the indian policy response

8/3/2019 The Indian Policy Response

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THE INDIAN POLICY RESPONSE

Socio-economic implications of Globalization in India- What India wants from WTO - What is required ofIndia by WTO - Analysis of policy response in twocrucial areas Agriculture and Pharmaceuticals. Anethical framework covering the issues that are

discussed and a common policy response issuggested.

In the early nineties, India embarked full speed on a

path of liberalization and globalization by reducingtrade barriers and non-trade barriers alike,demolishing the existing quota-licensing regime. Asa logical step in that process, it joined the WTO in1994 at the end of Uruguay round of talks. Majorchanges in existing laws and enacting new laws hadbecome imperative to comply with the WTOagreement. But substantial resistance to theacceptance of the WTO regime have erupted inareas of Agriculture, Pharmaceuticals. India as a


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founder of the ITA (Information technologyAgreement) under the aegis of WTO has significantadvantages as well as some critical obligations. Thispaper analyses the moral arguments of the policyresponse to these critical issues and attempts tosynthesize a common position based on ethicalperspectives .

AGRICULTURE

Before we discuss the policy imperatives of the WTOresponse, a brief background on the nature andstate Indian agriculture is necessary. Indianeconomy is agrarian in nature where nearly 70% ofthe population is dependent upon agriculturalincome. At the lower end of this strata are the vastmajority of poor farm labourers who do not own theland but work in the fields and farms to earn theirlivelihood. In the middle layer, we have a largenumber of marginal land owners and small farmerswho labour as well as employ other labourers toproduce. In the higher end there a small number oflarge farmers and farm corporations who employmechanised as well as very labour intensive farming.
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The politically powerful lobby of big farmers utilizepower, irrigation and fertilizer subsidies of thegovernment at the same level as the small farmers.The number of crops produced by this hugeagricultural base is limited comparative to the otherdeveloped countries, because of various historicaland climatic conditions.

Since the agriculture is labour intensive and most ofthe farming is done by small farmers owning smallland tracts, the productivity is low and costs arehigh. While some states subsidize power andirrigation, the central government provides fertilizersubsidies and procures the farm products at

minimum support prices to supply poor urbanconsumers to ensure food security through a PublicDistribution System. While budgetary support forexport subsidies and overseas market developmentis practically zero, domestic support is reverse in thesense that agriculture subsidizes other segments

like PDS. This condition is so entirely different fromdeveloped countries in the way food security isachieved at both ends of the market, by procuringthe farm products at minimum support prices which


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sustains the income levels of the huge 70%population and distributing the procurement atcontrolled prices in the market which benefits thepoor urban consumers.

The Indian negotiating proposal for the Qatar roundof talks on AoA (Agreement on Agriculture) puts thisposition succinctly as " The food needs and supply

gaps in developing countries are developmentalproblems and thus all their policies for agriculturaldevelopment aim at harnessing the potential forincreasing productivity and production in theagricultural sector. Given these characteristics ofagriculture in developing countries with very meagre

domestic support and the virtual absence of exportsubsidies, by no stretch of imagination can thesepolicies be considered trade distorting1

The introduction of TRIPS into the arena ofagriculture brings up an altogether cultural and

economic clash in India. Even in the US , the plantbreeder rights and patent protection for plantvarieties has been granted only as late since 1950s,where as the patent regime in general has been in


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vogue for a longer period of time. The extensivefarming techniques and the development ofknowledge as a key component in agriculturalproduction is a relatively new idea even indeveloped world. It is understandable that the notionof annual purchase of seeds for sowing is foreignand prohibitive in terms of cost , where the generalpractice has been re-use,share, exchange and

informal sale of seeds developed from the currentcrop. At present it is estimated that the reuse andinformal sale constitute 87% of the seed market inIndia where as the rest is provided bythe stateowned seed companies which store and sell seeds.None o fthem are protected under any IP protection

Regime. To comply with the AoA under WTO, Indiahad to enact a Plant Breeder Rights (PBR) bill. Dueto sustained focus by NGOs and public pressure, aFarmers bill of rights was passed as well to protectthe rights of the farmers to sell, reuse seeds and toprovide immunity against PBR violations for ignorant

infringements2 . Though it is necessary to offercomplete IP protection, India cannot be forced toleap frog its way to the TRIPS dictated regimes fromits current structure. By offering protection, it cannot


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be provably stated that the major Life ScienceCorporations would start significant investments inagricultural research in areas of Indian agriculturalinterests. Currently the lion share of research isdone in India by public enterprises with heavybudgetary support. The Commission on IPRconstituted by the UK Government has suggested agradual approach for developing countries in

building a IP Protection regime.

"Developing countries might consider raising thethreshold, in particular so that protection is onlygiven for significant or important innovations withparticular characteristics that are deemed socially

beneficial (for example, yield increases, or traits ofnutritional value). Thus the criteria for distinctnessmay be strengthened, and also criteria formulateddefining utility in terms of the objectives ofagricultural policy. Alternatively, countries maydecide to retain lower standards for certain

categories of plant in order to facilitate access bynascent domestic breeding industries to PVPprotection from which may flow commercial andexport benefits."3


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The main challenge that faces Indian agriculturethus is to transform from a large subsistence basedfarming to industrialized agriculture whereknowledge is the key component of production. Thistransition should be gradually effected in thefollowing way. The unskilled agricultural laborersshould be given state subsidized vocational training

in skilled and semi-skilled agro based industries.This will ensure that the vast labor force could beemployed all through the year instead of just thefarming season. Preservation of rain water andeffective utilization and sharing of water resourcesare vital. The component of industrialization should

be increased in agriculture. After the removal ofquantitative restrictions, foreign crops have floodedthe Indian market. There may be a trace ofopportunity in this difficulty. By procuring cheapercrops through imports, the subsidies for the PDScould drop significantly. But the problem of internal

glut in the state owned warehouses will become anightmare. Crop diversification, crop specializationand crop quality should be given more emphasisthan just the quantum of production, and the


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revenues of exporting high quality crops would morethan offset the loss in sales to state ownedenterprises. Already a strong reformist current isunderway in India to cut these power and fertilizersubsidies for large farmers and target them towardsthe small farmers and utilize the scarce funds inprimary health, education and ruralinfrastructure.This is where the nations farmers

should be goaded and guided.

PHARMACEUTICAL

The nature of Pharmaceutial Industry in India is verydifferent from their counterparts in the developed

world. Though India boasts of a very largetechnological base in this area, most of the playersare mass producers of generic drugs which are"pirated" from major companies in the developedworld. To cater to the needs of huge population withdrugs at a lower cost, the state has been veryreluctant to offer strong patent production. Thereforethe emphasis has been on cost effectiveness andquantum of production rather than on innovation andoriginal R & D. The introduction of product patent


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mandated by the TRIPS agreement introduces asevere constraint on the generic drug producers. Ifproduct patent is given, the larger overseascompanies from the developed world would rathereliminate or acquire the major players from the localmarket . In a drug market, where the people arecurrently benefited by the availability of affordabledrugs, this would result in creating powerful

monopolies that will raise the cost of drugs toexorbitant levels and take away these benefits. Theresults are perfectly imaginable - A disaster on amonstrous scale. Though India has no choice but tooffer product patents by 2006, this process could becalibrated to suit local conditions. For instance the

sphere of public health should be kept outside thepurview of patent protection. In a country where stillthe fight against communicable diseases likeMalaria, Tuberculosis and Polio is still on going, thedrugs that provide immunisation against these typeof diseases for vast majority of poor people should

be exempted. The drugs supplied at Primary Healthcenters to poor populations throughout the countryand drugs that treat killer pandemics like AIDSshould be exempted as well. Since the relatively well


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off communities are not affected as much by thesediseases whose buying power of these groups whichmatters greatly to the big pharmaceutical industry,the very poor should be immunised from the effectsof this drastic change.

Before trying to work our way to a suggestedapproach to this complex issue, let us look at the

history of pharmaceutical industry in certaindeveloped countires. US, Canada, France andSwitzerland. When product patents were first tried inthe early part of last century in France, all thechemical industries in France moved toSwitzerland.It is precisely the reason why in such a

small country such as Switzerland there is a vastand advanced chemical industry. The comparison ofUS-Canada is plain and obvious. United Statesopted for a stronger patent protection. Because ofstronger patent laws, the profits made bypharmaceutical industries have been growing

phenomenally. With the increased bargaining power,the industry has acquired significant clout in publicpolicy decisions. This phenomenal growth has notlowered the cost of drugs a wee bit as all the profits


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are shown to be spent by a growing R & D( butrather towards buying and enforcing more protection?) . It is public knowledge that the major research ofthese big companies has been profit oriented indiseases like Alzheimer and breast cancer, that areof cursory interest to the vast majority of people whohave more pressing health concerns than that.Inspite of popular needs, numerous attempts to pass

a patient bill of rights in the US have been futile.Rising health care costs are a major concern andthis high protection has not benefited the consumersat all. The Canadian experience is totally different.By offering limited protection through variousmechanisms like compulsory licensing, parallel

importing and grant of royalties rather than absolutemonopoly, the cost of drugs have been kept ataffordable levels. Because of this, Canada has beenable to achieve Universal Health Care for all itscitizens. Arguably it is a better situation to be in thanthe US where the rising number of uninsured

citizens are cooking a major health care crisis.

These experiences offer India very valuable lessons.India can guide the gradual transformation of its


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pharmaceutical industry to a knowledge based onewhile keeping the cost of drugs at affordable costs,by adapting a variety of techniques such ascompulsory licensing , curbing anti-competitivepractices , parallel importing of drugs from marketswhere the patent rights have been exhausted. Ithowever should be conceded that due to the veryextensive experience in producing generic drugs in

mass scale, Indian pharmaceutical industry is one ofits very few kind in the developing countries that arein the capability threshold of transforming into aknowledge and research oriented industry. If suchtransformation is effected, it must be noted that thiswill be one of the industries where the cost

differential could ultimately work to India's advantagelike its software industry.

A common sense approach

Before we suggest a common approach to the

issues, let us sketch out the various actors andstakes. As we observed, we have a very largenumber of land less laborers and poor urbanworkers at the lower end of the strata, whose


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income levels have to be sustained to ensureequitable economic growth, a fairly large number ofsmall farmers whose produce have to be procured atminimum support prices to ensure rural prosperityand a numerically significant, growing urban middleclass market. As India makes this massive transitionfrom an agrarian subsistence economy towards aknowledge oriented modern economy where

individual rights are inviolate, the country facessome tough choices. In Utilitarian perspective, beinga democracy when the very livelihood of majority ofpeople is at stake, the individual rights of minorityshould not dictate the policy for all .

D.W.Haslett writes in his book "Capitalism withMorality" that

[So] which system is the most justified depends inpart simply upon which is capable of turning out themost goods and services. But which is most justified

* depends much more than merely this. .....Eventhough a system turns out a greater quantity ofgoods and services than any other, it may not be theone that is most justified if it does not distribute


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these goods and services fairly... We must take intoaccount not only technical, quantitative matters, butmatters of morality and values as well, matters suchas justice, freedom and equal oppurtunity.*(emphasis mine)

When there are difficult choices to make, Indiashould aim to protect the vast majority of people who

need the protection and not the powerful farm lobbyor the industrial lobby who can compete equally inthe global market. The validity of these argumentsare still accepted in very large measure even by theemerging bourgeoisie, since the 1990s, thefundamental imperative for enlarging the pie rather

than sharing the shrinking pie with more people, byseeking more and more wider markets to drive thegrowth of the country as a large is gaining credenceas well. Pressed as it may be, to concede strongintellectual property rights to join the global market,the basic human rights of the vast majority of

peoples right to life, right to food, shelter and healthshould never be overridden in any calculation.Unless certain moral principles that have served thecountry since its struggle against colonialism are


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held inviolate, the foundations of future generationwill become shaky.

However the transition towards a modern marketeconomy integrated with the global market couldneither be avoided nor be postponed. But the choiceof pace and contents of this change is firmly inIndias sovereign hands. India should adopt a

sectored approach in this transition period. Theremust be a strong and effective safety net for thepeople living under the poverty line. The basic rightsof people under this net should be protected underall costs. The Public Distribution system needs to berestructured and targeted so that the majority of the

benefits go to the people living under the povertyline. For the next band of the spectrum limited andconditional protection of property rights should beprovided so that the domestic industry can competeequably with the multi-national giant corporations.For the higher band maximum protection of IP rights

should be provided where the consumers canwithstand the power of big market forces. Since it isthe higher end of upper middle class market theglobal trade forces are targeting and since it is plain


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obvious that the poor of India cannot buy anyservice or goods from the developed world markets,the market economy rules should be applied onlyabove the "safety net". On the other hand, theboundary should be clearly drawn with strongenforcement, by not allowing well off people toexploit this safety net for profitability. The role of thestate should be limited in facilitating smooth

transition of people from one net to another andpreventing foul play. Ultimately more and morepeople would be moved out of the "safety" net to thecompetitive arena as more and more globalizationoccurs.

CONCLUSION

There is a wider consensus in India for free tradingand globalization (depending upon what"globalization" means to everybody). But when it

comes to patents and copyrights there is always aclamour for protection on issues that (seemingly)affect Indian agriculture and industry adversely. Aharmonised common approach in all issues thataccomodates the nuances, enhances the credibility


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of India's voice in the global village and thusmaximises its bargaining power in the globalmarket.

REFRENCES

References pib.nic.in/focus/foyr2001/foapr2001/aoa1.html

1 Public Information Bureau. Union Ministry ofCommerce http://and Industry2. Dr. Suman Sahai "India: Plant Variety Protection,

Farmers' Rights Bill adopted" , Third World Network.http://www.twnside.org.sg/title/variety.htm

3 Commission on Intellectual Property RightsReport:http://www.iprcommission.org/papers/pdfs/final_repo

rt/Ch3final.pdf

Bibliography


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D.W.Haslett "Capitalism With Morality" ClarendonPress - Oxford 1994.

Prof. Michael Blakeney "Trade Related Aspects ofIntellectual Property Rights: A concise guide to theTRIPS agreement" , Sweet & Maxwell 1996.

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