CHAPTER-III

WTO - A PROFILE
There are a number of ways of looking at the WTO. It's an organization for liber
alizing trade. It's a forum for governments to negotiate trade agreements. It's
a place for them to settle trade disputes. It operates a system of trade rules.
(But it's not Superman, just in case anyone thought it could solve- or cause- al
l the world's problams!).
Above all, it's a negotiating forum
Essentially, the WTOis a place where member government go, to try sort out the t
rade problems they face with each other. The first step is to talk, The WTO was
born out of negotiations, and everything the WTO does is the result of negotiati
ons. The bulk of the WTO's current work comes from the 1986-94 negotiations call
ed the Uruguay Round and earlier negotiations under the General Agreement on Tar
iffs and Trade (GATT). The WTO is currently the host to new negotiations, under
the "Doha Development Agenda" launched in 2001.
Where countries have faced trade barriers and wanted them lowered, the negotiati
ons have helped to liberalize trade. But the WTO is not just about liberalizing
trade, and in some circumstances its rules support maintaining trade barriers fo
r example to protect consumers or prevent the spread of disease.
It's a set of rules
At its heart are the WTO agreements, negotiated and signed by the bulk of the wo
rld's trading nations. These documents provide the legal ground rules for intern
ational commerce. They are essentially contracts, binding goverments to keep the
ir trade policies within agreed limits. Although negotiated and signed by govern
ments, the goal is to help producers of goods and services, exporters, and impor
ters conduct their business, while allowing governments to meet social and envir
onmental objectives.
The system's overriding purpose is to help trade flow as freely as possible- so
long as there are no undesirable sideeffects- because this is important for economic development and well- being. Tha
t partly means removing obstacles. It also means ensuring that individuals, comp
anies and governments know what the trade rules are around the world, and giving
them the confidence that there will be no sudden changes of policy. In other wo
rds, the rules have to be "transparent" and predictable.
And it helps to settle disputes
This is a third important side to the WTO's work. Trade relations often involve
conflicting interests. Agreements, including those painstakingly negotiated in t
he WTO system, often need interpreting. The most harmonious way to settle these
differences is through some neutral procedure based on an agreed legal foundatio
n. That is the purpose behind the dispute settlement process written into the WT
O agreements.
BORN IN 1995, BUT NOT SO YOUNG :
The WTO began life on 1 january 1995, but its trading system is half a century o
lder. Since 1948. the General Agreement on Tariffs and Trade (GATT) had provided
the rules for the system. ( The second WTO ministerial meeting, held in Geneva
in may 1998, included a celebration of the 50th anniversary of the system).
It did not take long for the General Agreement to give birth to an unofficial, d
e facto international organization, also known informally as GATT. Over the year
s GATT evolved through several rounds of negotiations.
The last and largest GATT round, was the Uruguay Round which lasted from 1986 to
1994 and led to the WTO's creation. Whereas GATT had mainly dealt with trade in
goods, the WTO and its agreements now cover in services and in the traded inven
tions, creations and designs (intellectual property).
THE ORGANIZATION:
The WTO's overriding objective is also help trade flow smoothly, freely, fairly
and predictably.
It dose this by :

1.
Administering trade agreements.
2.
Acting as a forum for trade negotiations.
3.
Settling trade disputes.
4.
Reviewing national trade policies.
5.
Assisting developing countries in trade policy issues, through technical
assistance and training programmes.
6.
Cooperating with other international organizations.
STRUCTURE:
The WTO has nearly 150 members, accounting for over 97% of world trade. Around 3
0 others are negotiating membership.
Decisions are made by the entire membership. This is typically by consensus. A m
ajority vote is also possible but it has naver been used in the WTO, and was ext
remely rare under the WTO's predecessor, GATT. The WTO's agreements have been ra
tified in all members' parliaments.
The Wto's top level decision-making body is the Ministerial Conference which mee
ts at least once every two years.
Below this is the General Council (normally ambassadors and heads of delegation
in Geneva, but sometimes officials sent from members' capitals) which meets seve
ral times a year in the Geneva headquarters. The General Council also meets as t
he Trade Policy Review Body and the Dispute Settlement Body. At the next level,
the Goods Council, Services Council and Intellectual property (TRIPS) Council re
port to the General Council.
Numerous specialized committees, working groups and working parties deal with in
dividual agreement and other areas such as the environment, development, members
hip applications and regional trade agreements.
The WTO is 'member- driven', with decisions taken by consensus among all member
governments.
The WTO is run by its member governments. All major decisions are made by the me
mbership as a whole either by ministers (who meet at least once every two years)
or by their ambassdors or delegates ( who meet regularly in Geneva). Decisions
are normally taken by consensus.
In this respect, the WTO is different from some other international organization
s such as the World Bank and International Monetary Fund. In the WTO power is no
t delegated to a board of directors or the organization's head.
When WTO rules impose disciplines on countries' policies, that is the outcome of
negotiations among WTO members. The rules are enforced by the members themselve
s under agreed procedures that they negotiated, including the possibility of tra
de sanctions. But those sanctions are imposed by member countries, and authorize
d by membership as a whole.this is quite different from other agencies whose bur
eaucracies can, for example, influence a country's policy by threatening to with
hold credit.
Reaching decisions by consensus among some 150 members can be difficult. Its mai
n advantage is that decisions made this way are more acceptable to all members.
And despite the difficulty, some remerkable agreements have been reached. Nevert
heless, proposals for the creation of a smaller executive body- perhaps like a b
oard of directors each representing diffiernt groups of countries - are heard pe
riodically, but for now, the WTO is a member-driven, consensus-based organizatio
n.
HIGHEST AUTHORITY : THE MINISTERIAL CONFERENCE:
So, the WTO belongs to its members. The countries make their decisions through v
arious council and committees, whose membership consists of all WTo members. Top
most is the ministerial conference which has to meet at least once every two yea
rs. The Ministerial Conference can take decisions on all matters under any of th
e multilateral trade agreements.
SECOND LEVEL : GENERAL COUNCIL IN THREE GUISES:
Day-to-day work in between the ministerial conference is handled by three bodies
:
The General Council

The Dispute Settlement Body

The Trade policy Review Body
All three are in fact the same -the Agreement Establishing the WTO states they a
re all the General Council, although they meet under different terms of referenc
e. Again, all three consist of all WTO members. They report to the Ministerial C
onference.
The General Council acts on behalf of the Ministerial Conference on all WTO affa
irs. It meet as the Dispute Settlement Body and the trade Policy Review Body to
oversee procedures for settling disputes between members and to analyse members'
trade policies.
THIRD LEVEL: COUNCILS FOR EACH BROAD AREA OF TRADE, AND MORE :
Three more councils, each handling a different broad area of trade, report to th
e General Council:
The Council for Trade in Good (Goods Council) The Council for Trade in Services
(Services Council) The Council for Trade-Related Aspects of Intellectual propert
y Rights (TRIPS Council).
As their names indicate, the three are responsible for the working of the WTO ag
reement dealing with their respective area of Trade. Again they consist of all W
TO members. The three also have subsidiary bodies.
Six other bodies report to the General Council. The scope of their coverage is s
maller, so they are "committees". Butthey still consist of all WTO mem bers. The
y cover issues such as trade and development, the environment, regional trading
arrangements, and administrative issues. The Singapore Ministerial Conference in
December 1996 decided to create new working groups to look at invesment and com
petitions policy, transparency in government procurement, and trade facilitation
.
Two more subsidiary bodies dealing with the plurilateral agreement (which are no
t signed by all WTO members) keep the General Council informed of their activiti
es regularly.
FOURTH LEVEL : DOWN TO THE NITTY-GRITTY :
Each of the higher level councils has subsidiary bodies. The Goods Council has 1
1 committees dealing with specific subjects (such as agriculture, market access,
subsidies, antidumping measures and so on). Again, these consist of all member c
ountries. Also reporting to the Goods Council is the Textiles Monitoring Body wh
ich consists of a chairman and 10 members acting in their personal capacities, a
nd groups dealing with notifications (governments informing the WTO about curren
t and new policies or measures) and state trading enterprises.
The Services Council's subsidiary bodies deal with financial services' domestic
regulations, GATS rules and specific commitments.
At the General Council level, the Dispute Settlement Body also has two subsidiar
ies: the dispute settlement "panels" of experts appointed to adjudicate on unres
olved disputes, and the Appellate Body that deals with appeals.
HODS AND OTHER BODY : THE NEED FOR INFORMALITY:
Important breakthroughs are rarely made in formal meetings of these bodies, leas
t of all in the higher level councils. Since decisions are made by consensus, wi
thout voting, informal consultations within the WTO play a vital role in bringin
g a vastly diverse membership round to an agreement.
One step away from the formal meetings are informal meetings that still include
the full membership, such as those of the Heads of Delegations(HOD). More diffic
ult issues have to be thrashed out in smaller groups. A common recent practice i
s for the chairperson of a negotiating group to attempt to forge a compromise by
holding consultations with delegations individually, in twos or threes, or in g
roups of 20- 30 of the most interested delegations.
These smaller meeting have to be handled sensitively. The key is to ensure that
everyone is kept informed about what is going on (the process must be "transpare
nt") even if they are not in a particular consultation or meeting, and that they

have an opportunity to participate or provide input (it must be"inclusive")

One term has become controversial, but more among some outside observers than am
ong delegations. The "Green Room" is a phrase taken from the informal name of th
e director- general's conference room. It is used to refer to meetings of 20-40
delegations, usually at the level of heads of delegations. These meeting can tak
e place elsewhere, such as at Ministerial Conference, and can be called by the m
inister chairing the conference as well as the director- general. Similar smalle
r group consultations can be organized by the chairs of committees negotiating i
ndividual subject, although the term Green Room is not usually used for these. I
n the past deligations have sometimes felt that Green Room meetings could lead t
o compromises being struck behind their backs. So, extra efforts are made ensure
that the process is handled correctly, with regular reports back to the full me
mbership.
The way countries now negotiate has helped somewhat. In order to increase their
bargining power,countries have formed coalitions. In some subjects such as agric
ulture virtually all countries are members of at least one coalition- and in man
y cases, several coalitions. This means that all countries can be represented in
the process if the coordinators and other key players are present. The coordina
tors also take responsiblity for both "Transparency" and "Inclusiveness" by 'kee
ping their coalitions informed and by taking the positions negotiated within the
ir alliances.
In the end, decisions have to be taken by all members and by consensus. The memb
ership as a whole would resist attempts to impose the wil of a small group. No o
ne has been able to find an alternative way of achieving consensus on difficult
issues, because it is virtually impossible for members to change their positions
voluntarily in meeting of the full membership.
Market access negotiations also involve small groups, but for a completely diffe
rent reason. The final outcome is a multilateral package of individual countries
' commitments, but those commitments are the result of numerous bilateral, infor
mal bargaining sessions, which depend on individual countries' interests. (Examp
les include the traditional tariff negotiations, and market access talks in serv
ices.)
So, informal cosultations in various forms play a vital role in allowing consens
us to be reached, but they do not appear in organization charts, precisely becau
se they are informal.
They are not separate from the formal meetings, however. They are necessary for
making formal decisions in the councils and committees. Nor are the formal meeti
ngs unimportant. They are the forums for exchanging views, putting countries' po
sitions on the record, and ultimately for confirming decisions. The art of achie
ving agreement among all WTO members is to strike an appropriate balance, so tha
t a breakthrough achieved among only a few countries can be acceptable to the re
st of the membership.
WTO CHAIRPERSONS FOR 2007 :
The WTO General Council today (7 February) noted the consensus on the following
slate of names of chairpersons for WTo Bodies.
CHAIRPERSONS OF WTO BODIES - 2007
General Council Dispute Settlement Body Trade Policy review Body Council for Tra
de in Goods Council for trade in Services Council for TRIPS
Committee on the Trade and Development
Committee on Balace-of- payments Restrictions Committee on Budget, Finance and A
dministration
Committee on Trade and Environment
H.E. Mr. muhamad NOOR(Malaysia) H.E. Mr. Bruce GOSPER (Australia) H.E. Mr. vesa
HIMANEN (Finland) H.E. Mr. Karsten Vagn NIELSEN (Denmark) H.E. Mr. C. Trevor CLA
RKE (Barbados) H.E. Mr. Yonov Frederick AGAH (Nigeria) H.E. Mr. Shree Baboo Chek
itan SERVANSING (Mauritius) H.E. Mr. Chitsaka CHIPAZIWA (Zimbabwe)
Mr. Tony LYNCH (New Zealand)

H.E. Mr. Manuel A.J.TEEHANKEE (Philippines)

Committee on Regional Trade Agreements
Working Group on Trade, Debt and Finace
Working Group on trade and Transfer of Technology
Mr. Julian METCALFE (United Kingdom)
Mr. ravi BANGAR (India)
H.E. Mr. Kwabena BAAH-DUODU (Ghana)
Chairpersons of Bodies established under the Trade NegotiationsCommittee (To ser
ve until the next Session of the Ministerial Conference)
Negotiating Group on Trade Facilitation
H.E. Mr. Eduardo Ernesto SPERISENYURT (Guatemala)
MEMBERS AND OBSERVERS :
150 members on 11 January 2007 (with dates of membership) :
Albania 08 September
2000
Angola 23 November
1996
Antigua and Barbuda
01 January
1995
Argentina
01 January
1995
Armenia 05 February
2003
Australia
01 January
1995
Austria 01 January
1995
Bahrain, Kingdom of
01 January
1995
Bangladesh
01 January
1995
Barbados
01 January,
1995
Belgium 01 January
1995
Belize 01 January
1995
Benin 22 February
1996
Bolivia 12 September
1995
Botswana
31 May 1995
Brazil 01 January
1995
Brunei Darussalam
01 January
1995
Bulgaria
01 December
1996
Burking Faso
03 June 1995
Burundi 23 July 1995
Cambodia
13 October,
2004
Cameroon
13 December
1995
Canada 01 January
1995
central african Republic
31 May 1995
Chad
19 October
1996
Chile 01 January
1995
China 11 December
2001
Colombia
30 April,
1995
Congo 27 March
1997
Costa Rica
01 January
1995
Cote d'lvoire 01 January
1995
Croatia 30 November
2000
Cuba
20 Apirl
1995
Cyprus 30 July 1995
Czech Rapublic 01 January
1995
Democratic Republic of the Congo
01 January
Denmark 01 January
1995
Djibouti
31 May 1995
Dominica
01 January
1995
Dominica
01 January
1995
Dominican Republic
09 March
1995
Ecuador 21 January
1996

1997

Egypt 30 June 1995

El Salvador
07 May 1995
Estonia 13 November
1999
European Communities
01 January
Fiji
14 January
1996
Finland 01 January
1995
FormerYugoslav Republic
of Macedonia (FYROM)
04 Apirl
France 01 January
1995
Gabon 01 January
1995
The Gambia
23 October
1996
Georgia 14 June 2000
Germany 01 January
1995
Ghana 01 January
1995
Greece 01 January
1995
Grenada 22 February
1996
Guatemala
21 July 1995
Guinea 25 October
1995
Guinea Bissau 31 May 1995
Guyana 01 January
1995
Haiti 30 January
1996
Honduras
01 January
1995
Hong Kong,China 01 January
1995
Hungary 01 January
1995
Iceland 01 January
1995
India 01 January
1995
Indonesia
01 January
1995
Ireland 01 January
1995
Israel 21 April
1995
Italy 1 January
1995
Jamaica 9 March 1995
Japan 1 January
1995
Jordan 11 April
2000
Kenya 1 January
1995
Korea, Republic of
1 January
kuwait 1 January
1995
Kyrgyz Republic 20 December 1998
Latvia 10 February 1999
Lesotho 31 May 1995
Liechtenstein 1 September 1995
Lithuania
31 May 2001
Luxembourg
1 January
1995
Macao, China
1 January
1995
Madagascar
17 November 1995
Malawi 31 May 1995
Malaysia
1 January
1995
Maldives
31 May 1995
Mali
31 May 1995
Malta 1 January
1995
Mauritania
31 May 1995
Mauritius
1 January
1995
Mexico 1 January
1995
Moldova 26 July 2001
Mongolia
29January
Morocco 01 January
1995
Mozambique
26 August
Myanmar 1 January
1995

1997
1995

1995

2003

1995

Namibia 1 January
1995
Nepal 23 April
2004
Netherlands For the Kingdom
in Europe and for the Netherlands
Antilles
January 1995
New Zealand
1 January
1995
Nicaragua
3 September
1995
Niger 3 december
1996
Nigeria 1 January
1995
Norway 1 January
1995
Oman
9 November
2000
Pakistan
21 January
1995
Panama 6 September
1997
Papua New Guinea
9 June 1996
Paraguay
1 January
1995
Peru
1 January
1995
Philippines
1 January
1995
Poland 1 July 1995
Portugal
1 January
1995
Qatar 13 January
1996
Romania 1 January
1995
Rwanda 22 May 1996
Saint Kitts and Nevis 21 February
1996
Saint lucia
1 January
1995
Saint Vincent & Grenadines
1 January
Saidi Arabia
11 December
2005
Senegal 1 January
1995
Sierra Leone
23 July 1995
Singapore
1 January
1995
Slovak republic 1 January
1995
Slovenia
30 July 1995
Solomon Islands 26 July 1996
South Africa
1 January
1995
Spain 1 January
1995
Sri Lanka
1 January
1995
Suriname
1 January
1995
Swaziland
1 January
1995
Sweden 1 January
1995
Switzerland
1 July 1995
Chinese Taipei 1 January
2002
Tanzania
1 January
1995
Thailand
1 January
1995
Togo
31 May 1995
Trinidad abd Tobago
1 March 1995
Tunisia 29 March
1995
Turkey 26 March
1995
Uganda 1 January
1995

1995

United Arab Emirates

10 Apirl
1996
United Kingdom 1 January
1995
United States of America
Uanuary 1995
Uruguay 1 January
1995
Venezuela (Bolivarian republic of)
1 January
Viet nam
11 January
2007
Zambia 1 January
1995
Zimbabwe
5 March 1995
OBSERVER GOVERNMENTS :

1995

Afghanistan
Algeria
Andorra
Azerbaijan
Bahamas
Belarus
Bhutan
Bosnia and Herzegovina Cape Verde Equatorial Guinea Ethiopia
Holy See(Vatican)
Iran
Iraq
Kazakhstan
Lao people's Democratic Republic
Lebanese Republic
Libya
Montenegro
Russian Federation
Sao Tome and Principe
Serbia
Seychelles
Sudan
Tajikistan
Tongo
Ukraine
Uzbekistan
Vanuatu
Yeman
PRINCIPLE OF THE TRADING SYSTEM :
The WTO agreements are lengthy and complex because they are legal texts covering
a wide range of activites. They deal with: agriculture textiles and clothing, b
anking, telecommunications, government purchases, industrial standards and produ
ct safety, food sanitation regulations, intellectual property, and much more. Bu
t a number of simple,fundamental principles run throughout all of the these docu
ments.These principles are the foundsation of the multilateral trading system.
A CLOSER LOOK AT THESE PRINCIPLES :
Trade without discrimination : 1. Most favoured Nation (MFN):
Treating other people equally Under the WTO agreements, countries cannot normall
y discriminate between their trading partners, grant someone a special favour (s
uch as a lower customs duty rate for one of their products) and you have to do t
he same for all other WTO members.
This principle is known as most- favoured- nation (MFN) treatment. It is so impo
rtant that it is the first article of the Genral Agreement on tariffs and trade
(GATT), which governs trade in goods. MFN is also a priority in the General Agre
ement on Trade in Services (GATS), (Article-2) and the Agreement on trade- Relat
ed Aspects of intellectual property Right (TRIPS) (Article4), although in each a
greement the principle is handled slightly differently. Together, those three ag
reements cover all three main areas of trade handled by the WTO.
Some exceptions are allowed. For example, countries can set up a free trade agre
ement that applies only to goods traded within the group discriminating against
goods from outside. Or they can give developing countries special access to thei
r markets, or a country can raise barriers against products that are considered
to be traded unfairly from specific countries. And in services, countries are al
lowed, in limited cirumstances, to discriminate. But the agreement only permit t
hese exceptions under strict conditions. In general, MFN means that every time a
country lowers a trade barrier or opens up a market, IT has to do so for the sa
me goods or services from all its trading partners- whether rich or poor, weak o
r strong.
2. National treatment:

Treating foreigners and locals equally Imported and locally- produced goods shou
ld be treated equally- at least after the foreign goods have entered the market.
The same should apply to foregin and domestic services, and to foreign and loca
l trademarks, copyright and patents. This principle of "National Treatment" (giv
ing others the same treatment as one's own national) is also found in all the th
ree main WTO agreement (Article-3 of GATT, Article- 17 of GATS and Article-3 of
TRIPS), although once again the principle is handled slightly differently in eac
h of these.
National treatment only applies once a product, service or item of intellectual
property has entered the market. Therefore, charging customs duty on an import i
s not a violation of national treatment even if locally- produced products are n
ot charged an equivalent tax.
FREE TRADE : GRADUALLY, THROUGH NEGOTIATION:
Lowering trade barrier is one of the most obvius means of encouraging trade. The
barriers concerned include customs duties (or tariffs) and measures such as imp
ort bans or quotas that restrict quantities selectively. From time to time, othe
r issues such as red tape and exchange rate policies have also been discussed.
Since GATT's creation in 1947-48 there have been eight rounds of trade negotiati
ons. A ninth round, under the Doha Development Agenda, is now underway. At first
these focused on lowering tariffs (customs duties) on imported goods. As a resu
lt of the negotiations, by the mid-1990s industrial countries' tariff rates on i
ndustrial goods had fallen steadily to less than 4%.
But by the 1980s, the negotiations had expanded to cover non- tariff barriers on
goods, and to the new areas such as services and intellctual property.
Opening markets can be beneficial, but it also requires adjustment. The WTO agre
ement allow countries to introduce changes gradually, through "progressive liber
alization", developing countries are usually given longer to fulfil their obliga
tions.
PREDICTABILITY : THROUGH BINDING AND TRANSPARENCY :
Sometimes, promising not to raise a trade barrier can be as important as lowerin
g one, because the promise give businesses a clearer view of their future opport
unities. With stability and predictability, investment is encouraged, jobs are c
reated and consumers can fully enjoy the benefits of competition-choice and lowe
r prices. The multilateral trading system is an attempt by government to make th
e business environment stable and predictable.

After
THE URUGUARY ROUND INCREASED BINDINGS Percentages of tariffs bound before and af
ter the 1986-94 talks
Before
78
99
21
73
73
98
Developed Countries Developing countries Transition economies
(These are tariff lines, so percentages are not weighted according to trade volu
me or value)
In the WTO, when countries agree to open their markets for goods or service, the
y "bind" their commitments. For goods, these bindings amount to ceilings on cust

oms tariff rates. Sometimes countries tax imports at rates that are lower than t
he bound rates. Frequently, this is the case in developing countries. In develop
ed countries the rates actually charged and the bound rates tend to be the same.
A country can change its bindings, but only after negotiating with its trading p
artners, which could mean compensating them for loss of trade, one of the achiev
ements of the Uruguay Round of multilateral trade talks was to increase the Amou
nt of trade under binding commitments. In agriculture, 100% of products now have
bound tariffs. The result of all this : a substantially higher degree of market
security for traders and investors.
The system tries to imporve predictability and stability in other ways as well.
One way is to discourage the use of quotas and other measures used to set limits
on quantities of imports- administering quotas can lead to more red -tape and a
ccusations of unfair play. Another is to make countries' trade rules as clear an
d public ("transparent") as possible. Many WTo agreements require governmets to
disclose their policies and practices publicly within the country or by notifyin
g the WTO. The regular surveillance of national trade policies through the Trade
Policy Review Mechanism provides a further means of encouraging transparency bo
th domestically and at the multilateral level.
PROMOTING FAIR COMPETITION :
The WTO is sometimes described as a "free trade" institution, but that is not en
tirely accurate. The system dose allow tariffs and, in limited circumstances, ot
her forms of protection. More accurately, it is a system of rules dedicated to o
pen, fair and undistorted competition.
The rules on non-discrimination-MFN and national treatment- are designed to secu
re fair conditions of trade So too are those on dumping (exporting at below cost
to gain market share) and subsidiess. The issues are complex and the rules try
to establish what is fair or unfair, and how government can respond, in particul
ar by charging additional import duties calculated to compensate for damage caus
ed by unfair trade.
Many of the other WTO agreement aim to support fair competition: in agriculture,
intellectual property, services, for example. The agreement on government procu
rement (a 'plurilateral" agreement because it is signed by only a few WTO member
s) extends competition rules to purchases by thousands of government entities in
many countries. And so on.
ENCOURAGING DEVELOPMENT AND ECONOMIC REFORM :
The WTO system contributes to development. On the other hand, developing countri
es need flexibility in the time they take to implement the system's agreements.
And the agreements themselves inherit the earlier provisions of GATT that allow
for special assistance and trade concessions for developing countries.
Over three quarters of WTO members are developing countries and countries in tra
nsition to market economies. During the seven and a half years of the Uruguay Ro
nd, over 60 of these countries implemented trade liberalization programmes auton
omously. At the same time, developing countries and transition economies were mu
ch more active and influential in the Uruguay Round negotiations than in the any
previous round and they are even more so in the current Doha Development Agenda
.
At the of end the Uruguay Round, Developing Countries were prepared to take on m
ost of the obligations that are required of developed countries. But the agreeme
nts did give them transition periods to adjust to the more unfamiliar and, perha
ps, difficult WTO provisions particularly so for the poorest,"least-developed" c
ountries. A ministerial decision adopted at the end of the round says better-off
countries should accelerate implementing market access commitments on goods exp
orted by the least developed countries, and it seeks increased technical assista
nce for them. More recently, developed countries have started to allow duty- fre
e and quota- free imports for almost all products from least- developed countrie
s. On all of this, the WTO and its members are still going through a learning pr
ocess. The current Doha Development Agenda includes developing countries' concer
ns about the difficulties they face in implementing the Uruguay Round agreements
.

FUNCTION OF WTO :
The former GATT was merely a legal arrangement, while WTO is a permanent organiz
ation and it has a legal status, and enjoys privileges and immunities on the sam
e footing as the IMF and the World Bank. The WTO is the only international organ
ization dealing with the global rules of trade between nations. It has following
five functions as set out in Article- 111 of WTo (Debroy, Bibek 1996).
4.
The WTO' shall facilitate the implementation, administration and operati
on and further the objectives of this Agreement and of the Multilateral Trade Ag
reements, and shall also provide the framework for implementation, administratio
n and operation of the Plurilateral Trade Agreement'.
5.
The WTO' shall provide the forum for negotiations among its members conc
erning their multilateral trade relations in matters dealt with under the Agreem
ent in the Annexes to this Agreement'.
6.
The WTO'Shall administer the understanding on rules and procedures gover
ning the settlement of disputes'.
7.
The WTO' shall administer the Trade Policy Review Mechanism'.
8.
"With a view to achieving greater coherance in global economic policymak
ing, the World Trade Organisation shall co-operate, as a appropriate, with the I
MF and with the IBRD and its affiliated agencies'.
CHAPTER - IV
AN OVERVIEW OF BENEFITS AND DISADVANTAGES OF WTO TO INDIAN ECONOMY
The agreement is made up of 29 separate agreements', memorandums, declarations a
nd other ministerial decisions covering areas that had not been included in the
GATT. Some important agreements, which have significant implications for develop
ing and least developed countries in general and the Indian economy in particula
r are 8.
Agreement on Agriculture (AOA).
8.
Trade related Intellectual Property Rights (TRIPS)
8.
Agreement on the application of Sanitary and Phyto Sanitary (SPS)Measure
s and the Agreement on Technical Barriers to Trade (TBT).
8.
General Agreement on the Trade in services (GATS).
8.
Agreement on Trade Related Investment Measures (TRIMS).
1. AGREEMENT ON AGRICULTURE (AOA) :
The AOA aims to introduce certain ground- rules for trade and support policies i
nvolving agricultural products. In concrete terms, it aims to limit the use of a
gricultural policy instruments that have a negative effect or distort the world
trade. The Agreeement covers three types of agricultural policy instrument viz,
8.
Protection mechanism at borders,
8.
Export supports, since they directly affect tade and
8.
Production supports, which influence production volumes and prices and t
herefore affect trade indirectly.
The AOA included in the WTO agreement came into force in 1995. it is being imple
mented over a period of 6 years for developed countries and 10 years for develop
ing countries. The three components of AOA are market access, domestic support a
nd export competition. Market access aims to improve agriculture products' acces
s to all national markets by making the protection levels moer transparent, redu
cing them further and opening up domestic markets to imports. It covers tariff (
custom duties) and non- tariff (import quotas, variable duties paid upon entry i
nto a country minimum import prices and import licensing) barriers, which restri
ct the international trade. Domestic Support is distinguished into green, blue a
nd amber boxes according to their level of trade distortion. The green box subsi
dies are not subject to the reduction commitment and may even be increased. The
blue box subsidies are also not subject to the reduction commitment but cannot b
e increased. The amber box needs to be reduced by 20 per cent for developed coun
tries and by 13.3 per cent by developing countries over the implementation perio
d. Export subsidies are mostly used by Europe and US and not by majority of the
developing countries. Such subsidies have negative effect on world markets pushi
ng down prices and making it difficult to predict price levels, and discourage t

he production of importing countries because of unfair competition. A recent stu

dy by IFPRI, Washington has concluded that export subsidies by the developed cou
ntries affect the income of farmers of the developing countries to the extent of
US$ 40 billion per annum. Its effect on Indian farmers is about US$1.1 billion
per annum.
The provisions of AOA have major implication on Indian agriculture in general an
d on India's food producation, oilseed sector sugar industry and dairy sector in
particular.
INDIAN AGRICULTURE :
For Indian agriculture, the most important implication has been under the commit
ment for market access. The number of products on the list of quantitative restr
ictions was above 8000 in the pre-WTO period. With the list of such commodities
almost evaporating after the WTO agreement, a great threat of foreign agricultur
e commodities flooding the Indian markets is being perceived due to their relati
vely low prices. However, India has fixed high bound tariffs for agricultural co
mmodities at 100 per cent for primary poducts, 150 per cent for processed produc
ts and 300 per cent for edible oils. India can implement these tariffs as safegu
ards, which are considered sufficient to protect the relevant commodities agains
t cheaper imports due to high domestic support. However, the failure of market i
ntelligence and delayed implementtation of the tariffs may adversely affect the
domestic profitability of production (Chand 2000, Gulati 2001). The presently le
vied tariff rates are much below the bound rates and can be further revised in r
esponse to the production- consumption gap in case of some commodities.
The AOA commits members to open up access to their agricultural markets, cut tra
de- distorting domestic support and reduce export subsidies. It contains precise
rules on the progressive dismantling of subsidies. Yet this only applies to the
countries, which have hitherto subsidized their farm products. Countries, which
have not subsidized these product up to now are allowed to pay subsidies for a
specific period but only up to 10 per cent of the market price. This rule create
s substantial inequalities. It means that India can pay around US$ 1 billion in
support to its farm sector, whereas, the OECD countries can subsidize their farm
ers to the tune of US$ 320 billion annually, with WTO's blessings (Wilcke2002).
This threatens domestic profitability and production of the foodgrains in India
as majority of its population is still engaged in agriculture and a significant
proportion is surviving just around the 'poverty line.' The product support was
negative by as much as 35% of the value of output as the MSP provided was less t
han the external refernce proice determined under the AOA (Gulati 2001). The int
ernational prices have again been rising substantially after 2000 and these figu
res are again expected to the negative. As the entire expenditure on food securi
ty (PDS and public stock holding), payments under regional assistance programmes
and subsidies paid to resource -poor ot low- income farmers are exempt from dom
estic support reduction commitment, there is no problem in providing subsidies t
o agriculture sector as this support still comes to be negative. However, little
positive can be expected due to ever shrinking resources with government. The e
xport subsidies as mentioned in AOA, are however, not provided in India.
The major effort on the domestic front ensuring the viability of Indian agricult
ure has to be focused on raising productivity by stepping up public investment.
The development of infrastructure like irrigation rural electrification, roads a
nd markets has been a major causality sector has declined the nineties. The inve
stment in the agriculture sector has declined to 1.3 per cent of the GDP in 2001
as compared to 1.6 per cent in 1994. There is a strong complementary relationsh
ip between public and private investment and inadequate public investment could
lead to a lower private investment then desired. Further, the combined expenditu
re by the state and central government on agriculture research and education sta
gnated around 0.5% of agriculture GDP (Hanumantha Rao, 2001). The present govern
ment under the leadership of Dr. Manmohan Singh has taken several steps to boost
investment in agriculture. Yet, the there is bleak possibility of any major suc
cess on this front due to ever shrinking investible resources with the governmen
t.

INDIAN OILSEEDS SECTOR :

Indian oilseed sector, which was protected to attain self- sufficincy, was opene
d up in 1990s with ecomomic liberalization and siging of WTO. It has major impli
cations for the producer farmers as well as the consumers. The import of oil at
low tariff level has brought down the domestic prices of edible oils and oilseed
s. This fall in prices has surely benefited the consumers who pay almost half th
e prices for the refined oil than that could have been in the absence of imports
of edible oils. This fall in prices has adversely affected the economics of oil
seed crops in the country. Thus, the government has to chalk out a two pronged s
trategy aimed at optimizing the benefits of the producers as well as consumers.
The governemnt has increased the tariff level across the board for all oilseeds.
Though the current level of protection may be sufficient it cannot be said for
the future as the competitiveness is not static but dynamic. Therefore, a tariff
band can be fixed which would help the policy makers to respond quickly to chan
ges in broder prices of imports. As India imposes ad valorem tariff on imorts, t
he fall in international prices will lead to the fall in tariff amount. Therefor
e, it would be in India's interest to impose specific tariff (Singh and Asokan,
2000). However, the government policy should seriously aim at increasing the pro
ductivity of the oilseed crops (in terms of yields and oil contents), reducing t
he cost of production, improving the processing, transport and marketing infrast
ructure to achieve the overall competitiveness of India oilseed system to meet t
he challenges under the new international trading environment and to benefit the
consumers in terms of lower prices.
INDIAN SUGAR INDUSTRY :
The global sugar market is very thin because the major producers of sugar are al
so its major consumers. Only about 17 per cent of the world's total sugar produc
tion enters into the international market resulting in wide price fluctuations e
ven with a small change in the global demand or supply situation (Datta 2000). S
ugar has low price and income elasticities of demend. Rapid growth in the market
of alternative sweeteners, especially in the developed countries, has further d
ampened the global market prospects for sugar. Still the global market is quite
far from a competitive structure. The market is highly distorted in major develo
ped countries like EU. USA and Japan in the presence of quota and tariff restric
tion, beside large export subsidies. Since the world prices of sugar have been k
ept artificially low, Indian pricee is generally above the world the world price
s, thus creating a glut situation at home.
At present, Indian sugar industry is not export - competitive. Due to political
compulsions, the price paid to the farmers for sugarcane is very high compared t
o the statutory minimum price (SMP), which adversely affects the competitiveness
of the industry. In Haryana, the sugarcane farmers are being paid Rs.1100 per t
onne, being the highest price not only in India but also in the world. It is the
reason that most of the cooperative sugar mills are in the red all over the cou
ntry and sugarcane arrears of the farmers are pending to the extent of Rs.2000 c
rores. Hence, politics and economics cannot go together. At the SMP, the industr
y will be very competitive even with 30 per cent lavy quota and import of sugar
under OGL(lbid).the efforts should be made to integrate the firm and farm sector
for increasing competitiveness of the sugar industry (as for example the South
African Sugar Association SASA). Increase in installed capacity and crushing per
iod duration has positive impact on the competitiveness of the industry up to a
certain level. A very long crushing season, or too large a unit , however, may h
ave adverse impact on competitiveness in Indian industries. More recent sugar mi
lls with newer machineries and generally better recovery rates also display grea
ter competitive strength. However given the highly regulated policy environment
of the industry and poor global prospects, this result has not included entrepre
neurs to make massive investments in the sugar industry.
INDIAN DAIRY SECTOR:
For India, the expected benefits of fair and competitive trade liberalization wi

thin the framework of the AOA have not been realized. On the contrary, the subsi
dy policies still being applied by the OECD states, pose a major threat to India
's smallholder farming and above all, its dairy sector. The export subsidies by
OECD countries for skimmed milk powder amounted to 50 per cent, for whole milk p
owder to 60 per cent and butter and butter oil to 63 per cent. Indeed the EU sub
sidized butter oil to the tune of the 93 per cent, while the USA's subsidy amoun
ted to no less than 161 per cent. Due to massive subsidies by the EU and USA the
world market prices of buffer oil dropped below the Indian price, with the resu
lt that Indian imports of butter oil have risen from a previous figure of 282 to
nnes in 1995 to 18000 tonnes in 2000. India now fears that this subsidy policy c
ould be extended to other dairy products as well, possibly leading to a further
fall in prices, the domestic market price of butter oil has already dropped by 1
5 per cent since 1998 (Singh 2001, Wilcke 2002).
Major milk- exporting countries such as the EU, Australia and New Zealand may we
ll be prompted to exert more downward pressure on world dairy prices in order to
secure access to the Indian market with its population of over one billion and
very limited scope to impose protection measures with the WTO. The Indian govern
emnt has signally failed to capitalize on the various protection measures availa
ble to India within the WTO framework. A further threat to the Indian dairy sect
or is its lack of competitiveness compared with foreign milk products due to its
lower quality. Raising the milk quality by means of better hygiene in productio
n and processing, improvements in animal health and the introduction of new anim
al breeding programmes should be the key priority for the future along with furt
her increasing milk output. India is not a milk exporting country, which could c
ompete successfully on the world markets with major rivals such as New Zealand.
Australia and the EU. To do so we require substantial investments in quality imp
rovements the smallholder dairy farming structure in India, where dairying is st
ill a complementary activity with the crop farming, limits the possibilities of
private investments for such purpose and hence limited success in quality improv
ements. A focus on exports would also conflict with India's philosophy of selfsufficiency. For agricultural policy, still shaped first and for most by the exp
eriences of the 1960's and 1970's, primarily aims to ensure the country's self-r
eliance.
2. TRADE RELATED INTELLECTUAL PROPERTY RIGHTS (TRIPS):
Prior to the TRIPS Agreement, the intellectual property rights concerning the tr
ade (that included patents, utility, trade market and industrial designs) were g
overned by the Paris Convention of 1883, which was revised up to 1967. The paris
convention was fairly liberal and left the subject matter of patent, terms of p
atent and the duration of protection to be decided by the concerned national gov
ernments. The TRIPS Agreement covered eight types of intellectual property viz,
patent, trademark, copyrights, industrial designs, integrated circuits, geograph
ical indication, protection of undisclosed information and control of anti-compl
etion practices in contractual licenses. It is the area of patent where the adva
nced countries have a distinct advantage and a decisive lead and poses threat to
lndia(Sindhu 1999). TRIPS require all member countries to provide for strong an
d 20 year long patent protection to processes as well as products of both domest
ic and foregin innovations in all field including agriculture. It also erodes th
e authority of the governments to demand compulsory licensing of essential goods
in public interest and to regulate the prices.
Till recently developing countries like India largely kept their agricultural se
ctor outside the purview of IPR regimes to make technology affordable to poor pe
asants. Developing countries are thus provided aperiod to often years by TRIPS t
o reform their national IPR legislations. Till then, the developing countries mu
st provide for exclusive marketing right (EMRs) to innovations that have obtaine
d patent protection and marketing approval in any WTO member nation.
TRIPS AND INDIAN AGRICULTURE :
Recent worldwide expansion of I PR regimes has serious implications forsocial, e
cological and economic sustainability of Indian agriculture, public sector resea

rch institutions and the farmers(Ravishankar and Archak 2000).However even in th

e absence of IPRs, these public sector institutions have promoted narrow genetic
and technological base over the Last few decades, resulting in severe loss of a
gro biodiversity and traditional farming practices. IPRs mightfurther enchance t
his erosions besides fuelling bio-piracy and retard technology transfer(Gadgil a
nd Utkarsh 1999). Recent controversies over terminator and Bt-cotton technology
reveal the lack of public participation in the technology evaluation. However, t
he International Convention on Biological Diversity (CBD) has opened up vital sp
aces that we must occupy to bring in some benefits within the I PR framework, wh
ich we must inevitable accept. India must harmonize provisons of its patent act
as well as proposed legislation on plant variety protection and biological diver
sity. All these legislation must make it mandatory that all IPR applicants discl
ose genetic material accessed, its coutry of origin and prior public knowledge.
This information could be used to examine the novelty of innovation and share th
e resultant benefits including technology transfer with providers of the genetic
resoureces or relevant knowledge, for promoting their conservation. To protect
folck knowledge and practices, new forms of IPRs must be instituted such as regi
stration of land races and petty patents, besides information and material trans
fer agreements. These measures need to be complemented by an ongoing programme o
f the documenting knowledge and practices. This information must then be widely
shared through databases and networks with IPR authorities enterpreneurs and far
mers, for application of folk knowledge and practices. This would also help in d
issemination of appropriate technologies and promote prior public appreisal in a
n infomed fashion.
TRIPS AND INDIAN PHARMACEUTICALS :
One immediate consequence of the TRIPS Agreement will be a sharp increase in the
prices of drugs invented after the new product patent laws come into force in 2
005. The prices of four largest selling 'on patent drugs' are more than 10 times
higher in Pakistan, UK and USA, which recognize the product patents (Tablel). t
hus initially the TRIPS Agreement will only affect a small proportion of drugs a
vailable in India.
TABLE - 1
INTERNATIONAL PRICE COMPARISON FOR FOUR LARGEST SELLING ON PATENT DRUGS IN INDIA
S.No. Drug Name The drug is following times
costlier than in India
1.
Ranitidine
14.1
26.1
56.7
2.
Famotidine
14.0
27.1
54.0
3.
Ciprofloxacin 08.3
10.3
15.4
4.
Norfloxacin
03.2
06.5
23.2
Average overall drugs 09.9
17.5
37.3
However, the impact will gradually increase over time as virtually all new drugs
entering the market in future would be patent protected and many of the old dru
gs can be expected to become inffective overtime as the disease causing bacteria
or viruses develop resistance to them, thereby, forcing people to switch to the
new, more expensive drugs. Often, durg prices have little to do with the cost o
f production , or even in invention. The new combination drug therapy for AIDS p
atients being marketed in western countries at about US$ 10000, US$ 15000 per pa
tient per year has recently been offered by an Indian company CIPLA for as littl
e as US$ 300( Agarwal and Saibaba 2001). Thus, unless specific procedures or ins
titutional arangements are created to allow the price differences in developing
and developed countries, drugs will be greatly over priced and will be beyond th
e reach of a large fraction of population in developing countries. An importantl
y argument offered by the supporters of the TRIPS agreement regarding the world
welfare in the medium to long run in that the increased patent protection forinv
entors is necessary in the increasingly globalized world economy where flow of p
roducts among countries has increased rapidly so that the lack of patent protect

ion in developing countries may have serious consequences for the overall profit
s if pharmaceutical firms. This argument may have some merit even though the ben
efits may take some time to become visible. Thus, the TRIPS agreement may lead t
he pharmeceutical industry to do greater research into many of the serious disea
ses that largely afflict the populations of developing countries. This should br
ing benefits to developing countries in the medium to long run. There also exist
some specific problems with the TRIPS agreement that may harm the Interests of
the developing countries including India.
One such problem is related to the patent regime of WTO regarding a dispute over
the domestic bio-diversity legislation. Appropriate legal and institutional mea
ns must be provided for recognizing the rights of indigenous communities on thei
r traditional knowledge about their biological resources and traditional remedie
s, many of which are not well documented yet in written form. It will be a gross
abuse of patent laws if such knowledge of, say, various traditional herbal trea
tments of one country are given patent rights in other countries where such know
ledege may not be well known. It was shocking news to most Indians when some US
firms tried to patent basmati rice, the famous Indian variety of rice and some t
raditional remedies based on neem and turmeric which have been a part of the tra
ditional ayurvedic medicine system in India since ancient times. Very expensive
legal and socially wasteful procedures are needed to get such patent revoked.
AGREEMENT ON THE APPLICATION SPS MEASURES AND THE AGREEMENT TBT :
The SPS and TBT agreement involve standards aiming to protect the health and liv
es of people, animals and protect plant life, as well as technical standards suc
h as those on packaging and wrapping. Such standards are being increasingly deve
loped in the name of meeting consumer's needs. The WTO regulates the use of such
standards to prevent them being used as hidden barriers to trade.
Environmental and health related standards and regulations in developed country
markets have the potential to create barriers to trade. India has to adjust thei
r production processes in response to changing environmental regulations in deve
loped countries. Measures such as pesticide maximum residual levels (MRL) permit
ted in foodstuff, emission standards for machines, the packaging requirements et
c. have exerted pressure on exporters, however, what remains to be seen is the e
xtent of impact of these measures on trade. It is now widely believed that these
technical measures impede the trade of developing countries, either implicitly
or explicitly. The compliance with external eco-standards often necessitates the
import of inputs and technology, which are likely to raise the cost of producti
on and price of output. Since, the competitiveness of many Indian exports is bas
ed on the price factors, such a price rise could hamper India's competitiveness.
The low-valued products may be relativly more vulnerable. The sector affected b
y external environmental requirements are found to be India's vibrant export- or
iented sectors such a as leather and leather products, textiles, chemicals, mari
ne products, tea and other agricultural products.
AGRICULTURAL AND MARINE PRODUCTS :
The share of agricultural exports in total Indian exports declined from 30 to 22
per cent over the last decade. A number of agricultural products from India are
facing SPS related problems (Table-2). Some of the quarantine restrictions for
fresh fruits and vegetables imposed by many countries are also not based on scie
ntific justification. The compliance cost for exporters at times is prohibitivel
y high. Food and agriculture form an important part of exports from India. Recen
tly, attempts have been made to widen the range of exports resulting in the prom
otion of high value- added items such as processed agro and marine products. The
re are growing concerns that non- tariff barriers may undermine the benefits of
free access to the OECD markets' stringent and sometimes- arbitrary environment
related regulations. Over the Period August 2000 to July 2001, there were signif
icant rejections of imports from South Asia due to microbiological contamination
and filth. More than 40% of the rejections of exports from India were due to th

is reason (Chaturvedi and Nagpal 2003). Other than those inadequate food additiv
es, the presence of pesticides residual and heavy metals, and low-acid canned fo
ods are commonly cited reasons for contravention. More sophisticated monitoring
and testing facilities, and therefore, more costly procedures, are required for
meeting these regulations.
On top of that, the cost of rejection at the border can be considerable as it in
cludes loss of product value, transport and other export cost, and product re-ex
port or destruction.
TABLE -2
MAJOR SPS SANCTIONS AGAINST INDIAN AGRICULTURAL AND MARINE PRODUCTS
Year
Imposing Nation
Indian Exports
Reasons cited for Prohibiting entry

Tea
Fresh or Frozen Shrimps Fruits and vegetables
Shrimps
Cooked Shrimps Milk
1995
1995
1996
1997
1996
1989 1999 1983
Germany
US
US
US EU
EU EU
UAE and Saudi Arabia
Groundnuts Buffalo meat
Pesticide residue
Filth, decomposition and presence of salmonella Does not conform to the health s
tandards set by the US
Caught ith turtle excluding devices
Usage of benzoic acid as an additive
Usage of milk hormone Presence of aflatoxin Presence of cattle plague
Source : Banik (2001).
The export of marine products had grown significantly as one of the important it
ems of India's export from a few million US dollars in 1961-62 to US $ 1106.9 mi
llion in 1997- 98, accounting for approximatetly 3.32 per cent of the total expo
rt from India. In 2001-02, it had as share of 3.13 per cent in total agricultura
l exports (Ibid). The US ban on Indian shrimp products was a unilateral restrict
ion based on environmental reasons. The US lost the case at WTO when India and o
ther affected countries challenged the ban but it adversely affected the Indian
shrimp exports.
TEXTILE EXPORTS:
Textile exports account for 55 per cent of India's export earning. This sector t
akes up 4 per cent of GDP and 1 per cent of industrial products and employs 15 m
illion people. Around 40 per cent of India's textiles are directed to the EU, bu
t the stringent environment conditions in developing countries have adverse cons
equences for India's exports. The use of dyestuffs such as cobalt blue and sulph
ur black have been totally banned in the intermational market. Though viable sub
stitutes have been explored, switching over to them entails investments of over

US dollar 13 million, mainly for the up-gradation of technology and new treatmen
t plants in order to obtain the requistite quality(lbid). It will adversely affe
ct the cost competitiveness of the Indian industry.
LEATHER INDUSTRY :
India, which has largest holding of livestock in the world, is expected to play
a dominant role in the leather industry, which is spread over the organized as w
ell as unorganized sector. Exports from the leather sector today account for abo
ve 4.3 per cent of total export. Germany is the largest single export market of
Indian leather goods besides France, UK and Italy. On environmental standards, t
he leather industry face problems on both the domestic and external fronts. Rest
riction on the use of certain chemical dyestuffs and several other mandatory reg
ulations in major export, markets pose serious problems for the leather sector.
The increasingly stringent export standards have contributed to a rise in the co
st of production, especially in the leather sector where costs using the more en
vironmental friendly methods are nearly three times higher.
GENERAL AGREEMENT ON TRADE IN SERVICES (GATS):
The general Agreement on Trade in Services (GATS) was one of the agreements sign
ed under the purview of WTO in 1995. The central idea of GATS is that progressiv
e liberalization of trade in commercial services will promote economic growth in
W TO member countries.
GATS, HIGHER EDUCATION AND EDUCATIONAL SERVICES:
The system of higher education within India is palgued with appalling disparitie
s. These existing disparities of availability, quality and costs could skew the
pattern of future growth. Private participation in education has already created
a polarity, which would only worsen international as internaational participant
s enter the scene. The higher concentration of institutions is already leading t
o a large- scle education migration within the country. This educational exodus
will exacerbate as more and more institutions open the same areas. Opening up of
the sector to international institutions, caused by the trade agreement, could
deepen the regional disparity, mainly because the areas where the infrastructure
for higher education is already avilable, would be benefited more. At present,
India does have some areas of potential opportunities in higher education, which
could be supplemented with appropriate policies. However, in an unequal and dis
similar higher education scenario, the potential opportunity areas may further p
olarize the sector(Sahni and Kale 2004). In fact when marketization takes place
in an area as important as education, even the earlier and existent policies may
get sidelined. The effects of such skewed development can last long and will be
difficult to retrace one it sets in.
As per article 1.3 of GATS, government services remain outside the purview of GA
TS, provided they are not meant for commercial purpose and have no competition f
rom private sector suppliers. Hence, educational services come under GATS trade
liberalization since the private sector service providers are in direct competit
ion with government-run institutions . Shrinking budgetary resoureces for educat
ion in no way are helping the cause of promoting knowledge in India. Even if the
government substantially increases its educational spending via deficit finacin
g, it amounts to an inflation tax. Hence, private sector participation and trade
in educational service seems imperative. With abundant qualified human resourec
es india, must export educational product that use our human resources intensive
ly. India has to pay serious attention to the GATS agreement or applicable to ed
ucational services, identify opportunities and cometitiveness in various sub-sec
tors and negotiate WTO commitments accordingly (Deodhar 2001). India has long ex
perience of providing educational testing services and some world-renowned names
are such as Common Admission test (CAT) of the IIMs, Joint Entrance Examination
(JEE) of NTs,NET exmaination of CSIR- UGC and Graduate Aptitude Test in Enginee
ring (GATE). If the experience of these services is adapted for various fields a
nd if such services can be offered on round the year basis with sufficient compu
terization and use of the Internet facilities, India stands to gain from liberal

ization of such services.

E-COMMERCE:
The InfoTech industry in India grew from $ 50 million to $5 billion in the 1990s
and according to the ministry fro IT may grow to $100 billion by 2010, making a
s a new economy of India. Indian could earn $1 trillion annually by sale of info
rmation work alone on the basis of outsourcing for the industrial economies whic
h have white collar jobs valued at $10 trillion assuring 50 million persons and
$ 20000 as annual remuneration. Hence, WTO provides wide opportunities for the I
ndian IT sector to grow and earn foreign exchange for the country.The facilitati
ve role played by government to boost this sector need to be continued to realiz
e higher goals of income, employment and foreign exchange earning from this sect
or.
AGREEMENT ON TRADE RELATED INVESTMENT MEASURES (TRIMS):
It aims to get rid of certain practices imposed on companies by the State and on
which their activities or admission to national market depend (e.g. the commitm
ent to purchase or use products of national origin). India can benefit from TRIM
S by capitalizing on the key areas where increased investments can contribute im
mensely to the economic growth in future and where scarce supply of capital exis
ts from the domestic resources. The present requirements for capital for upgradi
ng, expanding and modernizing the agricultural, industrial and services sector i
n India are so large that we just do not have the resources to invest in them. F
or example in the telecommunication sector, the domestic resources (public and p
rivate) would not be sufficient for necessary capital investments and also the f
oreign investment is required for concomitant technological and managerial exper
tise, which may not be present in India. Even in respect of financial services a
nd insurance more FDI is welcome.

CHAPTER-V
GOVERNMENT POLICIES
At the time of independence Indian share in world trade was 2%, which declined t
o around 0.4% over the Next two decades, thanks to the Import substitution polic
y followed. India made no significant tariff. Concession either at the Kennedy o
r Tokyo round of trade Negotiation, since it would have defeated the very Purpos
e of the Import substitation Industrialisation Process. A major proportion of In
dia lost market was captured by the East & South East Asian countries.
There was a half-hearted effort made in the seventies to boost exports, resultin
g in the increased export of garments, gems and jewellery and several engineerin
g goods. In the late-eighties a more serious effort followed, which, however, in
the face of liberalisation of import licenses ended up by worsening balance of
payments. The chief reason behind the inability of exports to grow was that it w
as still considered as an instrument of financing the imports necessitated by a
growing economy and not an independent policy variable capable of enhancing econ
omic growth by itself.
But there was a qualitative difference induced by a quantitative factor of the l
iberalisation exercise. Imports grew so rapidly due to rising GDP growth that ex
ports too needed to grow rapidly as well . Thus India could not remain content w
ith the sedentary pace of export growth as was witnessed in the 1970s. However i
n order to achieve this , tariff concessions made by India's trading partners we
re of vital importaance and as such they would hardly be forthcoming if India di
d not give conessions in return.
However certain other developments started playing a major role. Developed count

ries at one time not all that concerned about competition from developing countr
ies started to change their attitudes once goods from East Asia started to - out
compete local products. As de-industrialisation started to take place and jobs
started to get lost, protectionism in Asian economices started to draw ever-incr
easing attention. From simply negotiations on tariff Reductions, the Uruguay Rou
nd of Trade Negotiation which started in 1986 aimed at seting up a New Global Ec
onomic Order where Trade in goods and Services would be carried out in an intern
ational regime where there existed clear, enforceable international trading rule
s. Not only were drastic tariff reductions called for quotas were sought to be r
eplaced by their respective tariff equivalents. Certainly in 1986, the internati
onal regim that was envisaged was not compatible with the economic regime that e
xisted in india at that point of time. It is another story that when this regime
finally came into place. India's economic regime had changed. For one, a strong
er Intellectual property Right regime was incompatible with India's domestic pat
ents regime that recognised only process patents for items like madicine. While
Indian pharmaceuticals flowered and prospered under this regime as they were abl
e to reverse- engineer almost any drug produced developed abroad(thus free-ridin
g on the inventions of other) while at the same time enusuring (through India's
durg price control orders) that drug price in lndia;s were among the lowest in t
he world, the same regime also ensured that Indian companies did not invest in m
olecule development. Similarly to allow free movement of capital was also not co
mpatible with a regime that depended on licences and quotas to direct investment
. In short India's lincence-quota regime was incompatible with what was being pr
oposed.
INDIA AFTER 1991 :
That India disbanded the Nehru-Mahalanobis Model in 1991 was not due to its icom
patibility with the coming global order but because it was deemed to have failed
in her pursuit of economic growth and economic develop-ment (however defined).
But by doing so, it became willy-nilly compatible with a WTO governed internatio
nal trading order even if arguably some provisions militated against Indian inte
rests. What made this order essential to Indian interests was the fact that afte
r 1991. the stated objective of the policy makers to go for an export led growth
strategy rather than one where aggregate demand led by state expenditure.
Figure -1
Thus the goal of open markets world-wide became imperative indeed cucial for eco
nomic growth. To this end allowing reciprocal access became inevitable and in so
far as this faciliated cheap capital goods or inputs, even welcome. That certai
n sectors promoted by the state would face import competition was no longer impo
rtant : the sword-arm of economic growth would be the export sector and these wo
uld be in areas where india had a comparative advantage.
But at the time when the P.V. Narasimha Rao-Manmohan Singh duo intrroduced the p
rogramme of economic reforms, this was stated in defensive terms; that India had
no choice but to globalise.Thus on issues like foreign direct investment there
was a good amount of diffidence with India arguing for investment only in select
ed areas, "in silicon chips not potato chips." So while trade in goods was accep
table, acceptance of foreign direct investment was not. Additionally, a stronger
regime on property right (especially, on pharmaceutical) was not seen to be in
India's interests as that would mean Indian Patients Paying a higher Price for m
edicine while the Indian drug manufacturer would no longer be able to reverse en
gineer the latest drugs with impunity. While FDI could conceivably produce some
gainers in lndia(undoubtdly, the consumers), a strong Intellecutual property Rig
ht regime would cause all to lose (save the Indian innovator then an ascent clas
s). India's firm opposition to an agreement on both these Issues, given the furi
ous opposition domestically to concessions on TRIPS and TRIMS, saw to it that In
dia was left isolated and the Dunkel Draft which became the basis of the WTO agr
eement contained a strong regime on both these issues. A similar event was notic
ed on the question of including agriculture under the purview of GATT/WTO. since
it was considerd the backbone of the economiy. It was hardly doubted that the f

armers would lose out in the face of international competition, coupled with the
granting of seed right to MNC firms. Thus for the first time India's domestic e
conomic regime came to be constructed by her commitments to an international tre
aty, not domestic interst. This is not to say that a strong IPR regims is inimic
al to India's interests but when that was not why India would have to legislate
to ensure it.
However two years after the introducation of economic reforms, the economy start
ed to grow, mainly being powered by exports lending credibility to the governmen
t and discrediting all those who had prophesied doom for the economy following r
eforms. Unlike the growth in the eighties that had given to rise to a Bop crisis
, this export led policy ensured an improvement in the Bop instead. It is on this
economic high that the governemnt (isolated in its bid to have its way on both
investment and intellectual property right) signed on to the Merrakech Agreement
. What was worse was the fact that for the ten years the Multifibre Agreement en
abled the developed countries to place quotas on exports of textiles and garment
s from countries like India in favour of countries like Bangladesh. What made th
e agreement palatable was that the first ten years after the formation of the WT
O was announced to be its transition phase during which the members countries we
re allowed to bring their legislation in line with WTO norms.
In all India did not adopt a pro-active approach at the multilateral level in th
e Uruguay Round of Negotiation although she participated in the process since 19
86 (Table-1). Although the country became a signatory member of WTO in 1994, in
spite of the internal debate over inclusion of agriculture and TRIPS, it was sti
ll unsure about the negotiation strategy to be pursued. The initial response of
India boiled down mainly to demand for increased market- access and extended cov
erage of special and differential treatment to developing countries.
The major reason for the relative inaction of India in multilaterl forum during
the later phase of Uruguay round was the higher export growth rate the country w
itnessed during the early- nineties. After the liberalisation in 1991. India exp
erienced a double digit growth in exports, something spectacular in India, going
by past experience. In other word, there was no immediate compulsion for adopti
ng a pro- active negotiating strategy for obtaining higher penetration into prin
cipal export markets. It may be stated out here that unlike growth in the 1980s
which was debt-led and thus unsustainable, this growth in the first of the ninet
ies was accompanied by a falling Central government debt-GDP ratio. As compared
to the 1980s when this ratio rose from 39 per cent in 1980 to (Figure-2) to 51 p
er cent in 1990 the ratio actually fell to 47 per cent in 1996 when the economy
boomed. This ratio started to rise only after the economy started faltering.
TABLE - 1 INDIA AT THE WTO MEETINGS
Outcome
India's Role
Information Technology Agreement was signed. In addition four new issues were di
scussed. Trade and Invesment competition policy, Transparency in Government
Mere presence
Mere presence
Procurement and Trade Facilitation Global E-commerce Agreement was Signed Also,
the implementation issues were discussed.
The negotiations failed as several developed countries wanted to incorporate env
ironmental and labour-standard related issues under the wings of WTO. The move w
as strongly opposed by developing countries.
A new round was launched and the concerns for developing countries like India (e
.g.TRIPS and Public Health) were attended. The market access and implementation

issues were also given due notice.

Was vocal against introduction of environmental and labour- standard related iss
uesunder WTO.
Mostly sigled out in its protest. However, made its presence and position felt f
or the first time.
No.of Place of Year
Outcome
India's Role
Ministerial Occurance
Cancun 2003 The members could not arrive at a
common viewpoint even on the last date of the conference. The ministerial decide
d to take stock of progress in negotiations and other work under the Doha Develo
pment Agenda. The developing Country solidarity at the ministerial was formed fo
r the first time.
Geneva 2004 Five member countries came
Actively protested against EU-US draft on agriculture jointly with other develop
ing countries.
Played a constructive role in the process while protecting developing countries
interests.
forward to create an atmosphere for initiating multilateral negotiations once ag
ain.
Source:
Compiled from WTO Ministerial Declarations and other documents.
Figure -2 Trends in the Debt-GDP Ratio
Year
Unfortunately India allowed herself to be guided by this mindset even during ear
ly days of WTO. The first two ministerial meetings were held at Singapore (1996)
and Geneva (1998) respectively, where various provisions of the agreement were
discussed and the state of their implementation was reviewed. In addition, two n
ew agreements namely, Information Technology Agreement and Global E-commerce Agr
eement were signed in these meetings. This was at a time when India's IT exports
started to take off! Fortunately the agreements inked on these issues have actu
ally helped e-commerce and not gone contrary to India's interests. The Singapore
ministerial was particularly important as it agreed to discuss in future on fou
r issues, (1) Government Procurement, (2) Trade and Investment. (3) Trade and Co
mpetition Policy and (4) Trade Facilitation Collectively known as Singapore issu
es. In addition the negotiation over implementation of other Uruguay round provi
sion was also in progress, the extent and coverage of which was debated among me
mbers.
The road between Singapore and Seattle was not rosy one for India owing to numbe
r of reasons. First of all, the export growth rate decelerated in the second par
t of the nineties. The disadvatages faced by the export sector were intensified
after the East Asian crisis, when the exchange rates of a nimber of countries in
that region were devalued. On the other hand, the service sector fast emerged a
s a major foreign currency - earner and the urgency to ensure free trade in this
arena (or, at least in Mode 4. i.e. movement of professionals) was intensely fe
lt. It was noticed while tariff barriers decreased to some extent in the post WT
O period several WTO compatible nontariff barriers through usage of higher stand
ard (e.g. SPS- TBT measures) and contingency provisions (e.g. anti- dumping meas
ures, safeguard provisions) have spuring up limiting the impact of elimination o
f traditional NTBs (e.g.- import quota). Non realisation pf proposed level of ma
rket access in developed countries emerged as a major source of dissatisfaction.
In addition, the developed countries wanted to incorporate labour and environme
ntal issues under the wings of WTO much to the annoyance of the their developing

counterparts.
However, the most important factor responsible for enhancing India's participati
on in WTO negotiations was the outcomeof the dispute settlement cases involving
her. In general, the period between 1995 and 1998 witnessed a substantial rise i
n the number of cases in WTO's dispute settlement mechanism. India was among one
of the victims of this provision as a number of developed countries moved to th
e dispute settlement body complaining about the WTO compatiblity of Indian polic
ies. The comlaints revolved mainly around IPR, import provisions on BoP grounds
custom duties and trade and investment in motor vehicles sector. A total of thir
teen case were filed against India during this period. While India lost in most
of the cases, the others were 'amicably' settled implying opening up of the dome
stic market. However the cases like the 'shrimp turtle' dispute (DS 58) proved t
hat traditional export items of India are very much vulnerable to external barri
ers.
On the other hand, India won three cases on import provisions of textile product
s during this period. But the non- realisations of market access proposed during
Uruguay round and increase in NTBs, coupled with forced liberalisation (i.e. su
bstantial opening up of domestic market after numerous defeats/setbacks at the D
SB) caused India to seriously weigh a pro-active negotiating strategy in associa
tion with other developing countries. However, it should be pointed out that a f
ew of the other developing countries were thinking along this line. As sally (20
00) pionts out." there are issues on which all developing and transition countri
es have common interests such as resistance to trade sanctions to enforce labour
and environmental standards credit for unilateral liberalisation and technical
support for dispute settlement.Here a united front would enhance bargaining powe
r."
In the Seattle Ministerial (1999), India was vocal at the multilateral forum for
the first time, protesting against a developed country initiative to incorporat
e labour and environmental standards under the aegis of the WTO. Due to the prot
ests of the developing countries, the devloped countries were not successful in
incorporating this element in the agenda. The Ministerial meeting ultimatly ende
d failure as the members could not arrive at a mutually agrreable solution. The
then commerce Minister Mr. Maran viewed the Seattle outcome as a success for Ind
ia as for the first time, developing and poorer countries were united mutual int
erest. The Ministry of Commerce officially held the view that another ministeria
l meeting should be convened only after arriving at a broad consensus among memb
ers on major issues and the agenda for it must include removel of the contentiou
s non-trade related issues and the concerns of developing countries over product
patents. In connection with the latter point. India also became vocal in favour
of introducing a system for granting of Exclusive
Marketing Rights (EMRs) to the applicant countries fulfilling certain conditions
.
During the Seattle-Doha period, India for the first time, started communicating
its dissatisfaction over several issues and sharing its position with other coun
tries at various appropriate forums of WTO and other international bodies. Broad
ly speaking, a clearly distinguishable and proactive stand emerged before the Do
ha ministerial and india became particularly concerned with (i) nonrealisation o
f anticipated benefits(e.g.- Agreement on Textiles and Clothing and Agreement on
Agriculture), (ii) inequities and imbalances in WTO (TRIPs, Subsidies, Anti-dum
ping etc.) and (iii) non- binding nature of special and differential provisions
(market access, DSB etc.). In short India strongly objected to be inclusion of a
ny new issue in the negotiating agenda before realisation of Uruguay round promi
ses, the non implementation of whichwas costly to developing countries.
TRIPS and DSB (this time,India was a comlainant) provisions also played a crucia
l role during this period .An India firm, Cipla was exporting a generic version
of HIV/ AIDS drugs to South Africa at an affordable price in early 2002. However
under massive pressure from a number of countires. South Africa finally stopped
importing the drug. This was a major source of-discontent to the African countr
ies and India. Months before the Doha ministerial India in association with 46 o
ther developing countries submitted a joint proposal on "TRIPs and Public Health

." The proposal demanded the WTO should ensure that the TRIPs Agreement does not
infringe upon the sovereign right of the members to formulate their own public
health policies and adopt measures for providing affordable access to medicines.
On the other hand, at the DSB India successfully challenged a number of cases r
elated to textile products and the sequence of events compelled it to stress mor
e on a proactive strategy.
However during the Doha meeting, India was isolated on various issues and surpri
singly Pakistan emerged as a major ally in most of the tussles. EU, US and other
developed countries were in favour of initiating a new round and as things turn
ed out, several developing countries were either not averse to this concept or a
t best in different to it. In addition, a formidable section of developing conut
ries also favoured discussion on the Singapore issues. In spite of the isolation
India held its stand that any new round or topic of discussion should only be p
ut in the agenda after realisation of the Uruguay Round commitments. The polar d
ifference between the two sides made India's voice particularly audible for the
first time at a ministerial meeting .At the end after a series of negotiations,
India consented on a joint ministerial declaration widely known as, 'Doha Develo
pment Agenda.' Although India's concerns were morally acknowledeged, the effecti
veness of future market access still depended on the reforms carried out develop
ed countries. In other words, the absence of sufficient bargaining power due to
lack of any strategic alliance with other developing countries, constrained Indi
a's success. However, the then Minister of commerce Mr. Maran commented that "In
sum the Doha mandate will not in any way harm us; on the contrary, we have subs
tantial gains." Officially India in dentified the following areas as gain in the
Doha ministerial.
Implememtation issues were given due importance.
*
ILO had acknowledeged as the appropriate forum for discussing labour-rel
ated concerns.
*
Market access issues in agriculture were discussed and Special and Diffe
rential Treatment for developing countries was focused.
In services the importance for ensuring free movement of natural persons has bee
n acknowledged.
*
A separate declaration on TRIPS and Public Health was included in the Do
ha Development Agenda in which India played a key role.
Negotiations in the area of market access on non- agricultural products were dis
cussed while the special needs and interests of developing countries were acknow
ledged.
The Council for TRIPS was assigned to address the issues of biological diversity
protection of traditional Knowledge and folklore.
Buoyed by the success achieved at Doha, India tried to utilise the two year peri
od before cancum in a much productive manner and coalition formation experience
with other developing countries were fruitful not only for general agreement tha
t affected merchandise and services trade, but also in case of institutional arr
angements like dispute settlement. The movement towards a pro-active strategy at
the WTO was accompanied towards implementing an increasingly WTO compatible reg
ime at home (Table-2) and frustration mounted at not obtaining the desired level
of market access in principal export destinations . In canvcum Idia principally
negotiated over liberalisation of agriculture trade in services in particular M
ode 4 of the later.20 In line with the concren raised at Doha. India was extreme
ly particular about ensuring transparency in the negotiations to take place in C
ancun ministerial.
While in case of Mode-4, India concern circled around transpaency in granting of
visa procedures in developed countries and varios other procedural bottlenecks;
the debate over agriculture trade circled arond the distortions caused by the s
ubsidisation schemes of EU and US, where the realised PSE or AMS levels are quit
e high. Since the Doha round EU has promised to reform its domestic policies sev
eral occasions but has delivered little. To make things worse, a fewdays ahead o
f Cancun, EU and US jointly came up with proposal; completely bypassing the issu
e of agriculture reform in Cancun Ministerial focusing on non-agriculture tariff
related issues instead. Several developing countries led by India, Brazil and C

hina came out with an alternate proposal and successfully blocked the EU-US plan
. The emergence of G- 20 as a bargaining group and the solidarity between them m
arket the beginning of a new era in WTO negotiations.
The Developing Country members (G- 20 and other) made it clear that the 'Darbez
Draft' released at the ministerial, could not be taken as a basis of negotiation
in future. For more than seven months, there was a deadlock in negotiations and
only in July 2004 five member countries including India came forward for a disc
ussion. The discussion, although not entirely fruitful, at least paved path for
future negotiations along the declaration known as 'July text' In addition the i
ntensity of proactive approach was further noticed in the sharp increase.
TABLE - 2
Policies Praised
A COMPARATIVE ANALYSIS OF THE TWO TRADE POLICY REVIEWS ON INDIA
Trade Policy Reviews (1998)
Policies Where Further Reform Advocated
Rapid reform in tariff rates over 1993- 94 to 1997- 98 Overall economic reform m
easures. Amendment in Copyright law in line with TRIPS.
Complex structure of tariff regime and tariff escalation Import restriction on c
onsumer goods. Restrictive import licenses and other procedural hassles on impor
ts.
Presence of indirect subsidies, export subsidies and other incentive.
Unifinished compliance with TRIPS. Reform in case of agricultural products. Tran
sparency in decision making. Reform in services.
Trade Policy Reviews (1998)
Policies Praised
Policies Where Further Reform Advocated
* Simplification of Tariff structure. Increase in use of contingency measures
on import.
Complete elimination of quantitative restrictions.
Wide range of price and
distribution controls in
agriculture.
* Reduction in export restrictions.
Existence of certain commodity specific
entry
restriction.
* Review of FDI policy.
* Move towards full conformity with TRIPS.
*
Significant reform in certain key service sector e.g telecommunication. financial service and to some extent
in infrastructural service.
Source : Compiled on the basis of the country Review on India (WTO 1998, 2002)
in the number of joint submissions at WTO, ranging from agriculture to services.
Interestingly the Indian submissions to WTO, both joint and individual, stresse
d both export promotion ( enhancement of market access) and domestic protection
(e.g. provision of special products, special safeguard mechanism in agriculture)
much vigorously. On the other hand, domestic reforms have been regularly undert
aken in order to enchance compliance with WTO. The adoption of the 2005 patents
ordinance and its subsequent tabling in Parliament, in spite of the domestic opp
osition, its the best example of it.
However, if we are to measure the trajectory of India's learning curve by a sect
or- by sector basis, two area stand out immediately. The first is anti-dumping w
here India has transformed itself from the major affected country to an aggresso
r becominge quick to intiate investigations. While in the mid- nineties it was o
ne of the major affected countries, during the last years it has topped the list
by being the initiator of the maximum number of anti-dumping investigations (Ta
ble- 4). The last two cases faced by India at the WTO have been on account of th
ese investigation. In fact, the last case has been lodged by Bangladesh ( the fi

rst time, a developing

The
TABLE-3
An Analysis of India's
Subject Area
1997
Total
Agriculture
7
34
(-)
(-)
Competition Policy
/ \
3
i \
0
/ \
1
/ \
0
i \
2
/ \
0
0
/ \
Dispute Settlement
0
(-) 5
Environment
/ \
2
/ \
0
/ \
0
/ \
0
/ \
General Council
(-) 51

country has filed a complaint against India at the WTO).

Submissions at WTO
1998
1999
2000

2001

2002

2003

2004

(-)
1

(3)

(1)

(-)

(4)

(2)

(10)

(-) 0

(-) 0

(3)

(1)

7
\) 0

(4)

2
3
0
8

(-) 4

29

(-) 1

(-)
Investment
1
12
(-)
(-)
Non- Agriculture
0
5
Market Access
(1)
WTO Rules
0
/ \
5
/ \
0
7
/ \
Services
3
(-) 18
(-)
(-)
TRIPS 0
0

(9)
1

(-)
4

(5)
1

(1)
1

(7)
4

(1)
0

(23)
0

(-)
0

(-)
0

(-)
0

(1)
0

(1)
4

(-)

(1)

0
3 i \
/ \

1
(1)
7
(2)

(-) 1
(1)
4
(4)

(-)
4
(3)

(1)
(1)
(-)
2
7
4
4
(-)
(2)
(4)
(3)
(The numbers in the parenthesis indicates the number of

0
1
0
(-)
0

2
(-)
WTO Rules Services
TRIPS

number of the joint submissions)

(The numbers in the parenthesis indicates the

(-) 5

(3)
(4)
(9)
1
1
19
(1)
(1)
(11)
the joint submissions)

secod area where India has evolved is with regards to its outlook towards region
al trading arrangement. Not too long back, India was unhappy with the growth of
regional trade agreements, which was constraining its market access. However fro
m 2003 onwards, i.e. from Cancun days, it has initated negotiations on prefernti
al access with a number of developing countries, which would clearly help it in
guaranteeing an assured export market on one hand and an ally in future negotiat
ions on the other.
Also indicative of India's evolution is the proactive nature of its serivce nego
tiations. The shrill rhetoric of the pre-1994 period of the simplistic equation
of free flow of capital with labour has been replaced by a more nuanced approach
that fully recognises the concerns of countries receving immigrants. This has b
een no doubt due to her performace in IT and IT enabled service where crossborde
r service will be increasingly important in the years ahead. But also the nature
of movement of natural persons that india's IT exports require enable india to
qualify demands for concessions on Mode 4 laying stress on educated labour (a mo
ve that dose not rise visions of immigrant hordes taking over host countries).

TABLE - 4
A Comparison of
Period India
A
1 January 19956
1 January 199621
1 January 199715
1 January 199815
1 January 19991 July 19991 July 20001 July 20011 July 2002-

Anti- Dumping Case between EU, India and the US

EU
US
B
A
B
A
B
31 December 1995
5
3
33
21

13

31 December 1996

20

10

23

35

21

31 December 1997

13

41

59

16

31 December 1998

33

12

21

42

22

6
11

32
49
29
23
15

20
32

28
29
77
58
29

7
10

30
30
30
30
30

June
June
June
June
June

1999
2000
2001
2002
2003

40
27
37
76
67

12
12

39
32

11
12

It is pertinent to point out what the WTO dose for India - by supplementing Indi
a's internal market with the global market offers India the opportunity to utili
se its most abundant factor labour both skilled as well as not so skilled :
It offers the opportunity to supplement its meager capital with investment from
the rest of world to enhance growth,
It allows Indian entrepreneurs to plan for global markets given the fact that th
eir export destinations have to be governed by laws that are WTO compatible and
thus are rule based and not run by administrative fiat.
How India Utilises this opportunity is a separate matter. For example, India's e
xport performance depends on a great deal on what the state delivers on the infr
astructure front. India's infrastructure is woefully inadequate to cater to indu
stry as well as agriculture and erodes competitiveness in both sector. This can
either be remedied by investment by the state and/or by instituting reforms to l
et the market paricipate in the solution of this problem.
This is true to varying degrees whether it be irrigation, port facilities, railw
ays or power. It is India's shortcomings in this area as well as irrational poli
cies that limit firm size (to deny scale economies) in precisely those where Ind
ia possesses comparative advantage that has led to the Indian exporter to be at
a disadvantage vis a vis his Chinese counterpart not necessarily (as some argue)
because the Chinese worker is more productive. It must be pointed out however t
hat an agreement of Trade Facilitation will in all probability improve India's c
apacity to engage in international trade significantly.
Equally important, it must be remembered that India cannot be seen as any other
LDC. India's (and certainly China's) level of development has endowed both econo
mies with industrial structures and institutions with the help of which they can
mount export initiatives in an array of different sectors. In the same vein, bo
th countries (certainly India) can use provisions on TRIPS to provide for cheap
medicine against pandemics like AIDS. In this situation India's performance in t
he global econony under the aegis of the WTO will be better than aa uni-commodit
y LDC and therefore its negotiating positions are different. For example, Where
many LDCs with an employment problem would be interested in securing concessions
on the movement of natural persons. India would be satisfied with concessions i
n the area of cross- border services and consumptions abroad, given the phenomen
al growth in Business Process Outsourcing aided by revolutionary developments in
telecommunications, Informations Technology that have utilised India's large po
ol of English- speaking professionals.
With regard to the stated objective of WTO to achieve policy coherence with the
bank or the fund, this must be some time off. Given the dual nature of the econo
my in India where given severe institutional shortcoming markets do not clear (l
eading to situations that there exist massive food surpluses along with underuti
lised labour) Keynesian policies even when they breach the demands for fiscal di
scipline cannot be wished away. Indeed, if deficits are due to productive expend
iture (irrigations projects placing orders with Bharat Heavy Electricals Limited
to Builed power plants). They may be totally non- inflationary. It may be noted
however that had government procurement been taken for discussion at the WTO Ke
ynesian policies aimed at boosting domestic demand even via productive expenditu
res may not have been compatible under WTO law.

CHAPTER-VI
IMPACT OF WTO ON INDIAN AGRICULTURE
IMPLICATION OF WTO AGREEMENT ON AGRICULTURE FOR INDIA:
India's obligations under the WTO agreement on Agriculture (AoA) fall mainly und
er four broad areas namly market access, export subsidies domestic support and S
anitary and Phyto sanitary measures (SPS). These are briefly discussed below :
MARKET ACCESS :
Introducation :
According to the WTO Agreement on Agriculture (AoA), all non tariff barriers to
agricultural trade were to be tariffed and converted in to equivalent levels of
tariffs. Further, tariffs resulting from this Tariffication process" were to be
reduced by a simple average of 36 per cent over 6 years in the case of developed
and 24 per cent over 10 years in the case of developing countries. The least de
veloped countries were exempt from these reductions
In additions to this, for countries which had tariffied. There was also an oblig
ation to maintain current and minimum access opportunities and to establish a mi
nimum access tariff quota of a minimum of 3 per cent of domestic consumption in
the base period 1986-88. This was to be gradually increased to 5 per cent of bas
e period consumption over the implementation period.
Along with many other developing countries. India was permitted to offer celling
bindings Instead of tariffication. These bindings were not subject to the reduc
tion commitments. India was also allowed to maintain quantitative restrictions (
QRs) on account of balance of payment problems. But since India had not tariffie
d and was instead allowed to bind its tariffs. It did not have any market access
commitment. But like many developing countries which decided to bind their tari
ffs. India is also not entitled to use the Special Safeguard Mechanism of the Ag
reement on Agriculture which can be used by only a few (36) developed countries
which had tariffed. This is a great disadvantage which needs to be addressed dur
ing future negotiations.
Since, AoA allowed members either to tariffy in all case or to bind their tariff
s, during the Uruguay Round, India chose to follow the latter route and bound it
s tariffs for 3.375 tariff lines which constituted 65 per cent of India's total
tariff lines defined at 6 digit HS level. Simultaneously, India continued to hav
e Quantitative Restrictions (QRs) which It was permitted to impose because of ba
lance of payment (BoP) reasons . Like many other developing countries except for
a few commodities. India bound its tariffs at very high level . For example, In
dia bound its tariffs at 100 per cent for primary products, 150 per cent for pro
cessed products and 300 per cent for edible oils. But for certain items (compris
ing about 119 tariff lines), which were historically bound at a lower level in t
he earlier negotiations (Table-1) the binding levels were very low. In some case
s, even zero. But these zero or low tariffs had no relevance because India was a
llowed to use QRs.
The USA and some other countries in the Dispute Settlement Body of WTO challenge
d India's continuation of QRs on the plea of BoP position. In view of its improv
ed position in the matter of foreign balances. India lost the plea for retention
of QRs on account of Blance of payment position both at the Dispute Settlement
Body as well as at the Appellate Body. According to the understanding arrived at
between the parties regarding the reasonable period of time lasted by March 200
1. India removed the QRs on 714 items including 142 commodities belonging to the
category of agricultural commodities during 1999-00. On the occasion of Export
and Import policy announcement on 31 st March 2001, the Minister announced the r

emoval of QRs on the remaining 715 items. Thereby ending the much maligned "Lice
nse Permit Raj" Table-1 below gives details :
TABLE-1
RECENT CHANGES IN TARIFF STRUCTURE OF INDIA
Total Number of Tariff lines as on
01.04.1996
Tariff lines free as on 01.04.1996
Tariff lines freed for Import during
1996-1997
Tariff lines freed for import during
1997-19998 (The QR's In respect of 1,429
tariff lines were withdrawn preferentially for imports from SAARC countries w.e
.f. 01.08.1998)
Tariff lines freed for import during
1998-1999
Traiff lines for import during 1999-2000
10,202 (10 digit) 06,161 488 391
894
714
715
Tariff lines freed for import during
2000-2001
With the removal of 715 items from the list which include 142 groups belonging t
o agriculture, quantitive restrictions on import have been completely abolished
and the obligation to replace QRs by tariffs has by and large been fulfilled (ex
cept for a few strategic commodities). After the decision to remove QRs, India w
as, under GATT Article XXVIII allowed to renegotitate the tariff bindings on tho
se commodities for which it had very low or zero tariff bindings. Consequently i
n December 1999 India successfully negotiated and the binding levels were suitab
ly revised upward to provide adequate protection to the domestic producers ( Tab
le-3). Out of these low bound tariff lines bindings on 15 tariff lines which inc
luded skimmed milk powder spelt wheat, corn, paddy, rice, maize, millet, sorghum
, rapeseed, colza and mustard oil, fresh grapes etc. were revised to a level ran
ging between 45 per cent to 75 per cent.
Analysis of Tariff Structure of India :
Under the WTO Agreement on Agriculture (AoA). India committed 3.375 commodity gr
oups at 6 digit level for tariffication and bound their tariffs (Table-2). These
commodities constituted 65 per cent of all the tariff lines in india.
The bound rates for all the commodities are ad valorem, export for two commoditi
es (HS codes 080212) whose bound rates are committed in the form of specific amo
unt in Rs/Kg.

TABLE-2
TARIFF COMMITMENT BY INDIA IN URUGUAY ROUNDS FOR AGRICULTURE SECTOR : BY DIFFERE
NT CHAPTERS OF HS CLASSIFICATIONS : NUMBER OF LINES
Ch. No. Description No. of Lines
1
Live animals
15
2
Meat and edible meat, offal
50
4
Dairy produce bird, eggs, honey 25
5
Products of animals origin
17
6
Live trees and other plants
13
7
Edible vegerables
57
8
Edible fruit and nuts, peel of citrus 50
9
Coffee, tea, mateand spices
33
10
Cereals 17

11
12
13
14
15

Products of the milling Industries

34
Oil seeds and oleginous fruits 44
Lac: gums, resins and other vegetables 12
Vegetable plating materials
11
Animals or veg. fats and oils 51

16
Preparations of meat, fish
16
17
Sugar and sugar confectionery 15
18
Cocoa and cocoa preparation
11
19
Prep, of cereals, starch milk 16
20
Prep, ofveg. fruit, nut etc.
45
21
Miscellaneous edible prep.
15
22
Beverages, spirits and vinegar 21
23
residues and wastes from food 24
24
Tobacco and mauf substitutes
00 29 Organic chemicals
02 33
Essential oil and resin oils
14 35 Albuminoidal substances 08 38 Miscella
neous chemical products 02 41 Raw hides and skins and leather 12 43 Furakins
and artificial fur
09
50
Silk
04
51
Wool, fine or coarse animals hair
10
52
Cotton 05
53
Other veg textile fibres
06
Total 673
Note: Tariff lines at 6 digit HS. There are Z lines that are defined as sub- g
roup of 6-digit HS. Includes only agriculture products.
Based on final bound commited at the UK.
Source: WTO Custom Tariff of India 1999-2000 col.
Out of these 3.375 commodity groups, 683 commodity lines at 6 digits of HS class
ification belong to the agricultural sector. A large proportion of the committed
lines belong to commodity groups like edible vegetables animals or vegetable fa
ts and oils: meat edible meat etc.
Some of the features of the bound tariff rates for agricultural commodities in I
ndia are discussed below.
The first feature of the bound tariff rates for India is that like many developi
ng countries . It bound its tariffs at very high and sometimes at prohibitives l
evels. In some cases (44 per cent cases) these rates exceeded 100 per cent.
Second for some commodities celling tariff binding were bound at very low levels
sometimes at 0 levels . The commodities for which tariffs were put at low or ev
en 0 level were rice, maize, sorghum,millet and skimmed milk powder. For some ot
her commodities like soya oil,olive oil, rapeseed, colza and mustard oil, the ce
lling tariff binding were much higher at 45 per cent and 300 per cent for other
major oils. For dairy products the tariff ranged between 0-40 per cent and for n
atural rubber, these were fixed at 25 per cent. Since for India there are major
agricultural commodity policy makers were rightly concerned about the adverse ef
fect of lifting of QRs on them.
However, consequent to the agreement to remove QRs. India was allowed to renegot
iate the tariff binding for these commodities. Table 3 gives details about the r
enegotiated tariff bindinge for 19 commodities for which the historical bound ta
riffs were very low or in some cases zero (Table 3).
The renegotiated rate are moderately high. For rice, for example, the duty has b
een rasied form 0 to 70 80 per cent. Similarly, the duty on coarse cereals has a
lso been raised quite high to a level of 60 80 per cent.
The third important feature is India's MFN tariff rates were significantly lower
than that of final bound rates for 686 products belonging to the agriculture se
ctor(Table 4 ). For 85.6 per cent of commodities numbering 587, the difference w
as more than 50 per cent and above. Thee average basic duty rate for all agricul
tural tariff lines was 34.9 per cent in 2000-2001 and slightly higher in 2001-02
which is way below the bound rates even if the Special additional duty (SAD) an
d special custom Duty (SCD) are added. It comes out that India has not only main
tained the UR bound rates but has unilaterally reduced the MFN tariff rates subs

tantially, compared to the level of UR final bound rates (Gulati 1989). A relate
d feature is that the tariff structure is characterised by large dispersion betw
een various bound tariffs (Table 4).
Tariff Lines
Descriptions
Special remarks
TABLE - 3
LIST OF PRODUCTS FOR WHICH BOUND RATES HAVE BEEN RENEGOTIATED
Original WTO Renegotiated NR Basic Custom Effective Import Bound
Duty
Duty Duty

Bound

0402.10 Milk and Cream in Powder

0
60
AU US ES
60
40 80
70 60
US TR
ID
ID
40 90
70 60
25 0
0 Restricted
granules or other solid forms of a fat contain by weight exceeding 6%
0402.21 Milk and Cream in Powder
0
granules or other solid forms of a fat content by weight exceeding 1.5% not cont
aining added sugar or other sweetening mailer.
0806.10 Grapes, fresh 30
Ex
Spelt 0
1001.90
1005.10 Maize (Com.) Seed
0
60
AU US CA EC
0
60
1005.90 Maize (Com.) Seed
0
A tariff quota of 100000 Ml al an in quota tariff rate of 15% applicable cumulat
ively to both the tariff lines. 0402.10 and 0402.21.
Same as above
India establishes a global TRQ at an quota rate of 15% for the following quantit
ies year- 1. 3,50,000 tonnes year- 2:4,00,000 tones. year- Si 4,50,000 tonnes. y
ear-4 and beyond 5,00,000 tones.
Tariff Lines
Original WTO Renegotiated Bound Bound
Special remarks
Descriptions
NR Basic Custom Effective Import Duty Duty Duty
1006.10 Rice in the Husk (Paddy 0
or Rough).
1006.20 Husk (Brown) Rice
0
1006.30 Semi milled or wholly milled
ed.
1006.40 Broken rice
0
1007.00 Grain Sorghun 0

0 rice, wheather or not polished or glaz

1008.20 Milled 0
80
80 70
80 80 70 75
75 50
BR 80 80
BR 70
0 0
0 0 0 35
35 15
SIL
BR US IR
80 80 70 75
75 50
1514.10 Rape Colza or Mustard Oil, 45 crude.
17.5
1514.90 Rape, Colza or mustard oil 45 other
1901.10 Preparation for Inlant use, putup for retail sales.
040590.02 Restricted
Restricted
Tariff quota of 1,50,000 tonnes at an in quota rate of 45%.
Restricted
SOURCE : Ministry of Commerce, Col.
TABLE - 4
DIFFERENCE IN MFN TARIFF RATES AND UR FINAL BOUND RATES Number of Lines by diffe
rent Range Groups (FY-2000-01)
Range (UR-TR) No. of Lines
Percentage Distribution
UR-TR > - 75
206
43.15
50-<UR-TR<75
291
42.42
25-<UR-TR<50
19
2.77
10-<UR-TR < 25 32
4.66
0-UR-TR < 10
38
5.54
UR-TR < 0
10
1.46
Total 686
100.00
TR = MFN Tariff Rtes (BCD) as announced in old budget 2000-01 read alongwith oth
er notification in force. UR = Uruguay Round final bound rates.
Note -1 : Tariff Lines at 6 digits Hs or sub-groups of 6-digits HS. Note - 2 : I
ncludes only agricultural products.
Source : 1- WTO and 2. Col. Customs and Central Excise Budget 2000-01.
Fourthly, in the case of 21 commodities the MFN rates were pegged at very high r
ates. Table 5 gives details of 21 commodities where the MFN rates have been pegg
ed at much higher levels than the general prevalent rates and were close to the
bound rates for 1.1.2001. Many of these tariff lines belong to the beveages grou
ps particularly spirits, liquors, ets. But some recent additions are food items
like chicken legs, milk powder, coffee, tea, sugar and rape & mustard oils that
face surge of imports consequent to the abolition of the QRS in 2001.
Fifthly, it is important to note that for three commodities, India has gone in f
or tariff rate quota (TRQ) system. In the case of maize, a quota of maize rangin
g from 30,000 tons in the first years to 50,000 tons in the fourth years would b
e imported at a duty of 15 per cent. After that the imports can have a duty of u
p to 60 per cent, Again, for two tariff lines of milk and cream powder, tariff q
uotas of 10,000 each can be imported at a duty of 15 per cent, but the out quota
duty would be 60 per cent. The third commodity for which TRQ has been introduce
d is rape, colza and mustard oil for which a quantity of 1,50,000 would be impor
ted at 45 per cent in quota tariff and out quota would be 75 per cent.

TABLE -5 BASIC CUSTOMS DUTY RATES

(Per cent)
Chapter
Binding 1.1.2001
2001-02
2002-03
Description of Goods
Poulrry Meat (Chicken Leg)
Other Milk Powder
Dried Grapes
Coconuts
Areca Nuts
Coffee
Tea
Rice in the husk (Paddy and husked (brown) rice
Semi-milled or wholly milled rice and broken rice Wheat, Maize (Corn) seed, spel
t, sorghum, millet Copra
2. 4. 8. 8. 8. 9.
9.
10.
10.
10.
12. 15. 15.
Soyabean oil, Crude or refined Rapeseed Oil, Colza or mustard oil, crude or refi
ned Palm oil, groundnut oil, sunflower/safflower oil, coconut oil & other oils,
crude
100/116/15 60 116
100
116/150 116/150
70
50 70 45
75
70
50 70 45
75 75
75
100
100 100 45 75
100 60 115 70 100 70 70
80
100 60 115 70 100 70 70
80
120/300
Chapter Description of Goods
Binding 1.1.2001
2001-02 2002-03
15.
Palm oil, groundnut oil, sunflower/ safflower oil, coconut oil & other o
ils,
refined 120/300 85
85
16.
Sausages and similar products of meat, meat offal or blood. Other prepar
ed meat, meat offal or blood of fowls of the species Gallus
domesticus
150
100
100
17.
Sugar 150
60
60
22.
Beer, grapes must, wines, Vermouth
other fermented Beverages
150/214 100
100
22.
Undenatured ethvl alcohol
214
210
170

22.
33.

Whiskies, rum, gin vodka

Liquors and cordials, etc.
Alcoholic Preparation of a
kind used for the manufacture
of beverages
174
170

214

210

170

170

Source : Custom Duties - 2002.

Finally, consequent to removal of QRs in March 2001, the Government of India und
ertook several measures to safeguard against a surge in imports. These include r
estricting the import of agricultural commodities like wheat, rice, maize, along
with petrol, diesel. Aviation Turbine Fuel (ATF) and urea only through designat
ed State Trading Enterprises, issuing import permits by Ministry of Agriculture
after an import risk analysis based on scientific principles and in accordance w
ith WTO Agreement on Sanitary and Phyto Sanitary Measures for import of all prim
ary products of plat and animal origin. An early warning system was also to be i
ntoduced. More important, consequent to complete removal of QRs, a substantial h
ike in custom duties in agricultural commodities like tea coffee and coconut (35
per cent to 70 per cent) crude edible oils(a uniform rate of 75 per cent from 3
5-55 per cent) and refined oils (85 per cent from 45-65 per cent) was introduced
. Futhermore, many of the commodity groups which were on the free list were put
on the canalised list with imports only allowed through the State trading Enterp
rises, mainly the Food Corporation of India (FCI).
The analysis of India import policy reveals that leaving aside some of the restr
ictive tariff lines. India has unilaterally gone ahead to reduce tairff barriers
much below the bound rates of duty under URA. The biggest agricultural commodit
ies like rice and milk (skimmed milk powder) are committed at quite low levels e
ven after duty on these were raised from earlier zero per cent. For wheat the bo
und rate of duty is 100 per cent, but roller flour mills are allowed to import a
t zero import duty. Similarly, for pulses the bound rate is 100 per cent , but t
hey are being imported under OGL at zero import duty. Edible oils most of which
are bound at 300 per cent import duty, were open for imports at 15 per cent duty
during 1998- 99 which was later raised to 25 per cent, even when the country wa
s flooded with imports of edible oils as was the case in 1999-2000. Although som
e scholars had hailed the liberalisation of trade and cutting of duty on oilseed
s and edible oils the excessive imports that followed these measures proved high
ly deleterious to the interests of resource poor oilseed farmers in the rainfed
states of India. The result was that in the budget for 2001-2002, the duty had t
o be raised to 70 per cent from the current rate of 35-40 per cent. Despite the
duty hike in 2002, agricultural imports in to the country have increased at fast
rate after the dismantling of the QRs.
The following table (Table-6) gives the existing duty structure on agricultural
commodities.
TABLE - 6
STANDARDS RATES OF DUTY
DURING 1988-2002
Commodity
1988-89
Wheat 0
0
Rice(non-basmati)
Maiza 0
0
Barley 0
0
Sorghum 0
0
Chickpea &
other Pulses
10
Rapeseed/
mustard seed
60
Soyabeen Seed 60
Groundnut seed 60
R/M Oil 45
45

ON IMPORT OF SELECTED AGRICULTURAL COMMODITIES IN INDIA

1990-91
0
0
0
0
0

1991-92
0
0
0
0
0

1995-96
0
0
0
0
0

1999-00
50
0
50
35
50

2000-01 2001-02
50
0
70
70
50
0
50

10

10

10

55
55
55
45

55
55
55
30

50
50
50
18

40
40
40
45

40
40
40
85

35
35
35

Soyabeen Oil
Groundnut Oil
Onion 100
Potato 100
Cotton 40
Jute
00
Sugar 00

45
200
100
100
35
00
35

45
125
100
100
35
00
35

45
45
10
10
50
00
00

30
30
10
10
40
35
40

18
18
00
15
05
05
00

45
45
00
35
05
05
00

45
85

Note: Source:
There are two types of duty rates on imports, standard and preferential duty rat
e is generally 10 percentage points lower and is applicable to import of some co
mmodities from a few countries.
Virmanl, 2002.
COMMITMENTS UNDER EXPORT COMPETITION
Introduction :
Disciplines in the area of Export subsidies required the developed countries to
reduce, over a period of 6 years, the base period (1986-90) volume of subsidised
exports by 21 per cent and the corresponding budgetary outlays for export subsi
dies by 36 per cent. For developing countries these reductions are 14 per cent i
n volume terms and 24 per cent in budgetary outlays over a period of 10 years.
Export subsidies of the kind listed in the Agreement on Agriculture which attrac
t reduction commitments are not extended in India. Also, developing countries ar
e free to provide certain subsidies such as subsiding of export maketing cost an
d internal and inernational trans port and freight charges etc. India is making
use of these subsidies in certain schemes of Agricultural & Processed Food Produ
cts Export Development Authority (APEDA) especially for facilitating export of r
ice, wheat and horticulture products.
Like many other developing countries, India also has a large potential to genera
te export surpluses in many agricultural commodities . However, one of the major
constraints for this is inadequate development of rural infrastructure for agri
culture and poor state of agro processing. Moreover large export subsidies being
provided by the developed countries also adversly affect Indian exports. This i
s particularly so in the case of wheat, rice and other cereals, sugar and dairy
products for which export subsidies run into billion of dollars thereby depressi
ng world prices Because of this the developing contries are unable to exploit th
eir potential comparative adavntage. It may be noted that the interests of some
food importing developing countires would be hurt with the abolition of export s
ubsidies. There is an urgent need to make provisions under the SDT clause to ful
ly proect their legitimate interests in this regard.
Proposals for Discipline on Export Subsidies :
India has in its Memorandum to the WTO, asked for a complete abolition of export
subsidies in a period of two years after 2000 and no rolling over of the unused
export subsidies. India has also demanded that all types of export assistance l
ike export credit guarantees, insurance, price discounts etc, should be included
in the calculation of export subsidies subject to reduction and elimination. In
dia has also stated that under the SDT clause, the developing subsidy etc. Final
ly,
India has argued for the abolition of provision protecting export subsidies [Art
icle 13 (c)] which gives protection to export subsidies that conform to the prov
isions of part (v) of AoA. It has also argued for the abolition of the peace Cla
use for the developed countries but would like the developing countries, to cont
inue to avail of the provisins of Article 19 (d) and(e), Quite a few of these su
ggestionss have been included in the revised draft of modalities currently dbein
g discussed at the WTO.
COMMITMENTS UNDER DOMESTIC SUPPORT
Introduction :
As discussed earlier, according to the WTO AoA, all non exempt domestic support
calculated as Aggregate Measure of Support (AMS), has to be reduced by 20 per ce
nt by developed countries in 6 years (1995-2000) and 13 1/3 per cent by the devl

oping countries in 10 years (1995-2004) taking 1986-88 as the base period. Howev
er domestic support given to the agricultural sector up to a deminimus level of
10 per cent of the total value of agricultural produce in developing countries a
nd 6 per cent in developed countries is allowed.
The details of the methodology adopted for the calculation of AMS for India in I
ts official submission to the WTO as also that adopted by other scholars who hav
e computed AMS is discussed below along with a critical evaluation of some of th
e data problems for calculation of product specific and non product specific sup
port. This is followed by a brief description of the updated calculation of AMS
done by us.
Critical Evaluation of AMS Calculation for India :
i) Product specific AMS :
As per the AoA, all the support/ policies directed at producers of various agric
ultural products and provided on product by product (like rice, wheat, cotton et
c.) basis constitute the product specific AMS. These support measures can be cla
ssified into three broad categories namely Market Price Support, the non exempt
Direct Payment and other product Speific Support. The only one measure that is r
elevant for the calculation of product specific support in India is the market p
rice support since the other two namely the Non exempt Direct Payments and other
Product Speicfic Support do not constitute a significant proportion of support
in India.
Market price Support constitutes the support extended by government to agricultu
ral producers through providing some minimum floor to the market price of agricu
ltural products. It is required to be measured on product by product basis as th
e gap between applied administered price and reference price times the quantity
of that product eligible to receive market support (minus fees/levies paid by pr
oducers on that product).
Reference price is the per unit fob (export ) price for the product concerned fo
r the "net exporting" and cif (import) price for the net importing country. Appl
ied administered price is the actual floor/ minimum support price and the quanti
ty eligible to receive support is either total output or the marketable surplus
of that product. The official calculation takes total output as the quantity eli
gible for support.
The Ministry of Commerce submitted its schedule of support to the WTO in the pre
scribed format. Their revised submission given in the Trade Policy Review of Ind
ia by WTO(1998) gives AMS for the triennlum ending (TE) 1988- 89 for 17 commodit
ies along with the total non product specific support (Table 7 & 8).
SOURCE
TABLE S.No.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.

7 OFFICIAL SUBMISSION ON AMS

Crop
1986-89 (Rs. Million) 1995 (US $ Million)
Rice
-77,235 -7,577
Wheat -89,580 -9,625
Bajra - 6,822
Jowar -16,454
Maize -12,517
Bariey - 4,203
Gram
- 4,045
Ground nut
-20,494 -1,809
Rapeseed/Torla - 8,694 -1,689
Cotton -14,543 -2,106
Soyabeen (Yellow and Black)
16
- 192
Urad
- 1,394
Moong - 1,752
Tur
- 4,550
Tobacco 11
- 181
Jute
- 3,833 - 388
SugarCane
2,405 184
Coarsa Cereals
-4,530
Pulses
-1,706

Total Product Specific -2,44,422

-29619
(-21,6096)
(29.84)
Non-product specific
45.514 5,772
(4,0896 (656)
Total AMS
-1,98,608
-23,847
Value T. Agri Output TE 1989
11,31,250
99,270
NOTE : FIGURES IN PARENTHESIS REFER TO THE RESPECTIVE RATIO OF SUPPORT TO THE VA
LUE OF TOTAL OUTPUT OF THAT COMMODITY.
WTO (2000), C/AC/NC/S/1. P. 18. ALSO SE : WTO(1998). TRADE POLICY REVIEW OF INID
A. GENEVA.
TABLE - 8
NON-PRODUCT SPECIFIC SUPPORT FOR THE TRIENNIUM ENDING 1988-89 (IN Rs. Million)
Subsidy on
Quantum of Subsidy
% value of total Agricultural Output
Fertilisers
10,205 0.90
Credit 998
0.09
Irrigation
17,927 1.58
Electricity
15,814 1.40
Seeds 820
0.72
Total non-product subsidy
45,804 4.05
Value of Output 11,31,250
In conformity with the modalities laid down under AoA. The methodology adopted b
y the official submission was to calculate the product Specific Support by calcu
lating the difference between the minimum support price and the cif price for ea
ch commodity. While the former figure was obtained from the Ministry of Agricult
ure, the latter was taken from the Mothly Statistics of Foreign Trade published
by the Director General of Commercial Intelligence and Statistics, Calcutta. In
the original submission the external reference price (cif) was taken as fixed fo
r the triennium 1986-87, 1987-88 and 1988-89 (TE1988-89). In later submissions,
inflation was accounted for by deflating the MSP by the depreciation of indian R
upee in terms of U.S. Dollar over the years.
ii) Non-Product Support:
For the non product support also, the methodilogy adopted by the Ministry of Com
merce in its official submission was in conformity with the modalities laid down
by the AoA. That is for tradable inputs, per unit subsidy was calculated by tak
ing the differnce between the domestic price and the import (border) price. For
non tradable inputs the subsidy to agriculture was determined by the quantum of
budgetary support for their provision.
The Table No. 8 gives the details of non product subsidy to Indian Agriculture g
iven in the submission.
The submission recognised that the subsidy given to resource poor farmers was ex
empt from reductin payment. Nevertheless the submission did not invoke the exemp
tion given to resource poor farmers since the aggregate of product non specific
support was less than the de minmus 10 per cent.
In addition to the official submission several scholars have also calculated the
product specific and non product specific support to Indian agriculture for var
ious years. In almost all the cases the methodology followed is the one laid dow
n by the modalities under the AoA.
However in spite of near similarity in the calculation methodology and almost th
e same sources of statistics the commodity wise estimates off product specific A
MS and the estimates of non product specific AMS by various authors are not exac
tly matching. This is because of several ambiguities that have arisen in the met
hod of calculation. These are brief by discussed below.
Problems in AMS Calculations : i) Product specific AMS :
The methodology adopted to calculate the Product Specific Support has already be
en described above. It consisted of comparing the domestic price with the fixed
reference price for the triennium 1986-87, 1987-88 and 1988- 89 (TE 1988-89) . F
or later years.Inflation was accounted for by deflating the MSP by the depreciat

ion if Indian Rupee in terms of U.S. Dollar over the years.

Although all the authors had followed the above methodology nevertheless, there
are differences in the estimates by various authors for variouss reasons. There
areFirst, India faced some special problems in the choice of the base year since du
ring the selected period TE 1988-89. India had a fixed exchange rate regime. Thi
s regime represented over valued exchange rates of about 15 per cent to 25 per c
ent above the free exchange rate and led to distortions in the calculation of AM
S.
The second set of problems in calculations of AMS arose because the modalities w
ere not very clear about the method for taking into account quality differences
in the price quotations for the imported and domestic commodities. Various calcu
lations for product specific support could diverge because of this reason. In ge
neral, the import prices go to detailed description of quality in terms of Harmo
nised code at six or even ten digit level. On the other hand, the quality differ
nces are not very important for commodities for fixing MSP and thee prescribed s
tandard is Fair Average Quality. It becomes difficult to chose a correct cif pri
ce that matches the domestic standards mof quality. The cif price taken by vario
us authors may not be the same because of this reason.
Another more serious difficulty in the estimates of product specific support is
that whereas the minimum support prices (MSP) are quoted for the unprocessed com
modity, the price quotations for cif price are generally available for the proce
ssed commodity. This is true in the case of paddy, coton and sugarcane. In the c
ase of paddy, levy price of rice is often taken as a proxy for including the pro
cessed costs. But no simple method is available for determining equivalent price
for sugar and lint. For this reason, the different methods used by various auth
ors lead to different results for product specific AMS. For example for cotton,
the official document made an error in that it compared the domestic price of co
tton with the cif price for lint. This exaggerated the product specific negative
AMS for cotton. On the other hand, Gulatl and Sharma (1994) and Bhalla and sing
h (1994) converted the MSP for cotton into equivalent price of lint. In this stu
dy also we have computed the comparable domestic prices of lint and compared it
with the price of lint. In most cases, a general mistake that is often made is t
hat the processing costs are not added for getting the derived prices for the pr
ocessed commodity.
Another minor error in the official document was that for tobacco which is an ex
port commodity in India, the reference price taken was cif price rather than fob
price which should have been the case according to the Agreement.But most of th
e scholars have avoided making this mistake and have taken the fob price for tob
acco as the reference price (see: Gulati et al...1994. Bhalla et al.. 1999) Notw
ithstanding the divergences in estimates of AMSs noted above the estimates for p
roduct specific AMS by various authors are not very different for most of the co
mmodities.
ii) Non-Product Specific Support:
To recapitulate the non product specific support is the measure of support given
to agriculture by way of subsidised supply of inputs. For tradable inputes, per
unit subsidy is to be calculated by the difference between the domestic and imp
ort price . For non tradable inputs, the subsidy to agericulture is to be determ
ined by the quantum of budgetary support for their provision. Although all the a
uthors followed the general guidelines laid down in the modalities of AoA for it
s calculation, nevertheless, because of some serious problems thee estimates of
non product subsidy vary considerably . Some conceptual problems that have also
arisen in the calculation of product specific support are briefly discussed belo
w.
Fertilisers :
Out of all the agricultural inputs namely fertilisers irrigation, electricity, c
redit and seeds, the only tradable inputs is fertilisers. In the official submis
sion the component of subsidy on indigenous fertilisers was arrived at by multip
lying domestic production by the differnce between per unit imported price and f
arm gate price of fertilisers. Adding the total subsidy on domestic fertiliser o

btained this way with the subsidy on im[ported fertilisers gives total fertilise
r subsidy. This figure works out to be different from the budgetary figure for t
he fertiliser subsidy.
In principle, authors like Gulati. also made their estimates on the basis of dif
ference between the domestic and border price of fertiliser. However, basing the
mselves on a detailed study of differences between border and domestic price ove
r a long period of time they came to the conclusion that on an average 50 per ce
nt of the government's budgetary subsidy for fertilisers goes to the farmers the
rest being the share of the subsidy to the fertilisers industry (Gulati. 1994).
Incidentally this formulation which was correct for the specific period covered
by the above study has become quite popular and has been extensively employed b
y several scholar. Some other scholars like Acharya(2000) have actually treated
the entire budgetary subsidy to fertilisers as going to the farm sector. Because
of these resons the estimates of subsidy on account of fertilisers differ widel
y from one author to the other.
The Hanumantha Rao Commitee (1998) on Fertiliser Pricing policy made careful cal
culation of fertiliser subsidy on the basis of a detailed exercise. The committe
e took per unit subsidy to the farmer as the difference between the import price
and the farm gate price for N.P. and K. This was then multiplied by the quantit
y of each of the fertilisers consumed by the agricultural sector to arrive at th
e total quantum of subsidy on domestic fertilisers to the farm sector. These est
imates have recently been updated to 2001 by Gulati and Narvanan (2003). Interst
ingly the share of total budegetary subsidy keeps on changing widely. It has inc
reased from 24.54 per cent during the TE 1983-84 to 124 per cent during the TE 1
996- 97. The weighted average for the period 1980-81 to 2000-01 comes to 67.50 p
er cent. Hence,the often used ratio of 50 per cent leads to serious under estima
tion of fertiliser subsidy ti the farm sector for the decade of nineties. We hav
e in our calculations followed the methodology adopted by the Hanumantha Rao Com
mitee.
All the other inputs like credit,irrigation and seed were treated as non tradabl
e. Some details and specific problems that have arisen are discussed below.
Electricity :
In the case of electricity the method used for working output per unit subsidy t
o agriculture is the difference between the average cost of electricity generati
on and distribution and the tariff charged from agriculture. But this method suf
fers from some serious limitations.
Firstly, the average operating costs and per unit cost of supplying electricity
tend to get inflated due to inefficiency in operation, overstaffing and outright
leakages.
Secondly, keeping in view the fact that a major chunk of the electricity supplie
d to this sector is during the late night hours when its opportunity cost is rel
atively low due to no or minimal demand from other potential buyers mainly the i
ndustrial sector the measurement of opprotunity cost or shadow price of electric
ity used by agriculture is certainly much lower then the average cost of supplyi
ng electricity.
Thridly, it is well known that the Quantity of power consumed by the agricultura
l sector is calculated as a residual after deduction from the total generation t
he amounts consumed by other important categories. This method puts all leakages
arising in other sector as consumption by agriculture thereby exaggerating the
consumption for irrigation purposes. According to some studies, the government c
alculations overestimate the real consumption by a wide margin anywhere from 20
per cent to 80 per cent of their total consumption, depending upen the state (Gu
lati1989 and Bhalla and Singh. 1994). Finally, as per the Aoa, all expenditure o
n infrastructure including capital change on electricity is exempt under the gre
en box exemptions and should not be included in the calculation of electricity s
ubsidy. A correct method of calculation would have been to find the difference b
etween the unit cost to the non agriculture and that to agriculture, with a view
to cancelling out the per unit fixed costs. But neither the official submission
nor any of thee anuthors has done the calculations in this manners Hense, all t
hier calculation are overestimate electricity subsidy to agriculture. We in this

study have corrected this error.

Credit :
According to the GATT agreement credit subsidy is to be measured on the basis of
differential rates of interest between the commerical lending rate of interest
on advances and the rate charged from the agriculturists for their short term lo
ans which are used for production purposes. However, the medium and long term lo
ans are not to be included in the estimation as the same are adanced for invesrm
ent purposes and are exempted from AMS measurement. In addition loans for invest
ment the support extended to small and marginal farmers on short loans need not
be included in the AMS measurement.
The official submission estimated the total short loans given by the cooperative
banks and the commercial banks and estimated the differential on the basis of m
aximum lending rate of the commercial banks and the short term lending rate to t
he cooperative societies. It also assumed that the short term loans were made fo
r six months.
Other scholars have also followed similar methodology. Bhalla et al.(1994) made
another adjustment in the calculation of the subsidy. They edusted the short ter
m credit extended by the Primary Agricultural Credit Societies(PACS) to medium a
nd large farmers for the contribution of borrowers towards share money of the PA
CS's and reduced the short term PACs outstanding advanes by 10 per cent to accou
nt for their share holding.
Irrigation :
According to the AoA, the irrigation subsidy is to be calculated as the differen
ce between the operational and maintenace cost of supply and the recovery charge
s from ther farmers. It is explicitly stated that the interest and depreciation
charges to be excluded in the determination of the cost of supply. Also exempted
from the subsidy measurement is the share of support utilised by the small and
marginal farmers. Thus irrigation subsidy is estimated as the gap between O&M ex
penses on major and medium works and actual collection of irrigation charges min
us part of this attributable to the small and marginal farmers.
The official submission used the data given in the National Accounts Statistics
to determine the total subsidy on maintenace and operational cost. But as noted
earlier the submission did not account for exemptions allowed to the small and r
esource poor farmers. Other scholars have also followed
the same methodology and used the same source. But Gulati et al. have taken in t
o account the examptions allowed to small farmars and reduced the subsidy to 60
per cent.
Seed Subsidy :
Seed subsidy is to be measured by the amount of budgetary support to the provisi
on of seeds. In India, the National Seed Corporation is the central corporation
that has ff been set up to provide timely and subsidised high yielding varieties
of seeds to the farmers. Besides the national corporation several governments h
ave also established state level enterprises to supplement the activities of the
NSC. Most of the authors have only taken the budgetary expenditure to the NSC a
s a measure of seed subsidy.
AGREEMENT ON THE APPLICATION OF SANITARY AND PHYTOSANITARY MEASURES (SPS):
Introduction:
Sanitary and phytosanitary measures mean any measure adopted by members to prote
ct human, animal or plant life or health within its territory from risks arising
from the entry or establishment or spread of pest or disease carrying or causin
g organisms, animals plants or beverages or foodstuffs. The Agreement on the app
lication of Sanitary and Phytosanitary Measures(SPS Agreement) affirms the right
of WTO Members to restrict international trade when necessary to protect human,
animal or plant life, or health from food borne risk or animal and plant carrie
d diseases(Article 14). The agreement builds on pervious GATT rules and requires
sanitary and phytosanitary measures to be based on science ,SPS measures may be
applied only to the extent necessary to protect human , animal or plant life, o
r health and they may not arbitrarily or unjustifiably discriminate between coun
tries where identical or similar conditions prevail.

The WTO does not set the standards. The Agreement allows countries scope to esta
blish their own levels of health protection yet provides grounds for improved ma
rket access for agricultural products. The WTO's SPS Agreement encourages member
countries to use standards set by international organisations, but it also allo
ws countries to set their own standards. This agreement seeks to harmonise S&P m
easures based on international standards, guidelines or recommendations develope
d by international organisations, so that members may not use their S&P standard
s as disguised barrier to trade. International harmonisation offers Members and
in particular developing country Members. The possibility to meet the requiremen
ts of the Agreement without having to go through the more demanding risk assesme
nt procedures otherwise required. It also help to shield developing countries ex
ports from more stringent import requirements.
The relevant international organisations are :
a)
the Codex Alimentarius Commission' For food safety, (food additives vete
rinary drugs and pesticidew residues contarminants etc.)
b)
the International office of Epizootic' for anomal health zaniness.
c)
the secretariat of the International Plant protection Conversion for pla
nt health.
The Agreement also says government can agree to refer to any other international
organizations or agreements whose membership is open to all WTO members.
There are several issues regarding SPS Agreement that concern the developing cou
ntries. The first important and highly contentious issus is that within the broa
d framework of SPS Agreement, members have the right to evolve their own S&P sta
ndards higher than internationally accepted by providing scientific evidence for
necessity of such higher standards. There are certain safeguards introduced. Th
e SPS Agreement lays down that such higher standards should be based on scientif
ic evidence, should not discriminate between countries and should not be a disgu
ised restriction to trade. Further, it is obligatory on the part of all the memb
ers to publish their S&P measures so as to acquaint the interested members with
the same. But this notwithstanding the higher standardise have often been used t
o discriminate against exports from the developing countries.
Members are required to notify in advance new or changed SPS measures which affe
ct trade and to set up enquiry points to respond to requests for information. Bu
t the time period for providing this information is not specified which may hamp
er trade. In this context, critical for market access is the reqirement for tran
sparency and quick dissemination of information about new regulations.
Problems have also arisen regarding the interpretation and implementation of Equ
ivalency, Article 4 of the SPS Agreement requires government under certain condi
tions to recognise other government s' equivalent measures. Different measures c
ould be equivalent in providing the same level of health protection against risk
s of disease or contamination. Equivalency results in a significant reduction of
routine checks,control and inspection measures while facilitating trade and imp
roving market access conditions similarly, the adaptation of SPS measures to reg
ional condition. Including the recognition of pest or disease free areas, is rec
ognized as a concept of significant importance for trade in agricultural product
s. The main question is how to establish that an exporting country's measures ar
e equivalent to those used in the importing country.
One of the complaints of the developing countries is that the developed countrie
s are not doing enough to accept that actions they are taking on exported produc
ts in particular inspection and certification procedures are equivalent to the i
mporting developed countries' requirements even when the measures are different.
This is because the measures provide the same level of health protection (Doha
WTO Ministerial 2001: Briefing notes SPS Measures Food Safety etc). This creates
great deal of hurdles in agricultural exports from developing countries.
There are a two more issues that are important regarding recurring changes in st
andards brought out by the developed countries. One is the advance waring govern
ment should provide when they draft new regulations and the second is the time d
eveloping countries should bee allowed to adapt their exports to developed count
ries' new standards. The SPS Agreement uses phrases such as " Voluntary Commitme
nts" and "a reasonable" period of time. But reasonable time has to be specified

say six months or a year for example.

Some other concerns of developing countries are, their lack of resources for imp
lementing the agreement, their inability to effectively participate in drafting
and agreeing the international standards monitoring new regulations their export
markets and the difficulty off demonstrating sufficient scientific evidence to
justify their own measures or challenge those of others.

THE IMPACT OF GLOBLISATION AND AGRICULTURE LIBERALISATION

Introduction :
In the previous chapters of this study, an attempt was made to give an overview
of the objectives of trade liberalisation and to examine critically the main pro
visions contained in the WTO AoA along with India's commitments under the Urugua
y Round (UR) Agreement on Agriculture, the study also reviewed the trends in agr
icultural trade of India and analysed state wise competitiveness of various agri
cultural commodities separately under the export and import hypothesis. Finally
the study looked at the challenges of providing food security to its people in t
he context of liberalisation of agricultural trade.
This Chapter is devoted to the main focus of the present study, namely to examin
e in what way the liberalisation of the Indian economy and the establishment of
a free and liberalised trade regime under the WTO has affected the fortunes of t
he Indian Farmer.
AoA has both direct and indirect effects on the farmer. The direct effect can be
determined by examining to what extent the various provisions of the Agreement
have affected the growth and employment in agriculture and have thereby impacted
on thee living standards of the farmers. But more important economic liberalisa
tion brings about a significant change in the macro economic policy framework th
at directly and indirectly influences overall and sectoral of patterns growth. H
ence, the impact of economic liberalisation on the farmer should be studied in t
he context of both direct and indirect effects of economic liberalisation.
The condition of the farmer is determined above all the growth of the economy in
general and growth of agriculture in particulangrowth in exports and imports co
nseqent to economic liberalisation distribution of gains of growth, availability
of farm and non farm rural employment, and poverty, food security and nutrition
situation. Further, the terms of trade of agriculture vis a vis the non agricul
ture sector in the post liberalisation period would determine whether or not agr
iculture was a net beneficiary of the reform process. Hence, an attempt would be
made below to look at all the above parameters for making some judement about t
he consequences of globalisation and agriculture liberalisation in India for the
Indian farmers.
WTO Provisions- Impact:
India's obligations under WTO AoA, in the matter of market access, domestic supp
ort and export competition were discussed in detail in first part of this Chapte
r. It was noted that at present India had no reduction commitments regarding dom
estic support and export subsidies. But in the matter of domestic support, there
is an exemption from reduction commitment only to a de minimus ceiling of 10 pe
r cent both in the matter of product specific and more so in the matter of non p
roduct specific support. The product specific support is currently negative for
most of the commodities, but is close to becoming positive in some important com
modities like wheat and rice, thereby giving a warning that product price cannot
be raised indefinitely. The non product support has also increased rapidly in I
ndia because of increasing subsidies and is currently at about 8 per cent of agr
icultural output as against a de minimus level of 10 per cent. This implies that
the input subsidies have almost been extended to the allowable limit. The warni
ng is clear that these cannot be extended much farther.
But at present, India's total support is well below the minimus levels. Further,
the green box also allows public expenditure for infrastructure development. In
veiw of this, at present these provisions do not have a negative impact for the
farmer. But there is a clear message for the farmer. He has to come out of the

mindset of dependence on ever increasing administered prices and on increasing s

ubsidies. He will have to compete in the internatinal market through increased p
roductivity.
The story is quite different in the matter of market access. Subsequent to a com
plaint by the USA to the Dispute Settlement committee of the WTO. India had to u
ndertake revision in its import policy and had to abolish its qunatitative restr
ictions on agricultural imports by 2001. India was, however, allowed to re negat
ive its tariff limits on certain commodities for which its bound rates were very
low or even zero.
Market access provisions were meant to reduce barriers to agricultural trade. In
dia was expected to gain from access to the agricultural markets of developed co
untries. But ass discussed in detail access was made difficult for some of the h
igh value dairy and meat products because of very high tariff ceilings and tarif
f escalation by these countries. More important, agricultural commodities from a
ll the developing countries including India were put to a great disadvantange be
cause of huge domestic and export subsidies given by the developed countries to
their agriculture. Very high standards set for SPS measures also acted barriers
to lndia;s exports. As would be discussed later in the chapter the gains from ag
ricultural exports were much lower than expected.
India bound its tariffs for agricultural products at very high rates. However, t
he MFN tariff rates were much lower than the bound tariff for most of the commod
ities. The lifting of quantitative restrictions has not resulted in a food of im
ports. This is mainly because import duties were simultaneously increased along
with the final instalment of QR's abolition. Bound rate were also negotiated at
the level of 50 per cent to 75 per cent for some commodities , which were bound
at very low rates earlier, Further, India countinues to have a competitive edge
in many agricultural commodities. However, import of some agricultural commoditi
es have risen recently. In particular, imports of edible oils have risen at a ve
ry rapid rate with quite adverse consequences for oilseed farmers in the dry lan
d regions of India. The deleterious effect of cheap imports on the incomes of th
e farmers cannot be ruled out in future.
THE IMPACT OF MACRO ECONOMIC POLICY CHANGE:
Impact on Exports :
The policy makers who initiated the process of economics liberalisation argued t
hat the opening up of the economy combined with steep devalution of the currency
. Would go a long way in increasing exports of tradable agriculture. Exports wer
e expected to get a boost with the establishment of the WTO and cutting of expor
t and domestic subsidies by the developed countries. Since agriculture is labour
intensive. This was expected to not only provide more employment to agricultura
l workers but also help to raise their productivity and incomes.
India's trade performance was analysed in detail in pervious Chapter. It was bro
ught out that India was able to accelerate its exports of agricultural commoditi
es. In the post liberalisation period of the 1990's. But the growth rate which w
as very high up to 1996-97 started to decelerate afterwards. This was because of
a slow down in growth of world trade combined with declining competitiveness of
Indian exports because of fall in international prices and also because of larg
e hikes given to administered prices of wheat and rice. International trade has
revived since 2002 and Indian export are also likely to increase as a result. Fo
r example, India's exports of rice and wheat have recently recorded a big increa
se, they amounted to 12.4 million tonnes during 2002-03 compared with only 2.2 m
n. tonnes during 2001-02. It may be noted that this increase was facilitated as
a result of existence of large stocks and transport subsidy made available to be
exporters.
It is, therefore, obvious that the Indian farmer did derive some gain from expor
ts. But to put this in perspective. One should remember that lndia;s exports con
stituted only 5 per cent of value of agricultural output and 6.1 per cent of its
GDP with imports accounting for 2.6 per cent of GDP in 2000-01. Consequently, i
n absolute terms, the gains from exports are only limited and only a very small
proportion of the farming community in some regions has benefitted from them. Co

nsequently increase in exports although welcome has not been able to make much i
mpact on the living condition of the farmers in India. However, India has a larg
e potential to increase its agricultural exports in a liberalised world once the
developed countries agree to eliminate their subsidies. In addtion, this would
need large investmente in agricultural infrastructure including agricultural res
earch agro processing not only to create export surpluses but also to remain com
petitive through increases in productivity.
Impact on Growth :
The impact of new economic policy on growth of the Indian economy has already be
en examined in study. The main conclusion was that the new policies were instrum
ental in accelerating the growth of the Indian economy. Both the GDP and per cap
ita income registered significant acceleration during 1990-91 to 2000-01 compare
d with all the earlier decades. The growth rate of Indian economy accelerated fr
om about 3.5 per cent pa during 1950-51 to 1979-80 to 5.5 per cent during the ei
ghties and further to 6 per cent per annum during the 1990's. There was a signif
icant acceleration in per capita income growth also. It is expected that higher
growth in GDP would also benefit the agricultural sector through inter sectoral
linkages.
This notwithstanding, it is growth of agricultural GDP that has a more direct im
pact on the living standards of the peasantry. As discussed earlier, instead of
showing expected buoyancy after the introduction of economic reforms, there was
a noticeable deceleration in the growth rate of agriculture. At 1980-81 constant
prices,the growth of agricultural GDP decelerated form 3.94 per cent p.a. durin
g 1980-81 to 1990- 91 to only 1.95 per cent p.a. during 1990-91 to 1998-99. Howe
ver, the revised series of GDP at 1993-94 prices show that there was no decline
in the growth rate of total GDP originating from agriculture the main reason for
the discrepancy in the two estimates is much higher GDP contribution attributed
to fruits and vegetables in thel 993-94 series. But the National Statistical Co
mmission(2001) has expressed serious doubts the validity of the income data from
fruits and vegetables.
Crop Production :
That agricultural growth decelerated during the 1990's is also brought out by th
e fact that there took place a very distinct deceleration in the growth rate of
crop output during the 1990's compared with the 1980's. The growth rate for all
crops taken
GROWTH RATES OF GDP AND PER CAPITA INCOME - 1980-81 PRICES
Year
GDP
GDP Agri.
Secondary
Tertiary
e
1950-51 to 1964-65
4.00
2.65
7.73
4.61
1.69
1967-68 to 1979-80
3.45
2.10
4.43
4.49
1.11
1980-81 to 1990-91
5.46
3.94
6.86
6.58
3.01
1990-91 to 1988-99
6.23
1.95
7.45
8.24
4.30

Per Capita Incom

SOURCES : Economic Survey, Various Issues.

GROWTH RATES OF GDP AND PER CAPITA INCOME - 1993-94 PRICES
Year
GDP GDP Agri. Secondary Tertiary
Per Capita
Income
1950-51 to 1964-65
3.94
2.54
6.88
4.76
1.86
1967-68 to 1979-80
3.44
2.05
4.23
4.54
1.23
1980-81 to 1990-91
5.62
3.13
6.96
6.72
3.06
1990-91 to 1999-00
6.19
3.30
6.64
7.97
3.99
SOURCE : National Accounts Statistics 2001-02.
together decelerated to 1.96 pa during 1990-91 to 2000-01 compared with a rate o
f 3.19 per cent pa during 1980-812 to 1990-91. It may be noted that the reported
crops taken together account for more than 95 per cent of gross cropped area in
the country (Table 11).
A more serious development was a visible deceleration in the yield growth of var

ious crops. Thus whereas the yield growth for all crops taken together decelerat
ed from 2.65 per cent pa during the eighties to 1.38 per cent pa during the nine
ties. That for rice decelerated from 3.21 to 1.27 and for wheat from 3.15 to 2.3
2 per cent p.a. Similar is the case for cotton. The main reason for deceleration
in crop yields is neglect in public investment in R&D and extension in agricult
ure.
A significant deceleration in the growth of crop output and yields has adversely
affected the farmers by reducing their income and profitability. This also had
an adverse impact on employment.
The most important reason for the decelaration in agricultural growth has been a
sharp deceleration in total deceleration in agricultural growth has been a shar
p

TABLE - 11
ALL INDIA COMPOUND GROWTH RATES
Crop
1949-50 to 1964-65 Area
Yield 1980-81 to 1990-91 Area
eld
Rice
1.21
3.5
2.25
0.81
1.74
0.92
Wheat 2.69
3.96
1.27
1.03
3.27
2.21
Coarse Cereals 0.90
2.25
1.62
-2.07 -0.54 1.18
T. Cereals
1.25
3.21
2.90
-0.06 1.86
1.38
T. Pulses
1.72
1.41
1.61
-.0.79 -0.04 0.55
Foodgrains
1.35
2.82
2.74
-0.19 1.66
1.28
Sugarcane
3.28
4.26
1.24
1.87
2.70
0.82
Oil Seeds
2.67
3.20
2.43
0.88
1.62
1.04
Cotton 2.47
4.55
2.04
2.33
1.37
-0.94
Non-Foodgrain 2.44
3.74
2.31
1.19
2.41
0.86
All Crops
1.58
3.15
2.56
0.19
1.96
1.09

OF AREA, PRODUCTION AND YIELD OF MAJOR CROPS

Prod. Yield
1967-68 to 1980-81 Area Prod.
Prod. Yield
1990-91 to 2000-01 Area Prod. Yi
0.71

2.22

1.46

0.40

3.56

3.47

2.94

5.65

2.62

0.46

3.57

3.10

1.23

-1.03

0.67

1.64

-1.34

0.40

1.77

0.37

2.61

1.70

-0.26

3.03

-0.18

0.44

-0.40

-0.67

-0.09

1.52

1.36

0.38

2.15

1.33

-0.23

2.85

0.95

1.78

2.60

0.80

1.44

2.70

0.30

0.26

0.98

0.68

1.51

5.20

0.07

2.61

2.54

-1.25

2.80

4.10

0.89

0.94

2.26

1.19

1.12

3.77

1.21

0.51

2.19

1.28

0.10

3.19

Sources : Col. 2001. Agricultural statistics at a glance. Ministry of Agricultur

e.
Figure -1 Growth Rates of Yield
6 5
4 2 0
i r i i i i i i

1981-91
r
Rice
Wheat Foodgram Sugarcane Oilseeds Cotton Nonfood All Crops
8
1991-01
Figure - 2 Growth Rates of Output
4
3 -U
2 4- 1
0 -1
-2
i i r
6
8
1 2 3 4 5
Rice
Wheat Foodgram Sugarcane Oilseeds Cotton Nonfood All Crops
1981-91 I 1991-01
deceleration in total investment and more so in public sector investment in agri
culture since the beginning of 1980's and more so since 1991.
This has resulted in reducing the potential for future growth. A decline in rese
arch investment has had more serious consequences and seems to be the main cause
for stagnation and deceleration of yields of major crops. The increased private
investment has not benefited agricultural research either. The major reason for
declinee in public sector investmnet has been fiscal compression, which has mai
nly fallen on investmnet. There has been littlew or no effort to cut on inessent
ial expenditures. Like expenditure on salaries, subsidies and defence etc.
Some of the conseqences of deceleration of agriculture on agricultural populatio
n would now be examined briefiy.
Collapse of Agricultural Employment:
Slowing down of growth rates in agriculture has had many serious consequences fo
r the peasantry in the country.
One of the serious development was a notable deceleration in employment growth i
n the economy from 2.20

TABLE - 12
CAPITAL FORMATION IN AGRICULTURE (Rs. in Crores)
Year
Total Public Private Percent Share Public
iculture As %age of GDP from Agriculture
(AT 1980-81 PRICES)
1960-61 1668
589
1079
35.03 64.7
5.1
1970-71 2758
789
1969
28.6
71.4
6.7
1980-81 4636
1706
2840
38.7
61.3
0.6
1990-91 4594
1154
3440
25.1
74.9
6.6
1991-92 4729
1002
3727
21.2
78.8
6.9

Private Total GCF in Agr

1992-93
1993-94
1994-95
1995-96
1996-97

5372
5031
6256
6961
6999

1993-94 13523
1994-95 14969
1995-96 15690
1996-97 16176
1997-98 15953
1998-99 16384
1999-00 18656
SOURCE : Col.

1061
1153
1316
1268
1132

4311
19.7
80.3
3878
22.9
77.1
4940
21.0
79.0
5693
18.2
81.8
5867
16.2
83.8
(AT 1993-94 PRICES)
4467
9056
33.0
67.0
4947
10022 33.0
67.0
4848
10842 30.9
69.1
4668
11508 28.0
71.7
3979
11974 24.9
75.1
3846
12538 23.5
76.5
4668
13988 23.0
75.0
CSO. National Account Statistics,

7.4
6.7
7.9
9.0
8.5
5.2
5.4
5.7
5.4
5.4
5.2
5.9
Various Issues.

per cent pa during 1987-88 to 1993-94 to only 1.03 per cent pa during 1993-94 to
1999-00. More important although employment growth has registered a decline in
almost all the sectors of the economy, compared with that during 1972-73 to 1987
-88, a significant development is a sharp decline and collapse of employment gro
wth in agriculture during the nineties.
Second, despite slowing in the growth in the labour force. There was visible inc
rease in open unemployment during 1993-94 to 1999-00. According to NSS, there we
re 3.98 million unemployed in India in 1973-74 and their number had increased to
7.49 million by 1993-94 and to as much as 9.15 million by 1999-00. In the meant
ime, the incidence of unemployment (defined as the ratio of unemployed person to
the labour force ) increased from 1.64 per cent in 1973-74 to 1.96 per cent in
1993-94 and 2.25 per cent in 1999-00.
The increase in both the number and per cent of unemployed is the direct consequ
ence of collapse of employment in agriculure .this is more so because the higher
growth of employment in the non agricultural sectors has not been sufficient to
compensate for decline in agricultural employment. The employment scenario duri
ng the 1990's has become a matter of great concren.
Growth of Workers (Employment)
1972-73 to 1999-2000: Rural plus Urban 2000-04 1994-88 1994-73
0.02 2.43 3.01 1.03
2.18 1.34 4.09 2.40
1.49 3.60 3.90 2.20
Agriculture & Allied Secondary Tertiary
All UPS Workers
Source: NSSO Surveys for 1972-73,1977-78,1983,1987-88,1993-94 and 1999-2000
TS
Growth of Rural Workers (Employment) 1972-73 to 1999-00
1994-2000
1988-1994
1973-94
Agriculture & Allied
0.19
2.19
1.44
Secondary
2.53
0.28
3.61
Tertiary
2.19
3.81
4.14
All UPS Workers 0.66
2.14
1.87
Source: NSSO Surveys -various rounds.
TABLE - 15
Number of Unemployed and the Incidence Unemployment, 1973-74 to 1999-2000
1973-74 1978
1983-84 1987-88 1993-94 1999-2000
No. unemployed (mn) 3.98
7.14
5.95
9.14
7.40
9.15 Incidence o
r
Unemployment (%) 1.64 2.58
1.93
2.74
1.96
2.25
Source: NSSO, Survey on Employment and Unemployment, Various Issues.
That the process of labour force deversfication is painfully slow is also brough
t out by the distribution of workers across sector. Thus, the share of agricultu
ral workers in total workforce declined from 73.9 per cent in 19972-73 to 63.9 p
er cent in 1993-94 and further to 60.2 per cent during 1999-00. In 27 years from
1972-73 to 1999-00, the share of agricultural workers in total workforce has on

ly declined from 13.7 per cent. At this rate of change, even in 2.050 more than
one third of the workforce will still be engaged in relatively low productivity
agriculture. Another disturbing feature is that the diversification of workforce
is much slower in the rural areas and 71.4 per cent of male workers are still e
ngaged in agriculture(Table 6). Similar is the trend about the distribution of f
emale workforce in rural areas.
Basing themselves on productivity and wage data, recently, some scholars have un
derplayed the crisis in agriculture and have suggested that compared with the pr
e reform period the economic condition of workers has improved during the period
1993-94 to 1999-2000,(Tendulkar.2003). The fact that during 1983 to 1993-94 and
1993 -94 to 1999-2000, growth rate of agericulture exceeded the growth of emplo
yment did result in increase in labour productivity. Available data from NSSO al
so shows that casual wages in agriculture at constant( 1993-94) prices marginall
y increased from Rs. 19.34 day to Rs. 22.39 day in 1999-00. Further, wage rates
in non agricultural occupations were found to be significantly higher than that
in agriculture. This suggests that the shift from agriculture to non agriculture
is not a distress phenomenon.
A further argument is based on official data that brings out a notable decline i
n the incidence rural poverty during 1999- 00 compared with 1993-94 (Table 8). T
he implication is that there was an improvement in the living standards of rural
households in India during the post reform period.
Both the above arguments need careful scrutiny. First, it is difficult to believ
e that the conditions of the peasantry improves enen when the output growth regi
sters a significant decline. One of the problems is that the wage data refers to
casual workers only. The condition of agricultural labour improves provided wag
e increase is accompanied by more days of work. According to some studies, total
earnings of casual workers have indeed improved (Tendulkar,2002).But this does
not in an way reflect earning of the cultivating peasantry. The latter are deter
mined by growth of output, growth in crop productivity and increase in per unit
profitabilty. The available data point out that there has been deterioration wit
h respect to all these variables.
Per cent Distribution of Usually Working by Broad Group of Industry : Rural Indi
a Usual Principal and Subsidiary Status
Year
Male
Female
Primary Secondary
Tertiary
Primary Secondary
Tertiary
!983
77.5
10.0
12.2
87.5
07.4
4.8
1987-88 74.5
12.1
13.4
84.7
10.0
5.3
1993-94 74.1
11.2
14.7
86.2
08.3
5.5
1999-00 7.14
12.6
16.1
85.4
09.0
5.8
Source: Col (1999), "Household Consumer Expenditure and Employment Situation in
India". NSS Report No. 44z and 55th Round of NSSO.
Casual Wages During Different Round of NSS
Sector 1978-79 1983
1987-88 1993-94 1999-2000
At Current Price
Agr-0 3.47
06.32 09.98 19.34 36.22
Secondary
4.53
10.31 16.57 31.93 65.32
Tertiary
4.53
09.29 15.38 28.50 53.39
All 0-9 4.12
07.30 11.75 21.64 42.51
At 1993-94 Price
Agr-0 12.44 13.55 17.67 19.34 22.39
Secondary
16.46 23.90 28.41 31.93 38.17
Tertiary
17.07 21.60 26.45 28.50 32.75
All 0-9 15.10 16.53 20.39 21.64 25.73
Source : NSSO, Various rounds.
Second, the data about GDP from agriculture are equally flawed. The validity of
official data on GDP from fruits and vegetables has been questioned by no less t
han the Statistical Commission of India.
Third, the official estimates about the incidence of poverty have also been seri

ously questioned(sen.2002). It appears that the mix up with regard to 7 days rec
all period and 30 days recall period has made it difficult to put full reliance
on these estimates. Some scholars have tried to use data of consumption from 55t
h Round Survey on Employment and Unemployment with a veiw to get independent est
imates of poverty. These authors also showthate a visible decline has taken plac
e in the incidence of poverty although the decline as not as large given by offi
cial data But this notwithstanding, the number of poor is still very large in In
dia and most of these are in rural India and belong to the agricultural labour a
nd marginal farmers households.
It appears that the introduction of economic reforms and the becoming founder me
mber of WTO have not brought about the promised benefits to a large section of t
he poor farming community in India.
TABLE - 18
Precentage of People Below Poverty Line
NSS (Round) Rounds/Year Rural Urban
in Millions Rural Urban
27 (LS) 1973-74 56.40 49.00 54.90
32 (LS) 1977-78 53.10 45.20 51.30
38(LS)1983
45.65 40.79 44.48
43 (LS) 1987-88 39.00 38.20 38.86
45 (TS) 1989-90 33.70 36.00 34.28
46 (TS) 1990-91 35.04 35.29 35.11
48(TS)1992
41.70 37.80 40.70
50 (LS) 1993-94 37.27 32.26 35.97
51 (TS) 1994-95 38.03 34.24 36.98
52 (TS) 1995-96 38.29 30.05 36.08
53(TS)1997
38.46 33.97 37.23
55th (LS) 1999-00
27.09 23.62
30 days Recall
55th (LS) 1999-00
24.02 21.50
7days Recall

1983-2000
Combind Absolute Numbers
261.20
204.25
251.72
229.40

60.31
67.74
75.29
83.35

242.10 76.30

26.10

194.44 67.48

23.33

172.54 61.68

LS= Large Sample, TS= Thin Sample.

Because of the changes In the methodology of data collection, these two sets of
estimates may not be strictly comparable to the earlier extimates of poverty. Ec
onomic Survey, 2000-2001. Page 194
Source: NSS. Household Consumption Surveys, Government of India. Various Rounds.
Terms of Trade :
The final issue is terms of trade agriculture vis a vis non agricultural sector,
which has received a great deal of attention in India. That the relative terms
of trade for agriculture vis a vis non agriculture are continuously deterioratin
g is vividly brought out by an analysis of national income and labour force data
over a longe period. It comes out that whereas Indian economy registered a sign
ificant sectoral diversification in terms of income, labour force diversificatio
n has been painfully slow. Thus whereas agriculture's share in GDP declined from
55 per cent in 1950-51 to 27 per cent in 1999-00, the proportion of workers eng
aged in agriculture only declined from about 66 per cent in 1950 to about 60 per
cent in the mean time, consequently the per worker productivity in non agricult
ure which was 1.8 times that of agricultural worker in 1950 had risen to 4.3 tim
es that of agricultural worker by 1999-00. The persistent decline in the relativ
e productivity and income of agricultural workers is a matter of grave concern f
or the political economy of India
Besides this overall picture, many scholars in India have studied barter terms o
f trade in detail by comparing the prices paid and the prices received by agricu
lture relative to non agriculture. One of the problems with barter terms of trad
e is that it only refers to the fact whether higher or lower relative prices wer

e received by agriculture. It dose not in any way determine the relative movemen
ts in income terms of trade. Since income depends not only on relative prices bu
t also on productivity. One way to correct would be to look at the relative move
ment in productivity along with prices. Or alternatively, implicit price deflato
rs derived from GDP in agriculture and non agriculture from current and constant
prices series could give a rough idea of the movement in income terms of trade.
Table 9 below and the accompanying Figure give details of terms of trade calcul
ated by these two methods.
The barter terms of trade bring out that there was some improvement in agricultu
re's terms of trade during the 1990's. But the degree of this improvement was mu
ch smaller than during the 1980's. Further, more unlike during the 1980'swhen a
notable improvement in terms of trade was accompanied by a significant increase
in productivity, during the 1990's, a small improvement in terms of trade was ac
companied by a decline in productivity. Therefore,nothing conclusive can be said
about improvements in income terms of trade during the 1990's. It once agian co
mes out that there was only a marginal increase in agriculture's terms of trade
vis a vis non agriculture.
Hence,contrary to expectations and despite large increases given to administered
prices of important agricultural commodities. Economic liberalisation during th
e 1990's did not lead to any perceptible increase in the fortunes of the agricul
tural sector.
Index of Terms of trade between Agriculture and Non-agriculture as Compiled by D
ES
(Triennium ending 1990-91 =100)
Year
Combind Index of
Index of
Index of
Index of
Prices Terms of
terms of
Prices Paid
Received
Trade (DES) *A Trade **B
1981-82 61.9
54.9
88.7
91.7
1982-83 66.0
60.3
91.4
91.3
1983-84 70.1
64.2
91.6
91.6
1984-85 72.4
68.0
93.9
89.8
1985-86 75.2
70.4
93.6
89.3
1986-87 80.2
76.7
95.7
91.3
1987-88 88.3
86.0
97.4
95.7
1988-89 91.8
90.3
98.3
93.1
1989-90 98.1
97.5
994
93.8
1990-91 110.2 112.3 101.9 95.8
1991-92 123.8 130.8 105.6 101.1
1992-93 133.5 138.7 103.9 97.4
1993-94 146.1 151.4 103.6 100.0
1994-95 160.5 171.1 106.6 100.2
1995-96 173.7 182.9 105.3 101.2
1996-97 184.8 190.6 103.1 103.5
1997-98 194.9 205.9 105.6 107.0
1998-99 209.9 220.8 105.2 105.59
1999-00 214.0 223.1 104.2 105.4
Notes: *A As complied by the DES. Ministry of Agriculture.
* *B Derived from National Income and NSS.
FIGURE - 3
TERMS OF TRADE PRICES RECEIVED AND PAID. DES
120 -r

&60 s 40
a:
i i i i i i r

1 I r
S20 0
0
# / J> J> / / J> J> J
Year
Total Agriculture
Figure -4
Terms of Trade using GDP Deflators
160
140
a)
n
u 2
IM
o </)

|2

120
100
80
60
40
20
0

#
S3"
n:
NT
?v
#
Years
Total Agriculture
Source: National Income and NSS data.
APPENDIX
TABLE-20
MAJOR AGRICULTURAL PRODUCTS : IMPORT TARIFFS AND TRADE POLICY STATUS
Commodity
Existing Rounding
Tariff Building
Uruguay Trade Policy Status
April, 1996
1991
1997
2001
Export Import Export Imports Imports
Animal 0
100
Mostly rtd.
Mostly rtd.
Mostly rtd.
Mostly r
td.
Meat
Fresh, Chilled, frozen 10
150
Mostly rtd.
Restricted
Mostly r
td.
Restricted
Free
Processed
50
150
Mostly rtd.
Restricted
Mostly rtd.
Restricted
Free
Processed
50
50
Mostly rtd.
Restricted
Mostly rtd.
Restricted
Free
homog, meats, hams hides
& skins, incl. leather 0
25
Restricted
Free
Restricted
Free
Free
Fish and crustaceans
10
150
Free
Mostly rtd.
Mostly rtd.
Mostly rtd.
NA

Dairy Product
Milk & Cream
40
Restricted
Free
Yogurt 40
150
Free
Powder Milk (1.5%)
Free
Free
Powder Milk (1.5%)
Restricted
Free

100

Restricted

Restricted

Restricted

Cancelled

Restricted

Free

Restricted

Cancelled

Restricted

Free

Cancelled

Restricted

Free

Commodity
Existing Rounding
Tariff Building
Uruguay Trade Policy Status
April, 1996
1991
Export Import 1997
Export Imports 2001 Imports
Powder Milk
40
40
Cancelled
Restricted
Free
Restrict
ed
Free
(1.5%) (Sweet) 40
40
Cancelled
Restricted
Free
Restrict
ed
Free
Butter 40
40
Cancelled
Restricted
Free
Free
Free
Butter Oil
40
40
Cancelled
Restricted
Free
Restrict
ed
Free
Cheese 40
40
Rice
0
0
Mostly rtd.
Cancelloed
Free
Cancelloed
Wheat & Wheat flour
Durum (hard) wheat
0
100
Restricted
Cancelled
Free
Cancelled
STE, FCI
Other wheat:
0
100
Restricted
Cancelled
Restricted
Cancelled
STE, FCI
Coarse grains & Flour
Maize 0
0
Restricted
Cancelled
Cancelled
Restrict
ed
Sorghum 0
0
Restricted
Cancelled
Cancelled
Restrict
ed
Milled 0
0
Restricted
Cancelled
Cancelled
Restrict
ed
Barley 0
100
Restricted
Cancelled
Cancelled
Restrict
ed
Rye
0
100
Restricted
Cancelled
Cancelled
Restrict
ed
Oats
0
100
Restricted
Cancelled
Cancelled
Restrict
ed
Others 0
100
Restricted
Cancelled
Cancelled
Restrict
ed
Commodity
Existing Tariff ~ Uruguay April, 1996 Rounding Building
1991
Export Trade Policv Status
1997
Import Export Imports 2001 Imports
Processed Cereals
Baby Foods
15
17.5
Free
Restricted
Free
Restricted
Free
Bakers dough
50
55
Free
Restricted
Free
Restricted
Free
Breakfast cerals
50
55
Free
Restricted
Free
Restrict
ed
Free
All others
50
Free
Restricted
Free
Restricted
Free

Pulses 5
150
Restricted
Free
Restricted
Free
Free
Vegetables
10
100
Mostly free
Free
Mostly free
Restrict
ed
Free
Dried Mashrooms
Onions and Potatoes
10
100
Mostly free
Restricted
Free
Restricted
Free
Fruits
(Graps & Plums) 50
35
Free
Restricted
Mostly free
Restrict
ed
Free
Dried prunes Preparation of Foods & Vegetables 50
100
Free
Restrict
ed
Free
Restricted
Free
About 13 Vegetables
50
100
Free
Restricted
Free
Restrict
ed
Free
Orange Juice
50
55
Free
Restricted
Free
Restricted
Free
Other Fruit Juice
50
85
Free
Restricted
Free
Restrict
ed
Free
Coffee (unprocessed)
Rousted & decaff
Coffee in bulk 10
100
Restricted
Restricted
Mostly Free
Restricted
Free
Tea
10
150
Restricted
Restricted
Mostly Free
Restrict
ed
Free
Commodity
Existing Tariff " Uruguay April, 1996 Rounding Building
1991
Export Trade Policy Status
1997
Import Export Imports 2001 Imports
Spices 50
150
Mostly Free
Restricted
Mostly Free
Restrict
ed
Free
Caraway Seeds 35
100-150 Mostly Free
Restricted
Mostly Free
Restricted
Free
Thyme, bay leaves
35
35
Free
Restricted
Free
Restrict
ed
Free
Oil seeds etc.
35
Free
Restricted
Free
Restricted
Free
Oil Seeds
40/50 100
Restricted
Cancelled
Mostly rtd.
Cancelled
Free
Oil cakes, meals and flours 50 150
Mostly free
Cancelled
Free
Cancelled
Free
Soya rapeseed, mustard
Oilve & colza oils
20
45
Restricted
Cancelled
Mostly r
td.
Free
STE
Other edible oils incl.
Coconut & Palm Oils
20
300
Restricted
Cancelled
Cancelled
STE
Raw Cotton
0
150
Restricted
Cancelled
Free
Free
Greasy Wool
10
25
Free
Free
Free
Free
Jute Sisel etc. 0
40
Free
Free
Free
Free
Sugar 0
150
Cancelled
Restricted
Mostly free
Free
Natural Rubber 25
25
Free
Cancelled
Free
Mostly Free
Raw Tobacco
50
100
Restricted
Restricted
Restricted
Restricted
Wood and Wood Products 25-50
25-40 Restricted
Restricted
Restrict
ed
Mostly Free
SOURCE : Compiled from India's Tariff buildings submitted to the WTO and the lat
est EXIM Policy.
NOTE : Mostly restricted means that most products or product varieties in the c

ategory are subject to licensing or other non- tariff

controls.

HIGHLIGHTS OF INDIAN PROPOSALS

India has submitted its initial negotiating proposals to the World Trade Organis
ation (WTO) for the mandated negotiations under the Agreement on Agriculture in
the areas of market access, domestic support, export competition and food securi
ty with the objective of protecting its food and livelihood security and creatin
g increased market access opportunities and with a view to promoting its agricul
rural exports. These proposals were approved by the Cabinet Committee on WTO mat
ters.
The summary of India's proposals is given below. Indian proposals submitted to W
TO on 15.1.2001 can broadly be classified into the following 2 categories :
i)
Increasing the flexibility enjoyed by developing countries by creation o
f a "Food Security Box" for providing domestic support to the agriculture sector
under the special and differential provisions as also further strengthening of
trade defence mechanisms with a view to ensuring the food security and to take c
are of livelihood concerns.
ii)
Demanding of substantial and meaningful reductions in tariffs including
elimination of peak tariff and tariff escalation, substantial reductions in dome
stic support and elimination of export subsidies by the develoiped countries to
as to get meaningful market access opportunities.
The proposals in the first category include :
Additional flexibility for providing subsidies to key farm inputs for agricultur
al and rural development.
Exemption from any reduction commitments of measures taken by developing country
members for alleviation of poverty, rural development rural employment and dive
rsification of agriculture.
*
Exclusion from AMS calculations of product specific support given to low
income and resource poor farmers.
Clarifications on certain implementation issues, such as, offsetting of positive
non product specific support with negative product specific support, suitable m
ethodology of notifying domestic support in stable currency to take care of infl
ation and depreciation.
*
Rationalisation of product coverage of AoA by inclusion of certain prima
ry agricultural commodities such as rubber, Jute, coir etc.
Flexibility enjoyed by developing countries in taking certain measures in accord
ance with other WTO covered Agreements should not be constrained by the provisio
ns of AoA.

Maintenance of appropriate level of tariff bindings on agricultural products in

developing countries, keeping in mind their developmental needs and high distort
ions prevalent in the international markets with a view to protect livelihood of
their farming population. Also linking the appropriate levels of tariffs in dev
eloping countries with trade distortions in the areas of market access, domestic
support and export competition.
Rationalisation of low tariff bindings in developing countries, which could not
be rationalised in the earlier negotiations.
Separate safeguard mechanisms on the lines of SSG including a provision for impo
sition of QRs in the event of a surge in imports or a decline in International p
rices, as an SDT measure to protect Food Security & livelihood concerns.
No minimum market access commitments for developing countries.
The proposals in the second category include :
Blue box and de-coupled and direct payments in Green Box to be included in the A
mber Box to be subjected to reduction commitments.
* Accelerated reduction in AMS so as to bring it below de minimus by the develop
ed countries in 3 years and by the developing countries in 5 years.
Substantial reduction in tariff bindings including elimination of peak tariffs a
nd tarif escalation in developed countries.
Expansion and transparent administration of TRQs pending their eventual abolitio
n.
Elimination through accelerated reduction in export subsidies and disciplining o
f all forms of export subsidisation etc.
Abolition of Peace Clause for developed countries.
TEXTS OF INDIA'S PROPOSALS
India's Proposals on Agriculture - II: Market Access :
PROPOSALS:
1.
An appropriate formula with a cap on tariff bindings should be evolved t
o effect substantial reduction in all tarif levels including peak tariffs and ta
riff escalations in developed countries. The developed countries should make a d
own payment by way of bringing down the tariff bindings, as on 1.1.2001, by 50 p
er cent by the end of the year 2001.
2.
As a special and differential measure, the developing country members sh
oiuld be allowed to maintain appropriate levels of tariff bindings keeping in mi
nd their developmental needs and the high distortions prevalent in the internati
onal markets. The appropriate levels oftariff bindings will have to necessarily
relate to othe trade distortions in the areas of market access, domestic support
and export competition being practised by the developed countries.
3.
A separate safeguard mechanism on the lines of the Special Safeguard pro
visions (Article 5 of AoA) along with a provision for imposition of quantitative
Restrictions under specified circumstances, should be made available to all dev
eloping countries irrespective of tariffication, in the event ofa surge in the i
mports or a decline in prices and to ensure the food and livelihood security of
their people.
4.
Even after the abolition of the peace clause (Article 13 of AoA), as a s
pecial and differential provision, measures taken by developing countries under
Annex 2 (Green Box) and other domestic support measures conforming to Article 6
of AoA shall be exempt for a period of ten years from imposition of countervaili
ng duties under the Agreement on Subsidies and Countervailing Measures and Artic
le XVI of GATT 1994 and shall also be exempt from actions based on non-violation
nullification or impairment of the benefits of tariff concessions under paragra
ph 1 (b) of Article XXIII of GATT 1994.
5.
Tariff Rate Quotas (TRQs) should be eventually abolished. In the interve
ning period, there should, hwoever, be substantial expansion of TRQs administere
d by developed countries. There should also be greater transparency in administr
ation of TRQs by prescribing guidelines for complete uniformity across countries
and products, adopting a common base period for calculating domestic consumptio
n for minimum market access commitment by the developed countries and stricter a
pplication of the MFN principle in allocation of TRQs with special preference be
ing given to developing countries having less than $1,000 per capita annual inco

me. Allocation of TRQs shoiuld be for specific products and not for aggregated c
ommodity groups.
6.
Developed country members should not be allowed to use SPS measures for
protectionist purposes by prescribing overly stringent trade restrictive SPS mea
sures for denying market access to developing countries.
7.
Developing country members should be exempt from any obligation to provi
de any minimum market access.
8.
The provision of Special Treatment as provided in Section A of Annex 5 o
f AoA, which is enjoyed by a very few countries for a few products, should be re
moved as it is against the basic principles of GATT.
India's Proposals on Agriculture - III: Export Competition :
PROPOSALS:
1. Export subsidies on all agricultural products shold be eliminated in the firs
t 2 years of implementation, both in terms of export subsidy outlays and subsidi
sed volumes. As a down payment, the subsidy outlays and subsidised volumes shoul
d be reduced by 50 per cent from the level maintained in the year 2000 by the de
veloped countries by the end of 2001.
2.
During the transition period also, no "rolling over" of unused export su
bsidies should be allowed.
3.
All forms of export subsidisation including export credit, guarantees, p
rice discounts and insurance programmes etc. in developed countries should be ad
ded to the export subsidies and should be subjected to the overall disciplines a
pplicable to export subsidies.
4.
Taking into account the needs and special conditions of developing count
ries :
i)
The existing special and differential treatment for developing countries
under Article 9.4 of the AoA should continue.
ii)
Special dispensation for developing countries provided under Article 27
read with Annex VII of the Agreement on subsidies and countervailing Measures sh
ould prevail over Article 8 of AoA.
iii)
Article 13 (c), which gives protection to export subsidies that conform
to the provisions of part (v) of AoA, should be abolished forthwith.
iv)
After the abolition of the peace clause (Article 13 of AoA), the provisi
ons under Article 9.1 (d) & (e) permitted to be used by developing countries wit
hout any reduction commitments under Article 9.4 of AoA should be retained as su
ch and should be exempt from countervailing duties and actions based on Article
XVI of GATT 1994 and the Agreement on Subsidies and Countervailing Measures.

India's Proposals on Agriculture - IV : Domestic Support :

PROPOSALS :
1. Direct Payments along with decoupled income support and Governmental financia
l participation in income insurance and income safety-net programmes (paras 5, 6
& 7 of Annex 2) as well as direct payments under production limiting programmes
(Art. 6.5) shoiuld be included in the non-product specific Aggregate Measuremen

t of Support and shoiuld be subject to reduction commitment so as not to exceed

the de minimus level, i.e., 5 per cent (for developed countries) and 10 per cent
(for developing countries) of the value of that Member's total agricultural pro
duction (Article 6.4).
2.
Product specific support provided to low-income resource poor farmers sh
oiuld be excluded from the AMS calculations, as is the case for the non-product
specific support as per para 6.2 of AoA.
3.
The total domestic support shold be brought down below the de minimus le
vel within a maximum period of three years by developed countries and in five ye
ars by the developing country Members. The developed countries should make a dow
n payment by the end of the year 2001, through a 50 per cent reduction in the do
mestic support from the level maintained during the year 2000; or by the amount
as is higher than the de minimus, whichever is lower.
4.
A suitable methodology of nothfying the domestic support in a stable cur
rency/basket of currencies should be adopted for taking into account the inciden
ce of inflation and exchange rate variations.
5.
Negative product specific support figures should be allowed to be adjust
ed against the positive non-product specific AMS support figures.
6.
While product specific support should be calculated at the aggregate lev
el, support too any one particular commodity should not be allowed to exceed the
double of the de minimus limit of that commodity, as prescribed under Article 6
.4.
7.
Support extended under paras 5, 6 and 7 of Annex - 2 should be shifted f
rom Article 13 (a) to 13 (b) of the Peace Clause. However, the Peace Clause must
lapse as already provided in AoA.
8.
The provisions of Article 6.4 of AoA should prevail over the stipulation
contained in Article 13 (b) (ii) of the Agreement.
9.
After the abolition of the peace clause (Article 13 of AoA), as a specia
l and differential provision, measures under Annex - 2 (Green Box) and other dom
estic support measures conforming to Article 6 of AoA.
10.
Shall be exempt from imposition of countervailing duties under the Agree
ment on Subsidies and Countervailing Measures and Article XVI of GATT 1994 and s
halll also be exempt from actions based on non-violation nullification or impair
ment of the benefits of tariff concessions under paragraph 1 (b) of Article XXII
I of GATT 1994.
11.
All measures taken by developing countries for poverty alleviation, rura
l development, rural employment and diversifiction of agriculture should be exem
pted from any reduction commitments.

CHAPTER-VII
RECAPITULATION, SUGGESTIVE MEASURER AND FUTURE PROSPECTS
We may now briefly summarize the discussions presented in this study. During the
past 13 years India has undertaken several policy reforms to create an enabling
environment for opening up of the economy and liberalization of agricutural tra
de, as a part of broad economic reforms programme initiated during the nineties,
and to meet its commitments as a WTO member country. The formation of World Tra
de Organisation as a multilateral trade regulatory authority in 1995 to catalyze
the philosophy of free trade has raised serious question marks on the concept a
nd philosophy of free trade itself. Theoretically, the principal mandate of the
WTO is to promote an open, equitable and non-discriminatory multilateral trading
system based on the principle of comparative advantage. However, implementation

of WTO frame work and its agreements, have led to serious problems resulting in
to non agreement on a number of issues as they seem to follow the principle of d
iscrimination and unequal exchange. The failure of recent round of Cancun Summit
to arrive at a consensus with regard to Agreement on Agriculture is a clear poi
nter. The three pillars of AOA, i.e., increasing market access, reducing domesti
c support (specially the subsidies on farm inputs) and curtailing export promoti
on measures (like export subsidies) under the WTO framework of negotiations, as
of now, do not warrant for any argument and concessions to the developing countr
ies with regard to the issues of self sufficiency, food security and poverty red
uction through agriculture. This has led to serious policy dilemma and dichotomy
in the country as regards to the objectives of a sound agriculture policy.
While India seems to have acted under pressure and presumptions to highlight the
need for reducing the domestic support, crop diversification and export enhanci
ng measures, the objective situation has always demanded a food security approac
h as nearly eighty per cent of the farmers belong to small and marginal category
, hardly having any competitive strength and economic security. The growth rates
in agriculture sector have already started declining and the foodgrain situatio
n appears to be worse today despite the surplus production. The dichotomy become
s more acute when the issue of agriculture is viewed in relation to poverty redu
ction, which notonly requies government support to the farm sector but also dire
ct intervention calling for asset redistribution and land reforms and extending
protection to the farmers and agricultural labourers. The issues of asset redist
ribution and land reforms have totally been relegated in to background ever sinc
e the export frenzy approach to agriculture growth took primacy. While the expor
t frenzy approach is based on large farm economics, the issues of food security,
environmental sustainability and preservation of bio- diversity require a compl
etely decentralized approach in which the local institutions and the class ofsma
ll and marginal farmers may have the adequate and effective participation. It is
apparent that under Indian conditions the issue of agriculture growth, with or
without WTO, can not be separated from the issue of agrarian relations which det
ermine the level of food security, environmental sustainability and poverty.
The issue of environmental sustainability in Indian context cannot be separated
from the issue of food security as the loss of bio-diversity has been one of the
prime causes for food insecurity. The loss of bio-diversity has made small and
marginal farmers more vulnerable after globalization despite the fact that this
group had been the traditional protector of plant varieties in the country.
WHAT NEED TO BE DONE :
The basic questions is: What needs to be done? There are two levels at which act
ion has to be taken. First is the international level and the second is the dome
stic level.
At the international level, resistance has to be built against the developed cou
ntries so that a level playing field is available to goods and services exported
by India and other developing countries. The net impact of the protective and d
iscriminatory policies of the US and OECD countries is to corner all benefits of
globalisation in their favour Human Development Report (2003) opines: " But in
the long-run low prices dampen incentives to invest, which leads to stagnation o
f an important sector of the economy (viz. agriculture) on which many poor peopl
e depend. That leaves the rich countries farmers as the sole true beneficiaries
of subsidies, with a multitude of losers across the globe."
At the international level, combined pressure of developing countries is bound t
o make an impact. With an improvement in relations with China after prime Minist
er Vajpayee's successful visit, if these two big countries belonging to the deve
loping world, mobilze support from Brazil, Pakistan, Banladesh, Vietnam. Philipp
ines, Africa, etc, it could represent the voice of two-third of the people of th
e world. Developed countries will ultimately have to yield to the basically logi
cal stand of these countries so that the benefits of globalisation should be equ
itably shared between the developed and the developing world.
In case, the developed and rich countries do not listen to the pleading of the d
eveloping countries to adhere to the norms and agenda agreed for reduction of ta
riffs and subsidies, then there are two alternatives left. Developing countries

should decide whether they would like to continue to be members of the WTO or wh
ether they should also take recourse to retaliatory measures. History provides a
mple evidence that when the voice of reason and logic was not listened to, then
the only alternative left was to retaliate. Since agriculture subsidies in India
are much less than the 10 per cent of the GDP level stipulated by the WTO (they
are around 3 per cent), there is enough scope to raise them as a retaliatory me
asure. But such a course is likely to give a serious jolt to the movement toward
s globalisation, But iof such an eventuality is forced on developing countries,
they have to use the bitter pill to save the livelihood of the farmers who depen
d exclusively on agricultural exports. Late prof.P.R. Brahmananda went so far to
assert in one of his lecture : "We have to think of domestic interests as param
ount. If we have to leave WTO for the interests of our farmers. I would not mind
it."
India's agricultural imports were of the order of US$ 1.86 billion in 2000-01, b
ut they increased to $2.29 billion in 2001-02. If the surge continues, then the
interests of Indian farmers would be seriously affected. Economic Survey (200203) makes a forthright statement:" India has considerable flexibility to counter
flooding of the Indian market by cheap agriculture imports through the impositi
on of tariffs (bound rats) under WTO. WTO permissible tariff rate reasonably hig
h : 112 per cent for nuts, 150 per cent for sugar and coffee, 100 per cent for t
ea and cotton. 70 to 100 per cent for foodgrains, 45 to 300 per cent for edible
oils and 40 to 50 per cent for fruits. Countervailing duties can also be imposed
to counter questionable subsidies given to agricuture products by the exporting
countries apart from having the option of acting under safeguard provision to c
ounter the suger of imports. In budget 2001-02, import duties were raied for man
y agri products such as tea, coffee, pulses and edible oils. In 2002- 03 budget,
the import duties were raised for pulses( from 5 to 10 per cent, tea and coffee
(from 70 to 100 per cent), natural rubber, pepper, cardamom and clove (from 35
to 70 per cent)." So far India has followed the agreement on Agriculture very ho
nestly, but honest implementation should not be treated as a sign of weakness. I
n case the US and OECD countries persist in their nefarious game of protective t
ariffs, quotas and subsidies for their farmers. India and other developing count
ries may be left with no choice but to retaliate. But this mean the start of a p
rocess which may reault in the deeling of globalisation world over.
However, this dose not mean that at the domestic level, India has no action to t
ake to improve its agriculture. In fact, the reform process is guilty of neglect
ing agriculture. In agricultural infrastructure, the most important irrigation.
The reform process emphasized the role of the private sector in promoting irriga
tion. But the experince of the Ninth plan as documented in the Tenth plan reveal
s that the private sector invested in irrigation technologies which were mainly
extractive such as tubewells. But these investment are not sustainable unless ap
propriate investment are made in rain-water harvesting and recharging of ground
water resources. However, data as provided by CSO reveals that in gross capital
formation in agriculture, the share of the public sector declined from 33 per ce
nt in 1994-95 to merely 23.5 per cent in 2000-01. In absolute terms, public sect
or investment declined from Rs. 4.947 crores in 1994-95 (measured at 1993-94 pri
ces) to just Rs. 3,919 crores in 2000-01. Although private sector investment imp
roved, but it did not fufill the function of rain water harvesting and rechargin
g of ground water resources.
In boosting agri exports, some success has been achieved, but agri-exports which
reached $ 6.004 million in 2000-01, declined to $ 5.871 million in 2001-02. Eco
nomic Survey (2000-03) indicating the main reasons for indian export continuing
to be in the range of 13-14 per cent of total export states : "Main reason is po
or export infrastructure, low level of agri-processing, grading, quality control
and poor or lack of quality branding and Packing. Infrastructure specific to ag
ri exports, such as storage, and fast track inland and mechanical port handling
facilities is also a limiting factor."
Another important area which needs attention is to make agricultural credit avai
lable at lower rates of interest. There is no doubt that the total flow of insti
tutional credit to agriculture which was of the order of Rs. 31,956 crores in 19

97-98 has more than doubled to Rs.82,000 crores in 2002-03. This is really herar
tening, but the rate of interest charged on loans ranges between 14-18 per cent.
This implies that the benefit of declining rates of interest has not been passe
d on agricultural borrows. On account of the efforts of former agriculture Minis
ter Mr. Rajnath Singh, the Finance Ministry agreed to reduce interest on farm lo
ans upto Rs. 50,000 to 9 per cent. This step, though in the right direction, is
still inadequate, moreso, in veiw of the fact interest on housing loans has been
reduced to 8.5 to 10 per cent, it s imperative on the part of the Government to
bring down interest rates on all agriculture loans short-term, medium-term and
long-term. Accepting the need to reduce interest rate on agricultural loans. For
mer Prime Minister Atal Behari Vajpayee on 27th July 2003 announced : "Crop loan
s, below Rs. 50,000 will be charged nine per cent interest and banks are being a
sked to charge the rate of interest below the PLRs for agricultural loans up to
Rs. two lacs." It may be noted that the Current PLR for most banks is between 11
to 12 per cent.
The upshot of the entire analysis is that whereas the developed countries want t
o penetrate the markets of developing countries in agriculture, they continue to
use tariffs, quotas and subsidies to help their farmers. There has been no pere
ptible change in the policies of the United States and OECD countries. To share
the benefits of globalisation in an equitable manner, it is imperative that deve
loped countries bring about reductions in tariffs and subsidies and eliminate qu
otas so to permit a level playing field for developing countries. Moreover, as e
stimated by the European Commission, half of all subsidies go to just 5% of larg
e farms.
If under the banner of globalisation. WTO intends to build a more equitable and
just world order, then at forthecoming ministerial meet at Cancun in September 2
003, it has to apply pressure on developed countries so that the principle of co
mparative cost becomes the basis of trade in agriculture, rather than the princi
ple of access to subsidies.
POLICY SUGGESTIONS:
It was expected that agriculture would the main beneficiary of macro economic po
licy changes brought about by economic reforms In 1991 and of multilateral trade
liberalisation after setting up of WTO 1995. The above the discussion has broug
ht out that these reforms failed to bring about the expected benefits to the Ind
ian peasantry. The main reason for this is the deceleration of agriculture growt
h during the 1990s which adverse consequences for the farmers directly as well a
s through decline In employment. Therefore, the first most Important task would
be to revive the growth process in Indian agricutlure. The main reason for decel
eration of agricultural growth was slow down of public investment In agriculture
. Experience of the 1980's and 1990's should teach the Indian policy makers that
public investment in rural infrastructure continues to be of paramount inportan
ce. It can be complimented but not fully replaced by private investment. Hence t
here is a need to accelerate public Investment In agriculture. Furthermore, the
existence of very precarious fiscal situation is primarily responsible for a dec
line in public infrastructure investment in general and in agriculture in partic
ular. This situation will have to be reversed through hard policy decisions for
regenerating agriculture growth.
Secand, a related serious development in agriculture is the deceleration of yiel
d growth rates of many crops. This calls for huge Investment in research and tec
hnology, which has been neglected for quite some time. The need is to put in pla
ce a vibrant indigenous research systm. Agriculture research has now assumed muc
h greater importance in view of the fact that international research is rapidly
getting privatised and the role of the CGIAR Institution like CYMMIT and IRRI is
becoming far less important . A much larger proportion of research result Inclu
ding seeds and other scientific inputs are likely to be supplied by the multinat
ionals at exorbitant prices. Complete dependence on multinational for supply of
seeds including genetically modified seeds would become extremely costly and bey
ond the reach of small farmers. Since this would entail huge cost to the economy
. It is important to harness resources for research within the country and to un

dertake large investment in indigenous R&D.

Third, a near collapse of employment growth in agriculture during 1993-94 to 199
9-2000 is a direct consequence of slow down in agriculture and increasing capita
lisation n this sector. Further, the employment growth in non farm sector was al
so not high enough to absorb all surplus labour force., leading therefore, to a
slow down in diverification. There Imbalance can only be corrected through large
acceleration in both the overall and agricultural growth.
Fourth, It is to be recognised that India being founder member of the WTO is bou
nd to under take further economic reforms in agriculture. These would included r
emoval of barriers to both external and internal trade in agriculture commoditie
s through tariff reduction, abolition of internal restrictions to trade, opening
future markets, and protecting pattent right etc. Some of the WTO commitments w
ould have to be met over a given time period. India should not only try to impro
ve its bargaining position in the next round of negotiations it should also try
to improve its competitiveness in many agriculture commodities through increase
in their productivity . India has also to take steps to reverse those policies l
ike continuos hike in administered prices that make its exports non competitive.
In this context it is important that the Commission on Agriculture Costs and pri
ces should also keep in mind the border prices which are relevant for the purpos
e of export competitiveness. Attempt should be made to turn the income rather th
an barter terms of trade in favour of agriculture. Once again, this can be done
not through hike in administered prices only through increase in productivity.
Fifth, there is also need to accelerate growth of agricultural exports from Indi
a. As reforms in agricultural sector are likely to open up exprt possibilities.
Given trade liberlisation by the developed countries. India has a huge potential
for increasing its agricultural exports. But this would need large investment i
n processing power, communications, marketing transport and other infrastructure
.
Sixth, there is a need to undertake some important institutional reforms consoli
dation of holdings and gradually freeing the lease market. But this reform shoul
d be preceded by careful record of existing occupancy tenants in order protect t
heir interests of. On the other hand the suggestions by industrial interests, ku
lak lobby and some liberalisers for their abolition notwithstanding, nothing sho
uld be done to dilute the legislation on ceilings on land holdings. This is beca
use a country where small and marginal farmers constitute 70 per cent of the lan
dholders. It would be disastrous to endanger their only source of livelihood.
Finally, there is a need to take some institutional measures that help the small
and marginal farmers in sharing the potential gains of growth and increase in e
xport. A pro active policy should be designed to involve the small and marginal
farmers and the landles labour in deriving benefits of increased agricultural ex
ports through innovative institutionlike intergrated co opratives like the mothe
r dairy and other service cooperative contract farming, etc. Special efforts sho
uld also be made to develop new technologies for the farming sector and reach th
ese to the small farmers for enabling them to diversify their production towards
high value commercial and export commodities. The efforts on the production fro
nt shouldbe supplemented by creation of institution like trading houses, market
intelligence service and creation of network of Information on national and inte
rnational prices. There is also a need to create necessary infrastructure in pro
cessing marketing and granding of produce. Investment in information infrastruct
ure through market commitees would procolate the information to the local levels
.
The clear lesson is that while liberalising the economy policy makers should rem
ember that it is only agricultural growth. Which determines the fortunes of a va
st majority of farmers in India and also makes a dent in their poverty. The post
liberalisation polices that have neglected Public investment in rural infrastru
cture are primarily responsible for the steep deceleration in agricultural growt
h. The present policies of fostering elite centred growth without according a ve
ry high priority to agriculture would lead to the creation of a dual society. An
d a dual society can have serious repercussions on the future of policy in a dem
ocratic country like India. It has also to be understood that a market driven li

beralisation process in agriculture is invariably strongly biased towards rich f

armers and prosperous regions. The local level activists and the peasant movemen
t would have to intervene effectively and play a crucial role In assuring that t
he interests of small farmers and of disadvantaged regions are protected and the
y are also enabled to gain from trade liberalisation.
It has to be underlined that globalisation offers both opportunities and challen
ges. The opportunities consist of participating in the benefits of world trade a
nd growth. The challenges lie in ensuring that a majority of working people in r
ural and urban India are also enabled to purtake these benefits and that these a
re not cornered by a small of elite population.

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