WTO AND INDIAN ECONOMY (AGRICULTURAL IMPLICATIONS)

BY:

RAYNAH FERNANDES 13

SRUSHTI GANGAN 14

NEHA GAONKAR 15

INDEX1. WORLD TRADE ORGANISATION

GATT

Principles of WTO

Objectives & Function

2. INDIA & WTO

3. INDIAN ECONOMY

4. INDIAN AGRICULTURE

Agricultural Trade

Agricultural Support Policies

Importance Of Indian Agriculture

5. AGREEMENT ON AGRICULTURE

The Three Boxes: Green, Amber and Blue

Trend In Pattern Of Consumption

Implication Of Agreement : Short Term and Long Term

6. WTO & INDIAN AGRICULTURE

India’s Commitment

India’s Agricultural Trade Under WTO Regime

7. A STUDY & ITS FINDINGS

8. SUGGESTIONS

9. BIBLIOGRPHY

ACKNOWLEGEMENT

We would like to acknowledge and express our sincerest gratitude for the efforts and timely guidance of our professor Mrs. Neelam Shetty of Managerial Economics for providing us the opportunity to study the impact of WTO agreements on the Indian economy especially focused on the agricultural sector.

We would also like to thanks and express our gratitude towards professor Mr. Agnelo Menezes of economics from the Bachelors of Arts faculty and his student from XRCVC Master Prashant Lindayat.

Each and every team member gave in his best to make sure that this report has all the necessary inputs and is completed on time. We definitely had a knowledgeful and enriching experience.

WORLD TRADE ORGANISATION

The WTO provides a forum for negotiating agreements aimed at reducing obstacles to international trade and ensuring a level playing field for all, thus contributing to economic growth and development. The WTO also provides a legal and institutional framework for the implementation and monitoring of these agreements, as well as for settling disputes arising from their interpretation and application. The current body of trade agreements comprising the WTO consists of 16 different multilateral agreements (to which all WTO members are parties) and two different plurilateral agreements (to which only some WTO members are parties).

World Trade Organization as a Multi-lateral organization facilitates the free flow of goods and services across the world and encourages fair trade among nations. The result is that the global income increases due to increased trade and there is supposed to be overall enhancement in the prosperity levels of the member nations. To put it in brief WTO encourages a multi-lateral trading system within its member countries.

Over the past 60 years, the WTO, which was established in 1995, and its predecessor organization the GATT have helped to create a strong and prosperous international trading system, thereby contributing to unprecedented global economic growth. The WTO currently has 153 members, of which 117 are developing countries or separate customs territories. WTO activities are supported by a Secretariat of some 700 staff, led by the WTO Director-General. The Secretariat is located in Geneva, Switzerland, and has an annual budget of approximately CHF 200 million ($180 million, €130 million). The three official languages of the WTO are English, French and Spanish.

Decisions in the WTO are generally taken by consensus of the entire membership. The highest institutional body is the Ministerial Conference, which meets roughly every two years. A General Council conducts the organization's business in the intervals between Ministerial Conferences. Both of these bodies comprise all members.

Basic Details

Location: Geneva, SwitzerlandEstablished: 1 January 1995Created by: Uruguay Round negotiations (1986-94)Membership:153  countries (as of 23rd July 2008)Budget:    155 million Swiss francs for 2003Secretariat staff: 560Head :    Director-General, Supachai Panitchpakdi

Origin and Evolution of WTO: GATT to Uruguay

One of the most dramatic events that have taken place in later part of 20th century was culmination of GATT 1947 into WTO (The world Trade organization), which came into being on 1st January 2005. As an organization it has vast powers and functions than what its ancestor GATT (General Agreement on Tariffs and Trade) had, the objectives and goals of both being broadly the same. GATT came into existence in the year 1948, after long negotiations to form an organization called ITO immediately after the Second World War did not materialize. The ITO was supposed to be the third international organization in the "Golden Triangle" that was supposed to come into existence, the first two being IMF and World Bank.

To begin with 23 countries became founder GATT members (officially, "contracting parties"). GATT remained the only multilateral instrument governing international trade from 1948 until the WTO was established in 1995. There were several controversies on whether the GATT had actually contributed to enhancement of world trade and did it serve its purpose of a multi-lateral trading organization. The liberalization of international trade during GATT era in its true sense was always debatable. However, it is very clear that over the period of 47 years of its existence, GATT was successful in initiating a process of tariff cutting in several groups of manufactured goods. Moreover the signatories in the GATT increased from 23 to more than 100 in a short span, ratifying the fact that being in the system was proved and considered more beneficial than not being in it.

On the other front, the internal and domestic economic problems and fluctuations made some economies to go back to increase the levels of protection and increase trade barriers to enable faster domestic growth and recovery. The problem was not just a deteriorating trade policy environment, but some other serious issues. GATT negotiations did not include services and agricultural trade in its gamut. As the world trade grew in size, the share of services trade along with that of merchandise started to increase leading to the insufficiency of the GATT principles to cover the expanding aspects of ever

evolving global trade. As a result, these loopholes were taken as advantage by many trading countries, resulting in a lopsided development of world trade. These and other factors convinced GATT members that a new effort to reinforce and extend the multilateral system should be attempted. That effort resulted in the Uruguay Round, the Marrakesh Declaration, and the creation of the WTO.

PRINCIPLES OF WTO

The agreements of WTO cover everything from trade in goods, services and agricultural products, these agreements are quite complex to understand, however all these agreements are based on some simple principles;

Non-Discrimination

This is a very simple principle which advocates that every member country must treat all its trading partners equally without any discrimination, meaning that if it offers any special concession to one trading partner, such concessions need to be extended to its other trading partners as well in entirety. This principle effectively gets translated into "MFN" or the Most Favored Nation. However, this principle is relaxed in certain exceptional cases, such as if country X has entered into a regional trade agreement with another country Y, then the concessions extended to Y country need not be extended to other non-members of the agreement. Besides these developing countries facing Balance of Payment problems also get concessions, and if a country can prove unfair trade it can retain its power to discriminate.

The Non-discrimination principle is also translated as a principle that would ensure "National Treatment" to all the goods, services or the intellectual property that enters any other countries national borders.

Reciprocity

This Principle reflects that any concession extended by one country to another need to be reciprocated with an equal concession such that there is not a big difference in the countries Payments situation. This was further relaxed for developing countries facing severe Balance of Payments crisis. This principle along with the first principle would actually result in more and more liberalization of the world trade as any country relaxing its trade barriers need to extend it to all other members

and this would be reciprocated. Thus progressive liberalization of the world trade was aimed at by WTO.

Transparency

The multilateral trading system is an attempt by governments to make the business environment stable and predictable. Thus this principle ensured that there is lots of transparency in the domestic trade policies of member countries. Moreover, the member countries are required to sequentially phase out the non-tariff barriers and progressively reduce the tariff barriers through negotiations.

Thus, these principles were primarily to serve the purpose of freer and fair trade and also to encourage competitive environment in the global market. This was further supposed to enhance development and Economic reforms in the developing countries over a period of time in a phased manner.

WTO: OBJECTIVES AND FUNCTIONS

The overriding objective of the World Trade Organization is to help trade flow smoothly, freely, fairly and predictably; to meet its objective WTO performs the following functions

Administering W.T.O Trade Agreements. Acting as a Forum for trade negotiations.

Settling and Handling Trade disputes

Monitoring  and reviewing national trade policies,

Assisting the member in trade policies through technical assistance and training programs

Technical assistance and training for developing countries. 

Co-operation with other International Organization

The goals behind these functions are set out in the preamble to the Marrakech Agreement. These include:

Raising standards of living; Ensuring full employment;

Ensuring large and steadily growing real incomes and demand; and

Expanding the production of and trade in goods and services.

These objectives are to be achieved while allowing for the optimal use of the world's resources in accordance with the objective of sustainable development, and while seeking to protect and preserve the environment. The preamble also specifically mentions the need to assist developing countries, especially the least developed countries, secure a growing share of international trade.

INDIA AND WTO

India is one of the founding members of WTO along with 134 other countries. Various trade disputes of India with other nations have been settled through WTO.

India has also played an important part in the effective formulation of major trade policies. By being a member of WTO several countries, are now trading with India, thus giving a boost to production, employment, standard of living and an opportunity to maximize the use of the world resources. It is expected that reduction in export subsidy and domestic support to the agricultural sector by the developed countries may lead to a decrease in production in those countries and, therefore, will give scope for expansion of exports from the developing countries.

India, with its cheap labour, diverse agro climatic conditions and large agricultural sector can definitely gain through expansion of international trade in agricultural products. However, the concerns relating to quality of products for seeking markets in the advanced countries needs to be addressed on an urgent basis.(Source : Ministry of Agriculture)

INDIAN ECONOMY

The economy of India is the fourth largest in the world, and is the tenth largest in the world Growth in the Indian economy has steadily increased since 1979, averaging 5.7% per year in the 23-year growth record. 

Indian economy has posted an excellent average GDP growth of 6.8% since 1994. India has emerged the global leader in software and business process outsourcing services, raking in revenues of US$12.5 billion in the year that ended March 2004. Agriculture has fall to a drop because of a bad monsoon in 2005. There is a paramount need to bring more area under irrigation. Export revenues from the sector are expected to grow from $8 billion in 2003 to $46 billion in 2007. India’s foreign exchange reserves are over US$ 102 billion and exceed the foreign reserves of USA, France, Russia and Germany. This has strengthened the Rupee and boosted investor confidence greatly.

A strong BOP position in recent years has resulted in a steady accumulation of foreign exchange reserves. The level of foreign exchange reserves crossed the US $100 billion mark on Dec 19, 2003 and was $142.13 billion on March 18, 2005.

Reserve money growth had doubled to 18.3% in 2003-04 from 9.2 in 2002-03, driven entirely by the increase in the net foreign exchange assets of the RBI.Reserve money growth declined to 6.4% in the current year to January 28, 2005.During the current financial year 2004-05, broad money stock (M3) (up to December 10, 2004) increased by 7.4 per cent (exclusive of conversion of non-banking entity into banking entity, 7.3 per cent)Economics experts and various studies conducted across the globe envisage India and China to rule the world in the 21st century.

SECTORS OF INDIAN ECONOMYthere are three major sectors in Indian Economy

AgricultureAgriculture and allied sectors like forestry, logging and fishing accounts for 25% of the GDP. It employs almost 58% of the total work force. It is the largest economic sector and plays a significant role in the overall socio-economic development of India. Due to steady improvement in irrigation, technology, modern agricultural practices the yield per unit area of all crops has increased tremendously.

IndustryIndex of industrial production which measures the overall industrial growth rate was 10.1% in October 2004 as compared to 6.2% in October 2003. The largest sector here holds the textile industry. Automobile sector has also demonstrated the inherent strength of Indian labor and capital. The three main sub sectors of industry viz Mining & quarrying, manufacturing, and electricity, gas & water supply recorded growths of 5%, 8.8% and 7.1% respectively. 

ServicesThe service sector is the fastest growing sector. It has the largest share in the GDP accounting for about 48% in 2000. Business services, communication services, financial services, community services, hotels and restaurants and trade services are among the fastest growing sectors.

INDIAN AGRICULTUREIndian agriculture was backward in every respect on the eve of Independence in 1947. It was characterised by feudal land relations, primitive technology, and the resultant low productivity per hectare.

The First Five year Plan (1951-56) accorded the highest priority to the agricultural sector to tide over the difficult food problem created by the partition of the country. Since then, agriculture has occupied an important place in every successive plan. The nation has invested huge resources for the development of agriculture under various plans. Two major components of agricultural development strategy have been:

subsidies on inputs and Minimum support price for output.Agricultural sector occupies a key position in the Indian economy. It

provides employment to about 65 per cent of the working population of India. Around one-quarter of India's national income originates from the agricultural sector.

Agricultural products like cereals (mainly rice), tea, coffee cashew, spices, tobacco and leather are important items of India's exports and hence foreign exchange earnings. Agriculture is also the source of raw material for agro-based industries including textiles, cigarettes, jute, sugar, paper, processed foodstuffs and vanaspati. Moreover, agricultural sector provides market for capital goods (tractors, pump sets and other agricultural machinery), inputs (fertilisers, insecticides), and light consumer goods.

Development of the agricultural sector depends, to a large extent, on such core industries as power, petroleum, fertilizers and machine tools. Thus, there is a degree of inter-dependence between agriculture and industry.

Needs of India

• India’s basic objectives in the ongoing negotiations are:

(a) To protect its food and livelihood security concerns and to protect all domestic policy measures taken for poverty improvement, rural development and rural employment.

(b) To create opportunities for expansion of agricultural exports by securing meaningful market access in developed countries.

Use Distribution of India's Geographical AreaAfter China, India is the most populous country in the world accounting for

16.0 per cent of world population. It is the seventh largest country in the world occupying 2.4 per cent of total world area. It has a land frontier of 15,200 kilometers and its sea coast runs to the length of 6,100 kilometers’.

Cropping PatternCropping pattern refers to the distribution of cultivated land among different

crops grown in a country. Cropping pattern reveals the nature of agricultural operations, e.g. the importance of food crops vis-À-vis cash crops.

Cropping pattern is influenced by a host of factors which can be broadly classified into two categories: (a) physical factors and (b) economic factors.

Among the physical factors, the important ones are soil conditions, extent of rainfall and type of climate. The economic factors include relative prices of agricultural commodities, size of the farms, availability of inputs, demand conditions, system of land holding and government policy regarding exports and imports, taxes and subsidies.

There are two main agricultural seasons in India: (a) kharifunder which crops are planted at the onset of the Southwest monsoon in June-July and harvested in September-October, (b) rabi under which crops are planted usually between October and December and harvested between March and May

India is a large country with diverse climatic, soil and terrain conditions. A wide variety of crops are grown in different parts of the country.

Small-sized Agricultural HoldingsSmall-sized holdings are a disturbing feature of the Indian agriculture. The

average size of farms has become smaller over the years and the trend continues. One important reason for this trend is the fast growing population which has adversely affected the per capita availability of land after Independence.

The pressure of population along with some social and economic factors has decreased the size of agricultural holdings in India.

Low ProductivityIndian agriculture was backward and stagnant at the time of Independence.

Ever since the launching of the First Five Year Plan (1951-56), agricultural sector has received the prime attention of the Government in the overall strategy economic development. As a result, farm productivity has increased over years and the country has achieved high degree of self-sufficiency in terms of' food grains and raw material for agro-based industries.Although per hectare yield of major crops has increased over the last four decades yet it is far below the international levels.

System of Marketing of Agricultural Produce in IndiaMarketing is the last link in the chain of production process. An efficient

marketing system which ensures reasonable return to the producers is essential to induce them to produce more. During the pre-Independence period, Indian agriculture was backward and stagnant and there was hardly any marketable surplus. Therefore, the system of marketing, though defective, did not attract much attention. However, in the post independence period and particularly after the green revolution, agricultural instituting has become a prime concern for the planners. Due to increase in agricultural productivity, the marketable surplus has increased; necessitating reforms in the existing system. The objectives of these reforms are to ensure: • Fair prices for the produce of the farmers,• Adequate and regular availability of food grains for urban areas, and• Regular supplies of raw materials for the industries

Rural Agricultural Credit in India

Credit Needs of the Indian Farmers

Need for agricultural credit arises because modern farm technology is costly and the personal resources of the farmers are inadequate. Provision of agricultural credit, as an input, is essential for widespread use of improved agricultural methods.

Credit requirements of the farmers may be classified (a) on the basis of propose, and (b) on the basis of time. They need credit for productive as well as for unproductive purposes. Productive purposes include all such activities which help in the improvement of agricultural productivity such as purchase of inputs and permanent improvements in land. Unproductive credit needs include celebration of marriages and other social and religious functions and litigation.

Classification based on time period has three categories. Farmers need credit for short period (up to 15 months) for the purchase of seeds, fertilisers, fodder for livestock etc. They need credit for medium term (15 months to 5 years) for the purchase of agricultural tools and implements, cattle, and digging and repairing of wells. They also require long-term loans (more than 5 years) for the

purchase of heavy farm machinery like tractors and harvesters.

Extent of Rural IndebtednessAccording to the All-India Debt and Investment Survey, 1981-82, at the all-

India level about 20 per cent of the households in the rural sector and 17 per cent in the urban sector were indebted. The average value of debt per indebted household in the rural sector was Rs. 3,311, much less than the urban sector average of Rs. 5,930. At the States' level, high percentage of indebted rural households was noticed in Tamil Nadu (28.7), and Kerala (28.5). The percentage of rural households reporting indebtedness was lowest for Assam (4.8). Kerala (29.7) topped the list in the urban sector whereas Assam (4.3) recorded the lowest figure. Widespread rural indebtedness is the result of lack of credit facilities at the institutional level.

Source of Rural CreditSources of agricultural credit are grouped into two categories: (a) Institutional sources and (b) Non-institutional sources.Institutional sources include cooperative societies, commercial banks and

other government agencies. Non-institutional sources comprise moneylenders, landlords, relatives etc.

A. Co-operative Societies: Co-operative societies form an integral part of the rural credit system in India. They are the main source of institutional credit to the farmers. These societies are chiefly responsible for breaking the monopoly of moneylenders in providing credit to the agriculturists. There are around 1 lakh such societies in the country at present.

The rising over dues have reduced the borrowing and lending activities of these societies. Moreover, these societies have paid inadequate attention to the needs of landless workers and rural artisans. Influential people in the villages have been the main beneficiaries of co-operative Credit. The RBI has repeatedly expressed concern in this regard because non-repayment of loans by the existing owners can adversely affect recycling of funds and the credit chances of the prospective borrowers.

B. Moneylenders: There are two types of moneylenders in rural areas: (a) Agriculturist moneylenders who carry on the business of money lending

along with farming, and (b) professional moneylenders whose only occupation is money lending. Although the relative importance of moneylenders has declined over the years, they are still an important source of credit for the rural le, particularly the small farmers and the artisans.

Moneylenders are popular because, unlike government agencies, they give credit for every purpose. They are easily approachable by the credit seekers and there are not many formalities in transacting a loan. However, the malpractices adopted by the moneylenders to exploit the needy farmers cannot be overlooked.

D. Kisan Credit Cards: The introduction of Kisan Credit Cards (KCCs) was a significant innovation in the rural credit delivery mechanism. However, the outreach of the KCCs to cover all eligible farmers under the scheme has been hampered by the lack of updated land records, small landholdings an illiteracy of borrowers.

India’s Agricultural Trade: Some Recent Trends

Exports

India has been both an importer and exporter of agricultural commodities for a very long-time. An examination of trends in exports of various commodities during recent years suggest that many commodities like rice, meat products, processed foods, fish, fruits and vegetables registered very high growth rates during the nineties. On the other hand some traditional exports like tea, cotton were not able to sustain their growth rates after the liberalisation. Marine products were the largest export earner while oil meals were also a major item in early 1990s. Recently oil meal exports have suffered and cotton exports have collapsed.

Imports

India’s agricultural imports have displayed extreme fluctuations. In recent years, imports of only two items, namely, pulses and edible oils have recorded consistently high volumes. Import of pulses, which used to vary in the range of 3-6 lakh tonnes in recent years except in 1997-98, when over 1 million tonnes were imported, surged to over 2 million tonnes in 2001-02 and has been close to that level since then, essentially reflecting shortage of domestic production. As in the case of agricultural export items, concerted efforts are required to raise the productivity and production of pulses in the domestic sector.

In fact the gaps between agricultural exports and imports have been narrowing down in recent years. Although India abolished its QR’s in 2001, this has not resulted in any surge of agricultural imports. There is an increase in growth but this is mainly because of large imports of edible oils. Recently there has also been a sharp increase in imports of cotton, raw wool and rubber.

India has a large potential to increase its agricultural exports in a liberalized world provided it can diversify a significant part of its agriculture in to high value crops and in agro-processing. This would depend first on undertaking

large infrastructure investment in agricultural and agro processing as also in rural infrastructure and research and development. India has not only to create export surplus but also to become competitive. The potential for exports would also depend on freeing of agricultural markets by the developed countries.

Agricultural Support PoliciesIndia, like most of the other countries including developed countries, employs a variety of instruments to both protect and support its agriculture. These instruments can broadly be clubbed in to three categories: domestic policies, import policies and export policies.

Domestic policies comprise a wide range of policy instruments like input subsidies on fertilizers, power, irrigation water, public investment in development of water resources –surface and groundwater, government intervention in markets, direct payment to farmers (such as those in the form of deficiency payments, insurance and disaster payments, stabilisation payments, as also some compensatory payments), price support for major crops , general services (such as government transfers to agricultural research and development, extension services, training and agricultural infrastructure etc)

Import policies refer essentially to border protection through trade barriers such as quantitative restrictions, quotas and tariffs on imports which in the process create a wedge between domestic and world market prices.

Export policies include those that either promotes exports (through instruments like subsidies and marketing arrangements that make exportable of a country more competitive) or those policies that constrain exports (often through canalization and restriction of exports and export taxes etc). Usually however import policies etc are discussed in the context of

Input Subsidies

The major components of input subsidy are: power, irrigation water and fertilizers .Subsidy -on both irrigation and power – is defined as the difference between the cost of providing the service and the charge levied for the service for the total quantum of that particular input used. In case of power therefore it includes that difference between the unit cost of power supply to all sectors combined and the average tariff rate charged from agricultural users for each unit of power and multiplied by the quantity of power supposedly supplied to agriculture. Irrigation subsidy is defined as the difference between the cost of

supplying water to farmers for irrigation and charges levied on water .Viewed in terms of pure domestic economy, the input subsidies have often been accused of causing most harmful effect in terms of reduced public investment in agriculture on account of the erosion of investible resources, and wasteful use of scarce resources like water and power. Further, apart from causing unsustainable fiscal deficits , these subsidies by encouraging the intensive use of inputs in limited pockets have led to lowering of productivity of inputs, reducing employment elasticity of output through the substitution of capital for labour and environmental degradation such as water logging and salinity .It is therefore imperative to reduce these subsidies for stepping up public investment in agricultural research and extension, canal irrigation and rural electrification. The reduction in subsidies would also have a favourable impact on the efficiency of input use, equity and environment. While subsidy reduction is one way to find resources for increasing public investment in agriculture, current and capital that lead to distortions and deleterious effects on natural resources and cropping pattern. In fact, there is scope for significant reduction in the cost of subsidy through better designing of the programmes and delivery mechanism. Further merely rolling back subsidies and diverting these to agricultural investment cannot solve all the problems of agriculture (Government of India: 2005).

Export SubsidiesThe export subsidies can be given in the form of transport assistance for export, providing common infrastructure for common use by small and medium producers, quality building and assurance measures, credit guarantee and insurance to exporters at better terms etc. The export subsidy is being given in the form of exemption of export profit from income tax and subsidies on cost of freight on export shipments of certain products like fruits, vegetables, and floriculture products.

IMPORTANCE OF AGRICULTURE IN INDIAN ECONOMY

The direct contribution of the agriculture sector to national economy is reflected by its share in total GDP, its foreign exchange earnings, and its role in supplying savings and labor to other sectors. Agriculture and allied sectors like forestry and fishing accounted for 18.5 percent of total Indian Gross Domestic Product (GDP) in 2005-06 (at 1999-2000 constant prices) and employed about 58 percent of the country's workforce (CSO, 2007). It accounted for 10.95 percent of India’s exports in 2005-06 and about 46 percent of India's geographical area is used for agricultural activity.

OVERVIEW

Yields per unit area of all crops have grown since 1950 due to application of modern agricultural practices and provision of agricultural credit and subsidies since Green revolution in India. However, international comparisons reveal that the average yield in India is generally 30% to 50% of the highest average yield in the world.

PROBLEMS

The low productivity in India is a result of the following factors:

• Overregulation of agriculture has increased costs, price risks and uncertainty.

• Government intervenes in labour, land, and credit markets. India has inadequate infrastructure and services

• Illiteracy, general socio-economic backwardness, slow progress in implementing land reforms.

• Inadequate or inefficient finance and marketing services for farm produce.

The average size of land holdings is very small due to land ceiling acts and in some cases, family disputes.

• Such small holdings are often over- manned, resulting in disguised unemployment and low productivity of labour.

AGREEMENT ON AGRICULTURE

Introduction

After over 7 years of negotiations the Uruguay Round multilateral trade negotiations were concluded on December 1993 and were formally ratified in April 1994 at Marrakesh, Morocco. The WTO Agreement on Agriculture was one of the main agreements which were negotiated during the Uruguay Round.

The WTO Agreement on Agriculture recognizes free and market oriented trading system in agriculture.

1. Tariffication.

2. Market access.

3. Export Competition.

TARIFFICATION

It means conversion of all non tariffs on trade such as import quota into tariffs. Tariff bindings are to be reduced under this agreement. That is to say, non-tariff barriers such as quantitative restrictions and export and import licensing etc. are to be replaced by tariffs to provide the same level of protection. Least developed countries are exempted from tariff reductions, whereas developed and developing countries are to reduce tariffs over a period of time. India has already reserved the right to impose high levels of import duties of 100%, 150% and 300% on primary products, processed products and edible oils respectively. The Quantitative Restrictions can easily be replaced with high import tariffs in case there is need to restrict import of these commodities for ensuring welfare of our farmers. Therefore, ability to restrict import of any commodity is not constrained in any manner by the provisions of the Agreement.

MARKET ACCESS

Where tariff bindings are too high, current market access has to be maintained as the amount of exports to other countries at preferential tariff rates. However, market access provisions do not apply when the commodity in question is a traditional staple in the diet of a developing country.

• Tariffication means that all non-tariff barriers such as... 1.Quotas. 2. Variable levies. 3. Minimum import prices. 4. Discretionary licensing. 5. State trading measures.

ii) The second element relates to setting up of a minimum level for imports of agricultural products by member countries as a share of domestic consumption. Countries are required to maintain current levels (1986-88) of access for each individual product. Where the current level of import is negligible, the minimum access should not be less than 3% of the domestic consumption, during the base period and tariff quotas are to be established when imports constitute less than 3% of domestic consumption. This minimum level is to rise to 5%by 2004 in the case of developing countries. However, special Safeguards Provisions allow for the application of additional duties when shipments are made at prices below certain reference levels or when there is a sudden import surge. The market access provision, however, does not apply when the commodity in question is a ‘traditional staple’ of a developing country.

DOMESTIC SUPPORT

Domestic support — amber, blue and green boxes:

In WTO terminology, subsidies in general are identified by “boxes” which are given the colours of traffic lights: green (permitted), amber (slow down), red (forbidden). In agriculture, things are, as usual, more complicated. The

Agriculture Agreement has no red box, although domestic support exceeding the reduction commitment levels in the amber box is prohibited; and there is a blue box for subsidies that are tied to programmes that limit production. There are also exemptions for developing countries.

THE THREE BOXES: GREEN, AMBER AND BLUE

The ‘Green Box’

In order to qualify for the “green box”, a subsidy must not bend trade, or at most cause minimal distortion. These subsidies have to be government-funded (not by charging consumers higher prices) and must not involve price support. They tend to be programmes that are not directed at particular products, and include direct

income supports for farmers that are not related to current production levels or prices. “Green box” subsidies are therefore allowed without limits, provided they comply with relevant criteria. They also include environmental protection and regional development programmes. Canada has proposed setting limits on all “boxes” combined, which would mean limits on green box subsidies as well.

Some countries say they would like to review the domestic subsidies listed in the green box because they believe that some of these, in certain circumstances, could have an influence on production or prices. Some others have said that the green box should not be changed because it is already satisfactory. Some say the green box should be expanded to cover additional types of subsidies.

The ‘Amber Box’

All domestic support measures considered to distort production and trade (with some exceptions) fall into the amber box, which is defined in Article 6 of the Agriculture Agreement as all domestic supports except those in the blue and green boxes. These include measures to support prices, or subsidies directly related to production quantities.

These supports are subject to limits: “de minimis” minimal supports are allowed (5% of agricultural production for developed countries, 10% for developing countries); the 30 WTO members that had larger subsidies than the de minimis levels at the beginning of the post-Uruguay Round reform period are committed to reduce these subsidies.

The reduction commitments are expressed in terms of a “Total Aggregate Measurement of Support” (Total AMS) which includes all supports for specified products together with supports that are not for specific products, in one single figure. In the current negotiations, various proposals deal with how much further these subsidies should be reduced, and whether limits should be set for specific products rather than continuing with the single overall “aggregate” limits. In the Agriculture Agreement, AMS is defined in Article 1 and Annexes 3 and 4.

The ‘Blue Box’

The blue box is an exemption from the general rule that all subsidies linked to production must be reduced or kept within defined minimal levels. It covers payments directly linked to acreage or animal numbers, but under schemes which also limit production by imposing production quotas or requiring farmers to set aside part of their land. Countries using these subsidies (and there are only a handful) say they

distort trade less than alternative amber box subsidies. Currently, the only members notifying the WTO that they are using or have used the blue box are: the EU, Iceland, Norway, Japan, the Slovak Republic and Slovenia

At the moment, the blue box is a permanent provision of the agreement. Some countries want it scrapped because the payments are only partly decoupled from production, or they are proposing commitments to reduce the use of these subsidies. Others say the blue box is an important tool for supporting and reforming agriculture, and for achieving certain “non-trade” objectives, and argue that it should not be restricted as it distorts trade less than other types of support. The EU says it is ready to negotiate additional reductions in amber box support so long as the concepts of the blue and green boxes are maintained.

The Agreement also imposes constraints on the level of domestic support provided to the agricultural sector. In India’s case, it may have in future some implications on minimum support prices given to farmers and on the subsidies given on agricultural inputs. The Agreement allows us to provide domestic support to the extent of 10% of the total value of agricultural produce. India is

not providing any export subsidy on agricultural products. The Agreement allows unlimited support to activities such as (i) research, pest diseases control, training, extension, and advisory services; (ii) public stock holding for food security purposes; (iii) domestic food aid; and (iv) income insurance and food needs, relief from natural disasters and payments under the environmental assistance programmes. Moreover, investment subsidies given for development of agricultural infrastructure or any kind of support given to low income and resource poor farmers are exempt from any commitments. Most of our major rural and agricultural development programmes are covered under these provisions. Therefore, the Agreement does not constrain our policies of investments in these areas.

Domestic support measures that have, at most, a minimum impact on trade ("green box" policies) are excluded from reduction commitments. Such policies include general government services, for example, in the areas of research, disease control, and infrastructure and food security. It also includes direct payments to producers, for example, certain forms of "decoupled" (from production) income support, structural adjustment assistance, direct payments under environmental programmes and under regional assistance programmes. Provisions of the Agreement regarding domestic support have two main objectives – first to identify acceptable measures that support farmers and second, to deny unacceptable, trade distorting support to the farmers. These provisions are aimed largely at the developed countries where the levels of domestic agricultural support have risen to extremely high levels in recent decades. De minimal support is the only form of support available to farmers in most developing countries.

All domestic support is quantified through the mechanism of total Aggregate Measurement of Support (AMS). AMS is a means of quantifying the aggregate value of domestic support or subsidy given to each category of agricultural product. Each WTO member country has made calculations to determine its AMS wherever applicable. For developing countries, this percentage is 13%.

AMS consists of two parts—product-specific subsidies and non-product specific subsidies. Product-specific subsidy refers to the total level of support provided for each individual agricultural commodity, essentially signified by procurement price in India. Non-product specific subsidy , refers to the total level of support for the agricultural sector as a whole, i.e., subsidies on inputs such as fertilizers , electricity, irrigation, seeds, credit etc .There are three categories of support measures that are not subject to reduction under the Agreement, and support within specified de-minimis level is allowed. These three categories of exempt support measures are:

1. Measures which have a minimum impact on trade and which meet the basic and policy specific criteria set out in the Agreement ( the Green Box measures in the terminology of WTO). These measures include Government assistance on general services like (i) research, pest and disease control, training, and advisory services; (ii) public stock holding for food security purposes; (iii) domestic food aid (iv) direct payment to producers like governmental financial participation in income insurance and safety nets, relief from natural disasters, and payments under environmental assistance programmes .

2. Developing countries like India which meet the criteria set out in paragraph 2 of Article 6 of the Agreement (‘Special and Differential Treatment’). Examples of these are (i) investment subsidies and (ii) agricultural input services generally available to low income Farmers

EXPORT SUBSIDIES

Such subsidies are virtually non-existent in India as exporters of agricultural commodities do not get direct subsidy. It is also worth noting that developing countries are free to provide three of the listed subsidies, namely, reduction of export marketing costs, internal and international transport and freight charges. Under the Agreement, export subsidies are defined as "subsidies contingent on export performance" and the list covers export subsidy practices such as direct export subsidies contingent on export performance; producer-financed subsidies such as government programmes which require a levy on production which is then used to subsidise the export of the product; cost-reduction measures such as subsidies to reduce marketing costs for exports including costs of international freight; internal transport subsidies applying only to exports; subsidies on incorporated products i.e., subsidies on agricultural products such as wheat contingent on their incorporation in export products made of wheat etc. All such export subsidies are subject to reduction commitments in terms of both the volume of subsidised export and budgetary outlays for such subsidies. As indicated earlier, such measures are virtually non-existent in India and, hence, the issue of reduction of export subsidy on agricultural products is not of particular relevance for India.

• The Agreement contains provisions regarding member’s commitment to reduce Export Subsidies.

• Developed countries are required to reduce their export subsidy expenditure by 36%. For developing countries the percentage cuts are 24%.

Product coverage

The Agreement covers not only basic agricultural products such as wheat, milk and live animals, but the products derived from them such as bread, butter, other dairy products and meat, as well as all processed agricultural products such as chocolates and sausages. The coverage includes wines, spirits and tobacco products, fibers such as cotton, wool and silk, and raw animal skins destined for leather production. Fish and fish products are not included nor are forestry products.

NATIONAL AGRICULTURE POLICY, 2000On July 28, 2000, Government of India announced a National Agriculture Policy to include this vital sector of the economy in the ambit of economic reforms. According to Economic Survey, 2000-2001, "After the economic reforms in 1991-92 that removed the restrictive and protective licensing regime for industry, the policy focus turned to agriculture. There is still the general impression that agriculture in India operates amidst a number of restraints and controls and that the farmers do not receive the benefits of free trade as compared to other sectors of the economy." The main elements of the new agriculture policy are the following:

Private sector investment in agriculture would be encouraged, particularly in areas like agricultural research, human resource development, post harvest management and marketing.

• Catapulting agricultural growth to over 4 per cent per annum by 2005.

• Restrictions on the movement of agricultural commodities throughout the country would be progressively dismantled.

• Appropriate measures would be adopted to ensure that agriculturists by and large, remain outside the regulatory and tax collection system.

• Rural electrification would be given high priority as a prime mover for agricultural development.

• Progressive institutionalization of rural and farm credit would be continuedfor providing timely and adequate credit to farmers.

Trend in Pattern of Consumption and Likely Demand for Food grains

There has been a slow down in the growth rate of direct demand for food grains consumption on account of several factors. First the growth rate of population has accelerated. Second, with rise in per capita income and changing tastes and preferences, the food basket is getting rapidly diversified. With such a diversification of consumption, the income elasticity of demand for food grains has declined perceptibly. The consumption patterns have been changing both in rural as well as in urban areas. The patterns of consumption of food grains over the years indicate a consistent fall in consumption of cereals both in rural as well as urban areas. In contrast there has been a significant increase in consumption of milk and milk products, edible oils, fruits and vegetables and meat, egg and fish. The available data shows that the food diversification has occurred in all expenditure groups including the poorest, although the poorest still spend a major part of their income on food grains. The decline in pattern of consumption of food grains especially amongst the poor has also been attributed to several other factors such as need for increased expenditure on fuel and light and on miscellaneous goods and services, the insufficient growth in availability of employment opportunities, stagnating or declining real agricultural incomes, lack of purchasing power etc.

The demand projections for food grains need to take in to account the possibility of a further fall in per capita demand on account of the likely development of rural infrastructure and mechanization. Further since the rural-urban differential in per capita consumption of food grains is quite high even now, one should expect a significant decline in average per capita consumption of food grains in the country with increasing urbanization. On account of all these factors it would not be unreasonable to expect a further decline in per capita consumption of food grains say by 2020 at the same rate as witnessed over the last two decades.

Implications of the Agreement Indian agriculture is characterised by majority of small and marginal farmers holding less than two hectares of land, less than 35.7% of the land, is under any assured irrigation system and for the large majority of farmers, the gains from the application of the science & technology in agriculture are yet to be realised. Farmers, therefore, require support in terms of development of infrastructure as well as improved technologies and provisions of requisite inputs at reasonable cost. India’s share of world’s agricultural trade is of the order of 1%. There is no doubt that during the last 30 years, Indian agriculture has grown at a reasonable pace, but with stagnant and declining net cropped area it is indeed going to be a difficult task to maintain the growth in agricultural production. The implications of the Agreement would thus have to be examined in the light of the food demand and supply situation. The size of the country, the level of overall development, balance of payments position, realistic future outlook for agricultural development, structure of land holdings etc. are the other relevant factors that would have a bearing on India’s trade policy in agriculture.

Implications of the Agreement on Agriculture for India should thus be gauged from the impact it will have on the following: i ) Whether the Agreement has opened up markets and facilitated exports of our products; and ii) Whether we would be able to continue with our domestic policy aimed at improving infrastructure and provision of inputs at subsidised prices for achieving increased agricultural production.

Implications - Short Term: Regarding freedom to pursue our domestic policies, it is quite evident that in the short term India will not be affected by the WTO Agreement on Agriculture.

India has been maintaining quantitative restrictions (QRs) on import of 825 agricultural products as on 1.4.97. QRs are proposed to be eliminated within the overall time frame of six years in three phases – 1.4.97 to 31.3.2003. (All our trading partners barring the US have agreed to this phase-out plan). Within the provisions of the GATT Agreement India has bound tariffs at high levels of 100%, 150% and 300% for primary products, processed products and edible oils respectively. Therefore, the QRs can be replaced with high import tariff in case we want to restrict imports of these commodities.

In India, for the present, the minimum support price provided to commodities is less than the fixed external reference price determined under the Agreement. Therefore, the AMS is negative. Theoretically, therefore, we could increase the product-specific support up to 10%.

The agriculture sector has a typical lag lead relationship between the prices and the produce. This acts as a deterrent. Whenever prices collapse, the farmers reduce the area under a particular crop and in turn, the prices increase during the next season/year. This cobweb phenomenon leads to equilibrium only in a close sector assumption. It will be quite ambitious to assume a certain level of price elasticity of demand / supply, income elasticity of demand, the production growth rates, resource allocations and finally, the farmers’ response to the market environment

Implications - Long TermAs mentioned earlier, for a large majority of farmers in different parts of the country, the gains from the application of science and technology in agriculture are yet to be realised which would require infrastructural support, improved technologies and provision of inputs at reasonable cost. The Agreement on Agriculture thus recognised this and developing countries have been given the freedom to implement such policies.

Indian agriculture enjoys the advantage of cheap labour. Therefore, despite the lower productivity, a comparison with world prices of agricultural commodities would reveal that domestic prices in India are considerably less with the exceptions of a few commodities (notably oilseeds). Hence, imports to India would not be attractive in the case of rice, tea, sunflower oil and cotton. On the whole, large scale import of agricultural commodities as a result of trade liberalisation is ruled out. Even the exports of those food grains which are cheaper in the domestic market, but are sensitive from the point of view of consumption by the economically weaker sections are not likely to rise to unacceptable levels because of high inland transportation cost and inadequate export infrastructure in India. Through proper Tariffication, however, we will have to strike a balance between the competing interest of 10% farmers who generate marketable surpluses and consumers belonging to the economically poor sections of the society.

It is also argued that because of increasing price of domestic agricultural commodities following improved export prospects, farmers would get benefits which in turn would encourage investment in the resource scarce agricultural sector. With the decrease in production subsidies as well as export subsidies, the international prices of agricultural commodities will rise and this will help in making our exports more competitive in world market. On the one hand, the price incentive could be the best incentive and could give a strong boost to investment in agriculture as well as adoption of modern technologies and thereby to the raising of agricultural production and productivity. On the other hand, the rise in domestic prices would put pressure on the public distribution system and accentuate the problem of food subsidy .India requires improvement in policies, infrastructure, institutions and technology. India’s agricultural

research system has stood several tests successfully in the past and has helped the country to tide over formidable food crises and other challenges.

WTO AND INDIAN AGRICULTURE

INDIA’S COMMITMENT

• As India was maintaining Quantitative Restrictions due to balance of payments reasons (which is a GATT consistent measure), it did not have to undertake any commitments in regard to market access.

• India does not provide any product specific support other than market price support.

In India, exporters of agricultural commodities do not get any direct subsidy. Indirect subsidies available to them are in the form of-:

(a) Exemption of export profit from income tax under section 80-HHC of the Income Tax

(b) Subsidies on cost of freight on export shipments of certain products like fruits, vegetables and floricultural products.

What India should do?

The most important things for India to address are speed up internal reforms in building up world-class infrastructure like roads, ports and electricity supply. India should also focus on original knowledge generation in important fields like Pharmaceutical molecules, textiles, IT high end products, processed food, installation of cold chain and agricultural logistics to tap opportunities of globalization under WTO regime.

India's ranking in recent Global Competitiveness report is not very encouraging due to infrastructure problems, poor governance, poor legal system and poor market access provided by India.

Our tariffs are still high compared to Developed countries and there will be pressure to reduce them further and faster.

India has solid strength, at least for mid term (5-7 years) in services sector primarily in IT sector, which should be tapped and further strengthened.

India would do well to reorganize its Protective Agricultural policy in name of rural poverty and Food security and try to capitalize on globalization of agriculture markets. It should rather focus on Textile industry modernization and developing international Marketing muscle and expertise, developing of Brand India image, use its traditional arts and designs intelligently to give competitive edge, capitalize on drug sector opportunities, and develop selective engineering sector industries like automobiles & forgings & castings, processed foods industry and the high end outsourcing services.

India must improve legal and administrative infrastructure, improve trade facilitation through cutting down bureaucracy and delays and further ease its financial markets.

India has to downsize non-plan expenditure in Subsidies (which are highly ineffective and wrongly applied) and Government salaries and perquisites like pensions and administrative expenditures.

Corruption will also have to be checked by bringing in fast remedial public grievance system, legal system and information dissemination by using e-governance.

The petroleum sector has to be boosted to tap crude oil and gas resources within Indian boundaries and entering into multinational contracts to source oil reserves.

It wont be a bad idea if Indian textile and garment Industry go multinational setting their foot in western Europe, North Africa, Mexico and other such strategically located areas for large US and European markets.

The performance of India in attracting major FDI has also been poor and certainly needs boost up, if India has to develop globally competitive infrastructure and facilities in its sectors of interest for world trade.

India has a large potential to increase its agricultural exports in a liberalized world provided it can diversify a significant part of its agriculture in to high value crops and in agro-processing. This would depend first on undertaking large infrastructure investment in agricultural and agro processing as also in rural infrastructure and research and development. India has not only to create export surplus but also to become competitive. The potential for exports would also depend on freeing of agricultural markets by the developed countries.

India’s Agriculture Trade under the WTO Regime

The trade regime of India prior to 1990 can be categorised as a restrictive trade regime. In the export trends the structural breaks can be located at 1990 and 1995. The breaks in the exports can be attributed to policy changes during those two years. Rice other than Basmati, which constitutes about 44 per cent of total quantity and 20 percent of total value of the exports, dominated the agricultural exports during the years 1998- 97 and 1999-2000. Oil meals constitute about 35 per cent in total quantity and about 40 per cent of the total value of exports. When the trade performance viewed in relative terms, during the years 1994-96, the share of India’s imports in the world imports stayed only at 0.50 per cent level and that of exports hovered around 1 per cent. An important observation emerges here that even with the process of liberalisation there has not been any significant breakthrough in India’s trade performance. The trade ratios for India’s agricultural sector indicate that it was a consistently net exporting sector from 1983 to 96 except during 1988. It is interesting that the trade ratios were in favour of exports in the agricultural sector. Larger share of imports as well as exports was accounted by the basic products rather than the processed products. Among the two, imports were dominated by processed products. This indicates that we could increase the processing facilities to increase the exports of processed agricultural products. In the recent modifications to QR there are a large number of processed products that are likely to get a fresh impetus in the processing industry. Among the imports linseed oil, jute fibres, silk and milk and cream (dry), wheat and meslin cotton (lint) and coconut oil are the dominant import commodities with high rates of growth. But not all of them had high share in the total value of imports. In fact, jute and fibres, linseed oil and coconut oil showed high rates of growth but claimed only a small share in aggregate imports. These commodities with low share of import but high growth are likely to record a steep increase in the imports. One can feel that the imports of meat and meat products, dairy products, fish and crustaceans, baby foods, soya bean, rapeseed and other oils, and Fruit preparations (including preserved fruits and juices) will increase in their import share.

On the other side, the export trends are positive except in the case of tea, citrus fruits, soya beans, and canned meat and jute fibres. Out of these commodities in the case of soybeans, canned meat and jute fibres, we have no history of large exportable surplus and moreover the elasticity of export demand of these commodities has also not been very high. But the case of tea and citrus fruits is different. It is necessary to trace the reasons for the failure in increasing the

exports. The inconsistency in aggregate trade is one of the major problems of the sector.

With a declining import share and the export share rising since 1988, the possibility of any import surges can be ruled out provided the tariff policy is managed properly. Their analysis of prices of agri-commodities indicated the crops viz., tobacco, jute, pepper, wheat, rice, sugar must have higher level of prices due to the removal of QR’s. The import of the commodities viz., cereals, milk and milk products, silk, pulses, rubber, lint cotton and vegetable oils may increase. But, the possibility of surges in imports could be dealt with proper tariff structure while the price level can also be managed through proper policy mix.

National Level

While analyzing the impact of Agreement on Agriculture (AoA) at the national level, we need to look at it from four different perspectives. First, it is well known that India has an extremely diversified agricultural sector. There are regions which are incapable of participating in international trade and may require large investments to do so. These regions will be at the receiving end both from the point of view of attracting investments towards agriculture as well as the non-availability of plough back surplus in advancing their agriculture sector. Second, India has comparative advantages in a few commodities. This advantage will certainly help in increasing the exports of such commodities, provided we have continued positive international demand elasticity and there is a continued advantage between the domestic and the world prices. Third, there are non-traditional export commodities, which have to be watched carefully, and India has to take advantage of tapping the market for these commodities. Lastly, India’s trade-in agriculture is characterised by its non-consistent, volatile nature across markets in terms of time series. It will be necessary to stabilize this with suitable measures. The impact of Agreement on Agriculture (AoA) on the national economy has to be viewed from three distinct perspectives. The initial reaction comes from the alteration in the support regimes both in domestic sector as well as in the export sector. The aggregate measure of support is allowed at 13.33 per cent of the base level gross value of product with 86-88 base. As India has not crossed this barrier and it is unlikely to cross this in near future, it does not cause great concern presently for us. However, in order to keep a check on the increasing budgetary deficit, it is necessary that the agricultural policy directs the support measures towards the ‘Green Box’ policies.

Specifically speaking, the country should take advantage of providing support to the resource poor regions and designing schemes for reduction of export

marketing costs as well as the domestic and international freight charges by recasting the present subsidy regime. In fact, these together will make a large difference in the value added to the exporters and can boost up the exports. In case of commodities where we do not have advantage of lower domestic prices, exports will become uneconomical unless support measures are put in place for a number of commodities. In such cases, in order to sustain the current export trends, the commodities which require price or export support are coffee, cotton, tea, groundnut oil, copra, sugar, wheat and maize. In respect of all these commodities, the average prices for over fourteen years in the Indian wholesale market are higher than those of the world prices. There are two likely outcomes of this:

(i) The imports of these commodities may experience a sudden spurt with the removal of Quantitative Restrictions; and (ii) exports will go down significantly because of the price disadvantages. It is in this context that we have to take advantage of the commodities which can withstand such pressure. As far as the variations in world prices and Indian wholesale prices are concerned, we find that the Indian wholesale prices fluctuate more violently as compared to the world prices. Such instability in the Indian wholesale prices may cause spurts in imports and create disincentives to the producers. It is, therefore, essential to watch the price fluctuations at least in a short-term perspective. The Food and Agriculture Organisation (FAO) has projected that the world trade from countries to the developed countries is likely to have lower growth rates as compared to the trade between developing countries. Therefore, it is necessary for us to concentrate more on the trade with developing countries where the emerging market is quite strong.

A STUDY: Reasons for farmers grievances

As WTO/AOA and suicide of the farmers, knowledge of WTO/AOA to the farming community, relationship between size of holding and income, relationship between income and educational attainment and lastly the issue relating to input subsidies have been incorporated in the study

The point wise discussion of all these aspects is being discussed one by one in the following paragraphs.

1) Illiteracy

Table -1 show that 29.6 percent of the farmers have knowledge of WTO/AOA and rest of the farmers was not even aware of WTO/AOA. This implies that our farming community is unaware and illiterate and we have to undertake awareness programmes to educate the farming community about WTO and especially AOA, so that they can reap the benefits from WTO/AOA.

2) Size of Land Holding

In India, land continues to be of enormous economic, social and symbolic relevance. The way in which access to land can be obtained and its ownership documented is at the core of the livelihood of the large majority of the poor, especially in rural and tribal areas and determines the extent to which increasingly scare natural resources are managed (Word Bank, 2007). The land reforms triggered in the Indian economy with the first constitutional amendment in 1951. The population in India is increasing continuously for the last four decades, as a result of this; the size of land holding is shrinking. The literature on this issue has stressed that land ceiling should be removed. Their arguments in favour of this issue are based on the factors like economies of scale and also

the need for corporate farming. In order to have an insight into the size of holding of the farmers the description of the primary survey is given in the Table-2. The results of the field survey highlight that majority of the farmers owned 3-6 acres of land in northern India. In case of large farm holding (above15 acre) the percentage of farmers is just 7.3 percent. The trend clearly shows that majority of the farmers own less than 6 acre of land in India (see the Table-2). Thus, small sizes of holding are responsible for debacle of farmers and due to this they are not in position to sustain. Further, more and more farmers are not finding farming as a viable profession.

3) Relationship between size of Holding and Income of the Farmers

Size of land holding has a significant bearing upon the income level of the farmers. Moreover, big farmers keep themselves aware of the policy measures taken at the national and international level. To explore this issue empirically, a nationwide survey of about 5000 rural households was conducted. They were interviewed by National Council of Applied Economic Research (NCAER) in both 1982 and 1999 to assess the extent to which cumulative land reform legislation and/or implementation at the state level affected changes in the accumulation of human and physical capital and income levels for the same households over the 17 year period spanned by the data. The strong association was found in the land holding and the income of the farmers.

The same issue has been addressed empirically in the present study constituting a sample of 409 farmers in this case. Hypothesis was tested by applying chi-square test to ascertain the association between size of land holding and income of the farmers. The results of the same are depicted in the Table -3 depicts that the size of holding directly varies with the income of the farmers. The calculated value of chi-square was found to be 172.337, which was highly

significant at one percent level of significance, depicting significant association between level of income and size of land holding.

4)WTO/AOA and Suicide of the Farmers

The ratio of suicide by the farmers is increasing day in day out. The issue of suicide and WTO/AOA has been linked by the media and NGOs. The present study shows that about 31.3 percent of theses pendent farmers believed that WTO is responsible for the suicide of farmers (see the Table-4). Further, 33.5 percent said that WTO is not responsible for the same and another 35.2 percent were found to be neutral. From the primary survey it is difficult to conclude whether WTO/AOA is responsible for the suicide of the farmers or not. In this regard, other researchers opined that the major cause of suicide of the farmers is debt. WTO/AOA and suicides of the farmer is still a pending issue because we have not still realized the implications of WTO/AOA fully and moreover the research only on this aspect is desperately required.

5) Farming in the Era of Globalization

Wheat and rice are the two main crops grown in the northern India for the last four decades. In case of farmers, they are specialized in the cultivation of these crops in their respective regions. The prices of food-grain in the international market are highly depressed (distorted) by the Organization for Economic Cooperation and Development (OECD) countries with high doses of subsidies given by these countries to their farmers but Indian government is unable to afford so much resources which can be diverted to the farm sector (Rao, 2003). Table -5 explains the perception of farming community about competitiveness of wheat and rice in the international market. The views of the farmers are depicted in Table-5.

The above table clearly shows that majority of the farmers (81.66 percent) in this region believe that they are not in a position to compete in the world market till the government take concrete steps toward this direction. This implies that Indian farmers are not having a fair access in the international market.

6) Marketing of Crops other than Wheat and Rice

This wheat-rice cropping pattern is prevalent for last four decades in Indian agriculture because of the Minimum Support Price (MSP) and availability of marketing facilities. But the same facilities for other crops are not readily available. Food Corporation of India (FCI) is the main agency for procuring the cereals apart from certain state agencies which are also procuring both cereals from the market.

The Chief Minister's Advisory Committee on Agriculture Policy and Restructuring (Punjab, October 2002) realized that all efforts made so far to introduce alternatives to these crops have failed on the market front. It is, therefore, essential the market clearance through minimum support price and procurement system must be assured, if the production of alternative crops, especially the oil seeds and pulse crops, is to be sustained on a medium to long term basis. The marketing of agricultural crops are becoming a major issue among farmers, which has been raised in the primary study. The result of the study is given in Table-6. It also shows that 76.2 percent of the farmers were of the opinion that there is no marketing facility for other than wheat and rice but 23.7 percent of the farmers believed that market for other than wheat and rice is available. There is a need to provide marketing facilities for other commodities like pulses, grams oilseeds etc. If this is ensured, the prices of these commodities will tend to decline. This will also result in saving of huge foreign exchange reserves of the country.

7) Diversification in Cropping Pattern

Depleting water table, stagnant income of the farmers, low productivity level are amongst few serious problems being faced by the Indian farmers. Apart from this, the marketing facilities are mainly available for wheat and rice to the farmers though for certain other corps like cotton and sugar cane the facilities are also available. Many researchers like Swaminathan (2001), Shiva (2002) laid more stress on diversification in the cropping pattern from wheat and rice to other cash crops to ease the situation. The Table -9 depicts the views of the farmers regarding diversification.

The survey shows that farmers in the region are more interested to adopt wheat and rice in their fields (Table -7 shows). The percentage of such farmers is 68.9 percent and rests of the farmers are cultivating other crops in addition to wheat and rice in their fields.

8) Inadequate Supply of Electricity

Electricity is the main input used in the agricultural sector and this sector depends heavily on adequate and incessant supply of electricity. The quality of electricity is inadequate at the time of agricultural operation in the field and at peak hours supply is not available and its highly irregular one. The farmers are forced to use diesel for propelling pump sets, which further enhances the capital-output ration in the agriculture sector. This ultimately diminishes the returns of the farmers. Under such circumstances, there is a strong need to analyze this issue from the point of view of farming community.

The field survey shows that about 80 percent of the farm community believes that supply of electricity is not adequate at the time of sowing, whereas 12.2

percent believe that it is adequate. Thus, there is a need to improve the quality and quantity of electricity supplied to agriculture sector especially during the sowing season.

Table-8a highlights that the electricity subsidy is most preferred by the Indian farmers. The second, most preferred subsidy is urea, third one is the credit and the least preferred subsidy to the farmers is canal subsidy. The basic point that emerged from the stud is that the electricity subsidy is of prime importance. It may be because it is the only subsidy which is readily available to the farmers.

Hence, in the light of the above empirical analysis certain important conclusions are emerged with are discussed in the following paragraphs.

CONCLUSION FROM STUDY

It emerged from the study that the size of land holding is continuously declining. More importantly, it was also established that the size of land holding and income are directly related. Another significant conclusion of the study points out towards a positive relationship between income and education level of the farmers. All the above relationship was tested with the help of Chi-square test technique and was found to be significant at one percent level. Further, regarding the marketing access it was found that the

SUGGESTIONS1. The Indian economy is predominantly an agrarian economy and its

prosperity depends upon the progress of agriculture. Agriculture sector is considered as the backbone of our economy and a majority of farmers depend upon it for sustaining their livelihoods. They should be give additional incentives and provision of electricity, irrigation facilities and infrastructural support, improved technologies and provision of inputs at reasonable cost.Among the agricultural production incentives, subsidies are considered to be the most powerful instrument for accelerating the growth of agricultural production. The subsidies should be equally distributed among the different regions and groups of our society for achieving the goal of rapid growth in agricultural development .Provision of input subsidies in agriculture has been recommended on the ground that it gives incentives to the farmers to use new technology. It also gives incentives to use these subsidies and hence increase production. However, they put a heavy burden on the state exchequer and reduce investable surplus and consequently the growth rate of the economy. Besides, they might generate inequalities in the distribution of income and may lead to distortions and inefficiency in the system.

2. In the Pharma sector there is need for major investments in R &D and mergers and restructuring of companies to make them world class to take advantage. India has already an amended patent Act and both product and Process are now patented in India. However, the large number of patents going off in USA recently, gives the Indian Drug companies windfall

opportunities, if tapped intelligently. Some companies in India have organized themselves for this.

3. The most important things for India to address are speed up internal reforms in building up world-class infrastructure like roads, ports and electricity supply. India should also focus on original knowledge generation in important fields like Pharmaceutical molecules, textiles, IT high end products, processed food, installation of cold chain and agricultural logistics to tap opportunities of globalization under WTO regime.

4. India should expand its exports of agricultural products in which it has tremendous comparative advantage. The provisions of W.T.O offered ample opportunities to India to expand its export market. Export prospects are brighter with soybeans, oilseeds, oil meal and cake, fruits and vegetables, and fruit preparations. Thus, high export prospects are seen with high value products, horticultural products, and processed products, marine products .India need not be extremely defensive and inward looking, as Indian agriculture has demonstrated strength which needs to be appropriately used to compete in the global market, otherwise it will become a case of missed opportunity.

5. The Government should improve the livelihood pattern of small & marginal farmers by enhancing their access to appropriate and affordable technologies, market related information and linkages.

6. Sustainability of extension services and expert advice through capacity building exercises effectively bridging the rural-urban divide.

7. Associate all professionals’ involved in different aspects of agriculture and rural development through national and international networks.

8. Promote financial sector inclusion for farmers and small & medium enterprises in agri-sector through access to market capital and risk management tools.

9. India would do well to reorganize its Protective Agricultural policy in name of rural poverty and Food security and try to capitalize on globalization of agriculture markets. It should rather focus on Textile industry modernization and developing international Marketing muscle and expertise, developing of Brand India image, use its traditional arts and designs intelligently to give competitive edge, capitalize on drug sector opportunities, and develop selective engineering sector industries like automobiles & forgings & castings, processed foods industry and the high end outsourcing services.

10.Biotechnological inventions are increasingly affecting agricultural production and trade. New genetically engineered varieties of crops have increased productivity and are more pest resistant. Therefore it is important, as it helps in increasing productivity which is of central concern to India. The Government should support the use of biotechnology in agriculture.

11.India blessed with its cheap labour, land, diverse agro climatic conditions and large agricultural sector can definitely gain through expansion of international trade in agricultural products.

12.India has a large potential to increase its agricultural exports in a liberalized world by diversifying, a significant part of its agriculture in to high value crops and in agro-processing.

13.For countries like India, multi functionality of agriculture is best shown through its growth in areas such as food security, employment and the elimination of poverty in rural areas. Moreover, these issues are neither emotive nor undefined but are practical and harsh realities which decision makers have to confront when addressing issues of agricultural policies. The need to provide employment opportunities in pre-dominantly rural agrarian areas is one of the main Non Trade Concern which we would like to see addressed.

BIBLIOGRAPHY

BOOKS:1. Indian Economy in 21st century – M.M. Sury

2. Agriculture and world trade organisation

3. Indian economy and WTO –G.K Chadha

4. Indian Economy: Current Development – A.N. Agrawal

WEBSITES:1. http://www.wto.org/

2. http://www.cii.in/

3. http://indiainfoline.com/

4. http://naas.org/

5. http://gtad.wto.org/

6. http://www.isapindia.org/

GUIDELINES:

Professor Agnelo Menezes