods and services artificially competitive against imports. Subsidies may distort markets, and can impose large economic costs. Financial assistance in the form of a subsidy may come from one's government, but the term subsidy may also refer to assistance granted by others, such as individuals or non-governmental institutions. Agricultural subsidies are largely present in Develop countries in

Examples of industries or sectors where subsidies are often found include utilities, gasoline in the United States, welfare, farm subsidies, and (in some countries) certain aspects of student loans.
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9. Types of Subsidies: There are many different ways to classify subsidies, such as the reason behind them, the recipients of the subsidy, the source of the funds (government, consumer, general tax revenues, etc.). In economics, one of the primary ways to classify subsidies is the means of distributing the subsidy. In economics, the term subsidy may or may not have a negative connotation: that is, the use of the term may be prescriptive but descriptive. In economics, a subsidy may nonetheless be characterized as inefficient relative to no subsidies; inefficient relative to other means of producing the same results; "second-best", implying an inefficient but feasible solution (contrasted with an efficient but not feasible ideal), among other possible terminology. In other cases, a subsidy may be an efficient means of correcting a market failure. For example, economic analysis may suggest that direct subsidies (cash benefits) would be more efficient than indirect subsidies (such as trade barriers); this does not necessarily imply that direct subsidies are bad, but they may be more efficient or effective than other mechanisms to achieve the same (or better) results. Insofar as they are inefficient, however, subsidies would generally be considered by economists to be bad, as economics is the study of efficient use of limited resources. Ultimately, however, the choice to enact a subsidy is a political choice.

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Another form of subsidy is due to the practice of a government guaranteeing a lender payment if a particular borrower defaults. This occurs in the United States, for example, in certain airline industry loans, in most student loans, in small business administration loans, in Ginnie Mae mortgage-backed bonds, and is alleged to occur in the mortgage-backed bonds issued through Fannie Mae and Freddie Mac. A government guarantee of payment lowers the risk of the loan for a lender, and since interest rates are primarily based on risk, the interest rate for the borrower lowers as well. Agricultural subsidies given by develop countries benefit large farmers rather than small farmers.

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10.Effect of subsidies: In standard supply and demand curve diagrams, a subsidy will shift either the demand curve up or the supply curve down. A subsidy that increases the production will tend to result in a lower price, while a subsidy that increases demand will tend to result in an increase in price. Both cases result in a new economic equilibrium. Therefore it is essential to consider elasticity when estimating the total costs of a planned subsidy: it equals the subsidy per unit (difference between market price and subsidized price) times the new equilibrium quantity. One category of goods suffers less from this effect: Public goods are once created in ample supply and the total costs of subsidies remain constant regardless of the number of consumers; depending on the form of the subsidy, however the number of producers on demanding their share of benefits may still rise and drive costs up. The recipient of the subsidy may need to be distinguished from the beneficiary of the subsidy, and this analysis will depend on elasticity of supply and demand as well as other factors. For example, a subsidy for consumption of milk by consumers may appear to benefit consumers (or some may benefit and the consumer may derive no gain, as the higher prices for milk offset the subsidy). The net effect and identification of winners and losers is rarely straightforward, but subsidies generally result in a transfer of wealth from one group to another (or transfer between sub-groups). Subsidy may also be used to refer to government
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actions which limit competition or raise the prices at which producers could sell their products, for example, by means of tariff protection. Subsidies reduce world price and affect export dependent and developing countries:

a. Economic effects of subsidies: Allocate effects: these relate to the sectorial allocation of resources. Subsidies help draw more resources towards the subsidised sector Redistributive effects: these generally depend upon the elasticitys of demands of the relevant groups for the subsidised good as well as the elasticity of supply of the same good and the mode of administering the subsidy.

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Fiscal effects: subsidies have obvious fiscal effects since a large part of subsidies emanate from the budget. They directly increase fiscal deficits. Subsidies may also indirectly affect the budget adversely by drawing resources away from tax-yielding sectors towards sectors that may have a low tax-revenue potential. Trade effects: a regulated price, which is substantially lower than the market clearing price, may reduce domestic supply and lead to an increase in imports. On the other hand, subsidies to domestic producers may enable them to offer internationally competitive prices, reducing imports or raising exports. Subsidies may also lead to perverse or unintended economic effects. They would result in inefficient resource allocation if imposed on a competitive market or where market imperfections do not justify a subsidy, by diverting economic resources away from areas where their marginal productivity would be higher. Generalised subsidies waste resources; further, they may have perverse distributional effects endowing greater benefits on the better off people. For example, a price control may lead to lower production and shortages and thus generate black markets resulting in profits to operators in such markets and economic rents to privileged people who have access to the distribution of the good concerned at the controlled price.
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Subsidies have a tendency to self-perpetuate. They create vested interests and acquire political hues. In addition, it is difficult to control the incidence of a subsidy since their effects are transmitted through the mechanism of the market, which often has imperfections other than those addressed by the subsidy. On 29 June 2012, C Rangarajan, Chairman of the Prime Minister's Advisory Council in view of present difficult economic position, advocated cutting down of fuel and fertiliser subsidies to keep the fiscal deficit within the budgeted level of 5.1 per cent. 11.Objective and benefits of subsidy: a. Objective Subsidies, by means of creating a wedge between consumer prices and producer costs, lead to changes in demand/ supply decisions. Subsidies are often aimed at : Inducing higher consumption/ production Offsetting market imperfections including internalisation of externalities; Achievement of social policy objectives including redistribution of income, population control, etc.

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b. Benefits of subsidies in India: The relative distribution of the benefits of a subsidy may be studied with respect to different classes or groups of beneficiaries such as consumers and producers, as also between different classes of consumers and producers. India spending on Subsidy:

In case of food subsidy, PDS suffers from considerable leakage and apart from a low coverage of poor; the magnitude of benefit derived by the poor is very small.

In case of electricity, the subsidy rates have been rising for both agriculture and domestic sectors because the unit cost has been rising faster than the relevant tariff-rate. Also, there is considerable variation in the level of per capita

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electricity subsidy indicates that, in the richer States, the per capita subsidy is substantially higher as compared to that in the poorer States.

In case of public irrigation, water has a very high marginal productivity when used in conjunction with HYV of seeds, chemical fertilisers, power and other related inputs. It is the richer farmers who may derive relatively larger benefits because of their capacity to use these allied inputs.

Subsidies to elementary education form about half of the total subsidies on general education. However, this is not true for all individual States: the share of elementary education is lowest in the high income States and the highest in the low income States (Goa, Punjab and West Bengal actually give higher subsidies to secondary education than primary education).A negative correlation between the level of per capita income and the share of subsidies to elementary education is thus discernible. Most subsidies to higher education accrue predominantly to the better-off sections of society as they have an overwhelming advantage in competing out prospective candidates from the poorer sections in getting admission to courses that are characterised by scarcity of seats.

For subsidies of health, the greater emphasis on curative health care expenditure often reflects a bias towards the better-off people whereas preventive health

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care expenditure with much larger externalities would clearly be of greater help to the economically weaker sections of the society.

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12.Conclusion: Benefits of Subsidies are mainly visible in Developed countries in large farms where as in Developing Countries like India the subsidies are mainly focussed for a particular segment of the society such as poors. The share of this segment is increasing and also the effect of subsidies is clearly visible in terms of the production and usage. Subsidies on Power, Education, water and food are the most popular subsidies in developing nations. Also, there is considerable variation in the level of per capita electricity subsidy indicates that, in the richer States, the per capita subsidy is substantially higher as compared to that in the poorer States. It is the richer farmers who may derive relatively larger benefits because of their capacity to use these allied inputs. The use of anti-dumping measures as a trade protection tool has increased phenomenally during the last decade. One significant aspect of this new trend is the increasing involvement of developing countries. India is one such country which has emerged as a frequent user of anti-dumping measures. Critics of anti-dumping duties though find it difficult to prove the fact that the imposition of anti-dumping duties results in economic benefits to the domestic industry. Consumers are aggrieved as well, as they feel deprived of the lower costs and availability of variety of goods. The role of the government in tackling the

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problem of anti-dumping should be to protect the smaller industries rather than concentrating on the major industries However, safeguarding competition in domestic industry is not the only purpose that anti-dumping laws serve and in the present situation, they are acting as barriers for free trade and domestic producers are concerned about avoiding competition. In case of allegations and anti-dumping duties slapped on economically weaker nations, it could result in a stunt of economic growth for these developing countries, as they are unable to develop secure and stable long term industries. Developing countries wanted anti-dumping rules to be tight and explicit as possible, allowing minimum transparency. Developed countries wanted to retain and even expand their discretion to meet what they saw as being used by companies to get around the present rules of anti-dumping code and thereby cause injury to domestic industry, their proposals tended to be the most radical and controversial The negotiating stance of developing countries like India should be for tightening the agreement. Even though abolishment of these anti-dumping laws will lead to increased competition, lower prices for consumers, more efficient production, and higher national income, it is unrealistic to hope that the WTO will remove this trade
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device in the near future. But before things worsen, an immediate reform is necessary and the WTO anti-dumping rules need to be amended to allow a more transparent process of investigation and to determine correctly whether the material injury caused is because of dumping or higher competition only. The WTO rules need to be formulated so as to target only predatory dumping and not persistent or sporadic dumping. All countries need to have the uniform standards for determination of the dumping margins so as to maintain fairness. While aiming at consumer welfare, it is necessary to justify the use of anti-dumping laws as tools against unfair trade, to reconsider its definition and analyse as to what is essentially fair and whats not and keeping in mind the gross abuse of anti-dumping laws answer the very fundamental question of whether these laws are necessary at all. The key characteristic of a sensible safeguard procedure is that it treats domestic interests that would be harmed by an import restriction, equally with those domestic interests that would benefit. The "morality" of the foreign interest is irrelevant - the issue is the plus and minus on the domestic economy. Operationally, this suggestion means simply that what is done in an "injury test," identification of impact on import competing interests - is repeated for users of imports. Some argue that there must be more rigorous anti-dumping rules that must be formulated at the domestic and international level. The notion of predatory pricing
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must be clearly incorporated in the definition of dumping. The burden of proof of dumping must be placed squarely on the party initiating dumping cases. The implementation of anti-dumping measures should be subject to the close inspection of the WTO. Countries should more amply inform their public of the costs and benefits of anti-dumping measures so as to promote an unbiased and fair public opinion on this matter. These measures would ensure that anti-dumping laws are fairly applied and assist only those producers who suffer as a result of the low prices, and not arbitrarily affect the production of efficient producers who are not in error.

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