Indian Economy, 5th edition (38 page)

India was skeptical about the issue even before joining the organisation but once it became a part of it, it started assessing the situation objectively and moved towards crisis mitigation. Globalisation as such opened unlimited prospects for the economies but at the same time brought several challenges, too. Yes, the challenges were different in nature for the developed and the developing countries. We need to enquire the prospects and the challenges brought by the WTO for the Indian agriculture.

Had the agriculture of the leading and politically vocal developing economies’ not be of subsistence level, the course of the world would have been completely different. It is the biggest hurdle in the process of globalisation and the success of the
w
orld Trade
o
rganisation! Yes, the process of converting the sector into industry has already started in most of the leading developing economies amidst tough resistance from the farmers, political parties and the NGOs (non-government organisations) alike.

The Prospects

The oldest and the first document regarding the impact of the implementation of the provisions of the WTO, Uruguay Round (1995–2005) was prepared jointly by the
World Bank,
the
GATT
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and the
OECD
63
.
According to the joint document, the WTO provisions were supposed to have the following positive impacts on the world trade:

1.
By 2005 there will be an addition of $745 billion in the world merchandise trade.
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2.
The
GATT Secretariat
provided a full break-up of the above-projected trade increase in the following way:

(i)
The clothing sector to have a share of 60 per cent.

(ii)
The agricultural, forestry and fisheries products to have a share of 20 per cent.

(iii)
The processed food, beverages and drinks to have a share of 19 per cent.

It means that due to the implementation of the WTO provisions, there will be only
one per cent
increase in the trade of all other goods excluding the above-cited sectors. It was a highly inflated view and became a matter of debate around the world. But the areas which were projected to have very high increase in their trade were not mere projections either. Member countries went home and started going for their own studies, estimations and projections—India being no exception.
w
e must see the assessment of India:

(i)
The products which were projected to have the maximum increase in their trade, India had a traditional great export potential in them. It means the WTO has a great prospect for agriculture in store as maximum goods fell in the agriculture sector. Assuming that India’s share in the world exports improves from 0.5 per cent to 1.0 per cent, and India is able to take advantage of the opportunities that are created, the trade gains may conservatively be placed at $2.7 billion extra exports per year. A more generous estimate will range from $3.5 to $7 billion worth extra exports.
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(ii)
The NCAER (National Council for Applied Economic Research) survey of the WTO on the Indian economy is cited as the best document in this area. The survey
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had all important things to say on this issue:

(a)
The exports of agricultural products will be boosted by the WTO accepted regime.

(b)
Only the foodgrains trade that too of wheat and rice were projected to be around $270 billion.

(c)
The survey also pointed out that almsot 80–90 per cent of the increased supply of foodgrains to the world is going to originate from only two countries China and India as they are having the scope for increasing production.

(d)
But the survey painted a very wretched picture about the preparedness of Indian agriculture sector to exploit the opportunities. It concluded China to be far far better than India is this matter.

(e)
It suggested almost every form of preparedness for the agriculture sector (its glance we may have been on the second Green Revolution in India—basically the revolution is modelled on the findings and suggestions by the survey).

(f)
Lastly, the survey ended at a high note of caution and concern that if India fails in its preparations to make agriculture come out as a winner in the WTO regime the economy will emerge as the biggest importer of the agricultural products. At the same time the cheaper agri-imports might devastate Indian agricultural structure and the import-dependence may ruin the prospects of a better life for millions of poor Indians.

(g)
Even if India does not want to tap the opportunities of the globalising world it has to gear up in the agriculture sector since the world market will hardly be able to fulfill the agri-goods demands of India by 2025 AD. It means, it is only India which can meet its own agri-goods demand in the future.

There is no doubt in it that the WTO has brought problably
the last opportunity
to make our masses have better income and standard of living via better income coming from agriculture. But provided we go for the right kind of preparation at the right time. There are enough prospects, undoubtedly.

The Challenges
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If the WTO brings high prospects for the Indian agriculture, it also brings in some hard-boiled challenges in front of it. These could be seen as individual challenges of the similar economies as well as joint challenges of such economies. The
first
category of challenges pertains to the area of relavent preparations, investment and restructuring of the agriculture. And the
second
category of challenges are nothing less than a revision in the very agricultural provisions of the WTO itself (around which today revolves the success and faliure of the organisation itself!). We may take a look at the challenges before the Indian agriculture:

(i)
Self-sufficiency of food:
Due to inflow of cheaper foodgrains from the world it would not remain economically viable in India to produce them and farmers might incline in favour of the profitable agri-products. This will make India heavily dependent upon the world market for its food supplies marring its achievement of food self-sufficiency. This will have serious political and ethical outcomes for India
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.

(ii)
Price Stability:
Dependence on the world market for the supply of agricultural products and specially for foodgrains will never be safe for India. As the international market for the products is highly speculative and full of variations (due to natural factors) the price stability will be always in danger—fluctuations hamper the producers and consumers of the agri-goods in India. It would be very tough fighting
dumping
of the surplus agri-goods from other countries.

(iii)
Cropping Pattern:
The cropping pattern of agriculture might take a very imbalanced shape which will be highly detrimental to the ecology at large
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as the farmers will be always in favour of going for the crops and commodities which have comparative price advantage.

(iv)
Weaker Sections:
The benefits of globalisation may not be neutral to areas, crops and the people. There will never prevail a certainty as to which area/region or crops or the people are going to benefit from, globalisation in which year. At the same time globalisation is a process where profits can be made but it is a market-based concept. Those who are unable to produce due to lack of capital, investment and entrepreneurship will have no gains from it. They will be net consumers or buyers. Since India has a vast population of the weaker sections (as other third world countries have) this population will neither be able to increase its income nor able to purchase the agri-goods having no price stability.

It means that the weaker sections of India might miss this chance of growth and development. We need to make the benefits of globalisation reach these people, too. This could be done by a timely and society-orientied public policy which is a big challenge
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.

(v)
WTO Commitments:
There are certain time- bound obligatory commitments of India towards the provisions of WTO in the area of agriculture which are highly detrimental to the people and the economy. We may see this challenge from two angles—

(a)
According to the agricultural provisions, the total subsidies forwarded by the government to the sector must not cross 10 per cent of the total agricultural outputs. At the same time, exemptions to farmers are to be withdrawn—hampering the Public Distribution
s
ystem badly. India’s subsidies are still far below this limit but pose a threat to the sovereign decision of need to be increased.

(b)
The subsidies (with different names) to agriculture which are forwarded by the developed countries are highly detrimental to Indian agriculture and they are very high, too
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.

None of the above-given challenges are easy to fight. These are not to be fought by India only but almost all developing countries are to face it. Once the WTO comes into operation, many experts from India and abroad have provided ways to fight these challenges which may be summed up in the following way—

(i)
To fight the challenges related to self-sufficiency in food, the price stability and the cropping pattern a judicious mix of suitable kind of agricultural policy and the trade policy will be the need of the hour. To the extent agricultural policy is concerned, India has a limited level of freedom. But the WTO regime does not allow the member countries to impose higher tarrif or tarrif itself to ward off cheaper agri-goods from entering the economy—this is the main reason behind the above challenges. It means it is essential to modify, change or revise the provisions of the WTO.

Similarly, the issue of agricultural subsidies (
the Boxes
) need to be equitably defined so that they do not look biased. Here also the provisions of the WTO need revision.

To fight out this typical challenge experts suggested that the
WTO is not God-given
. Its provisions may go in for change if concerted efforts are made by the member countries in this direction. Like-minded nations who face the same kind of crises should come together and go for a joint effort, from inside the WTO, for the revisions or relaxations in its provisions. Morality related and ethical issues might be used as eye-openers and a handy tool to have the attention of the developed nations and the WTO alike.

Prima facie this suggestion looked as a preach easier said than done. But post-1995 times saw a polarisation of like-minded countries inside the WTO that finally culminated into failure of the
s
eatle Round
of the WTO deliberations. The most powerful country in the world failed to convene a meeting that too in its most distant region (the Alaska!)—a moral triumph of the poor over the rich. This incidence while indicating a possible failure of the WTO itself, boosted the morale of the developing countries to go for stronger groupings and even sub groupings under the WTO.

After the Doha Round the USA had hinted to forget multilateralism and indicated its intentions towards bilateralism. The European Union had the same intentions but it did not show it as openly as the USA. The year 2002 came as a watershed period for the WTO when the EU in its new diplomatic move announced to hear the agriculture-related issues of the developing nations. The USA announced the intentions few days after the EU announcement—just few days before the
Cancun Meet
of the WTO. The Hongkong deliberation of the WTO, though it did not give anything concrete to the develolping world, provided enough hope, there is no doubt in it. The real picture emerges in the next meet for which the different pressure groups had serious meets and deliberations on their alternatives of bargaining power.

(ii)
The second level suggestion to India was in the area of its preparedness for the WTO regime. India was required to set new and internationally best standards in the area of production by boosting the areas such as—research and development, biotechnology, information technology, health and phytosanitary matters. This will make Indian goods and services compete in the international market
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.

WTO and Agricultural Subsidies
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AMS

The subsidies provided by the government to the agricultural sector (i.e. domestic support) is termed by the WTO as Aggregate Measure of Support (AMS)
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. It is calculated in terms of
product
and
input
subsidies. The WTO argues that the product subsidies like minimum support prices and input subsidies (non-product) like credit, fertilisers, irrigation and power will cut the production cost of farming and will give undue advantage to such countries in their access to world market—such subsidies are called to cause
‘distortions’
to the world trade. Such subsidies are not permitted in one sense as they have a minimum permissible limit
de minimis
under the provisions which is 5 per cent and 10 per cent of their total agricultural output in the case of developed and developing countries, respectively.

The Boxes

The agricultural subsidies, in the WTO terminology have in general been identified by ‘boxes’ which have been given the colours of the traffic lights—
green
(means permitted),
amber
(means slow down i.e. to be reduced) and
red
(means forbidden).

In the agriculture sector, as usual, things are more complicated. The WTO provisions on agriculture has nothing like
red box
subsidies, although subsidies exceeding the reduction commitment levels is prohibited in the
‘amber box’.
The
‘blue box’
subsidies are tied to programmes that limit the level of production. There is also a provision of some exemptions for the developing countries sometimes called the ‘S & D box’.
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