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TRANSCRIPT
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Chapter 3
Research Methodology
PLAN AND PROCEDURE
The present work aims at studying the impact of W.T.O. on agriculture
exports in India. It is essential on the part of a researcher to make a blue-print of
the entire gamut of his investigation before actually taking it up. This exercise
helps in ensuring success of a venture without much difficulty. Moreover, having
complete initial planning, there are less chances of being biased in investigations.
While considering the nature of problem in hand, the following steps were chalked
out:
1. Research Methodology
2. Objectives & Hypothesis
3. Scope
4. Collection of data
5. Statistical techniques of analyzing the data
6. Planning of Chapters
7. Limitations of the study
1. RESEARCH METHODOLOGY
Though various methods of research are available for the data collection but the
final decision about the choice of a method depends upon the nature of the problem
selected and the kind of data necessary for its objectives. Generally, the following
methods are used in the field of research:
Exploratory Research:
In Exploratory Research, the focus is on the discovery of ideas. Exploratory
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Research seeks to develop insights and to provide direction for any future research.
Exploratory research is done for formulating a problem for more precise
investigation or of developing the working hypothesis from an operational point of
view.
Flexibility and creativity characterize exploratory research study since the
aim of its investigation is to find new hypotheses. Hence, formal design is rare in
this type of research and much is left to the creative imagination of the market
researchers. He could conduct a study of secondary sources of information or get
views from the experts or resort to case study analysis. Market researchers exercise
their individual initiative in spotting and following leads in an organized way.
Descriptive Research:
Descriptive studies are undertaken in many circumstances. When the
researcher is interested in knowing the characteristics of certain groups such as
age, sex, education level occupation or income. The objective of such a study is to
answer what, who, when, where and how of the subject under investigation.
Descriptive can be divided in two categories – cross sectional and longitudinal.
The purpose and nature of descriptive research is quite different from that
of exploratory research. Many descriptive studies are made with only hazy
objectives and with inadequate planning. Much of the data collected in such studies
turns out to be useless. Descriptive studies of this type are actually more of
exploratory type. Effective descriptive research is marked by a clear statement of
the decision problem, specific research objectives and detailed information needs.
The research design should be fairly structured. Since the purpose is to provide
information regarding specific questions or hypothesis, the research must be
designed to ensure accuracy of the findings. Since descriptive studies may cost
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huge amount of money to carry out, there is then this necessity of its formal
design.
Experimental Research
Experimental studies also known as Hypothesis Testing Research studies
are those where the researcher tests the hypothesis of casual relationships between
variables. Casual design investigates the cause and effect relationship between two
or more variables. Suppose a manufacturer has sold his product at two points of
time t1 and t2. The sale in t2 is much higher than that is in the previous year. During
the year the firm has also launched an advertising campaign for its product. The
manufacturer is interested in knowing whether advertising has caused the increased
in sales in the year t2.
Such studies require procedures that will not only reduce bias and increase
reliability, but will permit drawing inferences about causality. Usually experiments
meet this requirement.
Case Study:
Although this method has long since attracted skepties ire because of its
non-scientific nature, it is making a comeback. It involves the comprehensive study
of one of a few specific situations and particularly the study of complex situations
in which interrelations of several individuals are important. A situation is called a
case.
The design of a research project is the plant that ties the data to the
conclusions that will be drawn. This method is based on finding the differences
and the similarities so as to find the answers. Case research is not a quantitative
exercise but is used to enhance understanding. It requires a rare combination of
judgement to select cases and insight in interpreting them. Its strong points are
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holistic orientation, real life situation, i.e. in case study method inferences are
made on the entire picture and not some of its parts; all the people actually
concerned with the problem are contracted and data is obtained informally as well.
The nature of present research is descriptive. It describes the impact of
World Trade Organization and Agreement of Agriculture upon Indian agriculture
on various dimensions, describes the policy implications and also describes the
initiatives should be taken to improve the position of Indian agricultural trade.
2. OBJECTIVES OF THE STUDY
The specific objectives of this study are as under:
(i) To study the patterns of world trade in agricultural commodities and
compare the relative performance of agricultural trade of developed,
developing and least developed countries.
(ii) To study the export performance of Indian agriculture in WTO era.
(iii) To work out the product specific support, non-product specific support and
aggregate measurement of support for Indian agriculture.
(iv) To study the export competitiveness of India’s major agriculture
commodities in the emerging liberalized farm trade order.
(v) To study the implications of TRIPS and SPS measures for Indian
agriculture.
(vi) To identify problems of agriculture exports and to design suitable policy
measures for enhancing India’s agricultural exports.
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HYPOTHESES OF THE STUDY
The following hypotheses have been taken for the present study.
(i) AOA of the WTO has enhanced world trade in agriculture.
(ii) Indian agriculture is highly subsidized.
(iii) AOA of the WTO obligates India to abolish its agricultural supports
and protective measures.
(iv) Indian agriculture cannot survive in a free import regime.
(v) TRIPS regime will jeopardize the accessibility of good quality seeds for
Indian farmers.
(vi) SPS measures are hurdles in the way India's agricultural exports.
3. SCOPE
This study covers the activities related to Indian agricultural trade
particularly from 1990 to 2009. The import and export related data is focused to
describe the impact of World Trade Organization’s Agreement on Agriculture
(AoA) on Indian agriculture trade. The performance parameters related to
agricultural trade are used to describe the impact of AoA upon Indian agriculture.
The secondary data is taken in relation to world trade in agriculture in terms of
WTO phases, import and export growth rates, import and export items, and the
impact of AoA’s provisions upon agricultural trade activities.
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4. DATA COLLECTION
The present study is based on the secondary sources of data. The main
sources of data are:
- Agricultural Statistics at a Glance: Various issues, Ministry of Agriculture
and Cooperation, Government of India, New Delhi
- Economic Survey, Ministry of Finance, Economic Division: Various
issues, Government of India, New Delhi
- Monthly Statistics of Foreign Trade: Various issues, Director General of
Commercial Intelligence and Statistics (DGCIS), Government of India,
Calcutta.
- Reports of the Commission for Agricultural Costs and Prices: Various
issues, Department of Agriculture and Cooperation, Directorate of
Economics and Statistics, Ministry of Agriculture, Government of India,
New Delhi.
- Centre for Monitoring Indian Economy (CMIE) publications.
- Handbook of Statistics on Indian Economy, Reserve Bank of India,
Mumbai.
- FAO Trade Year Book, Rome, Italy.
- International Financial Statistics Yearbook.
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5. STATISTICAL TECHNIQUES OF ANALYSIS THE DATA
In order to sketch India’s economic growth and export performance,
the relevant time series data for the period 1985- 86 to 2006-2009 has been
taken from various issues of Economic Survey (since 1991 to 2009) and
Handbook of Statistics on the Indian economy (2008-09). In order to estimates
GDP and export performance of the Indian economy growth in GDP and
Export have been measured keeping in view the structural break, if any, in the
time series export data during 1991 and 1995 when economic reforms and
WTO Arrangements respectively came into existence. To analyze the collected
data, various mathematical, statistical and econometric techniques have been used
in the study. To work out the quantum of input, output and export subsidies; the
methods provided by AOA are used. For assessing the competitiveness of Indian
agriculture different types of measures and coefficients are used. To analyses the
impact of AOA on world trade in agriculture, and on India's agricultural trade
performance, we have adopted the regression equations as mentioned below:
Compound Growth Rate
To estimate the trend in the data following semi log-linear regression model
is used
log Y= log A + log B T
Where,
Y : Dependent variable,
B : 1+g; g = compound growth rate,
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T : Time.
The values of parameters log A and log B in the model are estimated by using
Ordinary Least Square (OLS) method. The compound annual growth rate (CAGR)
is computed by using the formula:
CAGR = [Antilog (log B)-l] 100
Nominal Growth Rate
Let f1 be the ratio of the world agricultural imports in last year to the first year of
the period under consideration. Thus f1 measures the growth due to expansion of
world market for the country's agricultural exports, which will be called 'passive
expansion'.
Let f2 be the ratio of the country's share of world trade in the agricultural exports at
the end of the period to its share at the beginning of the period. Thus f2 measures
the growth due to expansion of market share in the world agricultural exports,
which will be called 'active expansion'.
Let f3 be the trade diversification factor defined as reciprocal of the change in the
share of the agricultural exports from the beginning to the end of the period. Thus
f3 captures the growth in exports due to diversification into non-agricultural
exports.
The nominal export growth rate is now defined as the product of the f1, f2 and f3,
i.e,
G = f1f2 f3
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Where,
G : Nominal growth rate
f1 = W1/W0; W1 = World agricultural imports in last year, W0 - World
agricultural imports in first year,
f2 = (T1/T0)/ (W1/W0); T1= Country's agricultural exports in last year, T0=
Country's agricultural exports in first year,
f3 = (T0/X0)/(T1/X1); X0 = Country's total exports in first year, X1= Country's total
exports in last year.
It is being noted that individual values of f1, f2 and f3 identify the sources of the
nominal export growth.
Net Terms of Trade
The net terms of agricultural trade is computed as:
100P m
P xNT
Where,
NT : Net terms of trade,
(Px): Value index of agricultural exports,
(Pm): Value index of agricultural imports.
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Specialisation in Agricultural Trade
The specialization in agricultural trade is assessed by following measure:
IE
IEST
Where,
ST : Specialization in agricultural trade,
E : Value of agricultural exports,
I : Value of agricultural imports.
Subsidy to Agriculture Sector
To work out the quantum of various types of subsidies prevalent into Indian
agriculture following measures are used.
(i) Market Price Support: Market price support is measured on a product by
product basis as the gap between domestic support price and a fixed external
reference price times the quantity of that product, which is eligible to get such
domestic support price. It is defined as:
MPS = red
W
Off
d PPQ
Where,
MPS : Market price support,
Q : Quantity eligible to receive applied price,
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Off
dP : Applied price/official price,
ref
wP : Fixed external reference price based on 1986-88.i
Now, product specific support as, percentage of value of agricultural output of the
concerned commodity (PVA) is defined as:
100
QP
PPQPVA
Off
d
red
W
Off
d
The fixed external reference price based on the year 1986-88 is the per unit FOB
price for the net exported agricultural product and per unit CIF price for the net
imported agricultural product during the base period (1986-88). The reference
price is adjusted for quality differences. The applied price is the government
procurement price and quantity eligible to receive support is the total output of that
product.
(ii) Fertilizer Subsidy: The fertilizer subsidy is computed as the gap between
import parity price and farm gate sale price of fertilizer times the quantity of
fertilizer utilized by agriculture sector.ii It is defined as:
Fs = Qf(Pi-Pf)
Where,
Fs : Fertilizer subsidy,
Qf : Quantity of fertilizer utilized by agriculture sector,
Pi : Import parity price, i.e., CIF price + dealer margin + pool handling expenses,
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Pf : Farm gate sale price of fertilizer.
(iii) Power Subsidy: Power subsidy is computed as the gap between unit cost of
power supply to all sector and per unit tariff charged from agriculture sector times
the numbers of units utilized by agriculture sector. Accordingly,
Ps = NC(CS-TA)
Where,
Ps : Power subsidy,
Nc : Number of units utilized by agriculture sector,
Cs : Per unit cost of power supply to all sectors.
TA : Per unit tariff for agriculture sector.
(iv) Irrigation Subsidy: The irrigation subsidy is calculated as the gap between
operational and maintenance expenditure (excluding interest payment) on major,
medium and minor irrigation projects and gross receipts received from these
projects. It is defined as:
Is = Oi,-Ri,
Where,
Is : Irrigation subsidy,
Qi : Operation and maintenance expenditure,
Ri : Gross receipt received from major, medium and minor irrigation projects.
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(v) Credit Subsidy: The credit subsidy is measured as the differential rates of
interest between the market lending rate of interest on advances and the rate
charged from the farmers for their short-term loans which are used for production
purpose times the amount of short-term loans to agriculture sector.
CS = AL(RB-RA)
Where,
CS : Credit Subsidy,
AL Amount of short-term loans to agriculture sector,
RB : Maximum lending rate of commercial banks,
RA : Average lending rate by primary agricultural credit societies (PACs) for
short-term loans.
(vi) Seed Subsidy: The seeds subsidy is measured as the gap between the annual
income and expenditure of the National Seeds Corporation Limited, i.e., the
amount of revenue foregone for the provision of seeds. It is defined as:
Si = Yi - Ei
Where,
Sj : Seed subsidy in the ith year,
Y; : Income of the National Seed Corporation in the ith year,
Ej : Expenditure of the National Seed Corporation in the ith year.
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1. Methods for Assessing the Competitiveness of Agriculture
The Competitiveness of Indian agriculture is assessed by employing
following measures-
(i) Nominal Protection Coefficient (NPC): The NPC is the ratio of domestic to
world reference price of the commodity under consideration. NPC helps in
measuring divergence of domestic price from the world reference price and thus
determine the degree of domestic protection/un-protection of the commodity in
question. It is defined as:
W
i
d
ii
P
PNPC
Where,
NPCi : Nominal protection coefficient or the commodity i,
d
iP : Domestic price of the commodity i, adjusted for transportation, handling and
marketing expenses,
W
iP : World reference price of the commodity i, adjusted for transportation,
handling and marketing expenses.
If the Nominal Protection Coefficient (NPC) is greater (lesser) than unity, then the
commodity is protected (un-protected) compared to free trade scenario.
(ii) Effective Protection Coefficient (EPC): The EPC is the ratio of the value
addition of commodity at domestic prices to the value addition at world reference
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prices; EPC is an improvement over NPC to the extent that it takes care of the
distortions in domestic and world prices of tradable inputs. It is defined as:
W
i
d
ii
V
VEPC
Where,
EPC, : Effective Protection Coefficient of the commodity i,
d
iV : Value added at domestic prices, i.e., domestic price of a commodity minus
the domestic value of all tradable inputs required to produce a unit of that
commodity,
W
iV : Value added at world prices, i.e., world price equivalent minus value of all
tradable inputs at border prices adjusted for transport, handling and marketing
expenses.
A more specific expression of EPC is:
W
j
K
1j
b
i
d
j
K
1j
d
i
i
AijPP
AijPP
EP C
Where,
Aij : Quantity of the jth input used to produce one unit of the ith commodity,
d
iP : Domestic price of the jth tradable input adjusted for transportation,
handling and marketing expenses,
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W
jP : World price of the jth tradable input adjusted for transportation, handling
and marketing expenses,
k : All tradable inputs.
If the value of EPC is greater than unity (EPC>1), it indicates that the protection in
input and output market provides incentive to produce the commodity and vice
versa.
(iii) Effective Subsidy Coefficient (ESC): The ESC is an improvement over EPC
as it corrects the latter by adjusting it for the subsidies on non-tradable inputs in
domestic economy. It is defined as the ratio of value added at domestic prices
adjusted for net subsidies-subsidy minus tax-on all inputs to the value added at
border prices. It is defined as:
W
dd
iVA
)NS(VAESC
Where:
ESCj : Effective Subsidy Coefficient for the commodity i,
VAd : Value added at the domestic prices,
VAw : Value added at the world prices,
NSd : Net subsidy on non-tradable inputs in domestic economy.
The whole expression may be defined as:
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W
j
K
1j
b
i
jij
n
1kj
jij
n
1kj
d
jij
K
1j
d
i
i
AijPP
TASAPAP
ESC
Where,
Sj : Subsidy on the jth non-tradable input.
Tj : Tax on the jth non-tradable input.
jij
n
1kj
jij
n
1kj
TASA : Net subsidy on non-tradable inputs.
While the others expressions are same as discussed for EPQ.
If the value of ESC is greater than unity (ESC>1), it indicates that protection is
accorded to the commodity in question and less than unity (ESC<1) means, that the
commodity in question is competitive in the world market,
(iv) Domestic Resources Cost (DRC): The DRC is defined, as the value of factors
of production needed to earn a unit of foreign exchange through export or save a
unit of foreign exchange through import substitution by production of commodity
under consideration. In the other words, DRC is the ratio of the cost of domestic
non-tradable resources (evaluated at shadow prices) to net foreign exchange
earnings - value of output minus value of tradable inputs. Accordingly,
W
jij
K
1j
W
i
d
jij
n
1kj
i
PAP
PA
DRC
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Where,
DRCi : Domestic Resources Cost of the ith
commodity,
Aij : Requirement of the jlh input to produce one unit of the ith
commodity,
S
jP : Showed price of the jth
non-tradable input,
WPi : World reference price of the ith
commodity adjusted for the value of by-
product,
W
jP : World reference price of the jth
tradable input adjusted for transportation,
handling and marketing expenses.
If the value of DRC is greater than unity (DROl), it means that the domestic
resources can be put to better use in an alternative way, and if less than unity
(DRC<1), then producing the commodity in question is a relatively sound use of
resources.
(v) Export Performance Ratio (EPR): The EPR is defined as the ratio of the
share of a particular commodity in the country's total exports to the share of
that commodity in the world total exports. The export performance ratio of ith
commodity may be defined as:
Wi/We
Ei/CeEP Ri
Where,
EPRj : Export Performance Ratio of the ith commodity.
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Ei : Export of ith commodity from the country,
Ce : Total exports of the country in reference year,
Wj : World total exports of the ith commodity,
We : World total exports in the reference year.
If the value of EPR is greater than unity (EPR>1), it indicates that country has
comparative advantage in the exports of commodity and vice versa.
6. PLANNING OF CHAPTERS
The study is divided into six chapters. First chapter describes introduction to
the development in Indian agriculture sector in historical perspective. Second
chapter provides the review of literature and describes the need of research. The
third chapter describes the research methodology of the study, data collection, and
tools adopted for data analysis. Fourth chapter describes the volume and trade of
Indian agriculture. It describes the major points related to import and export of
Indian agricultural products. It also describes the agricultural trade in the whole
world besides comparing the performance of developed and developing
economies. Fifth chapter is of analysis of data which examines the implications of
WTO regime for Indian agriculture exports. Finally, the sixth chapter presents the
findings and policy implications which summarize the study. The chapter also
gives directions for further research in this area.
7. LIMITATIONS OF THE STUDY
The secondary data is mainly sourced from national and international
records of esteem organizations; however, it may be influenced from the political
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interferences and manipulation. The Agricultural sector is very wide and affected
with various external factors which are beyond the control of developing as well as
developed nations like drought, flood, seasonal fluctuations, and other natural
calamities. Due to involvement of external factors, the growth of Agricultural
sector cannot be easily improved. Further, due to time constraints, the data is
collected only from the major national and international data sources, and it was
not possible to collect the primary data. But despite these limitations, the research
study is quite useful and its findings recommend certain decisions to be taken to
improve the growth of Indian Agricultural exports and reduce the imports related
to certain Agricultural products.
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