An Analytical Study on Impact of WTO on Agricultural Trade in India.

An Analytical Study on Impact of WTO on Agricultural Trade in India.

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  An Analytical Studyon Impact of WTO on Agricultural Trade in India. Introduction India is a nation known for villages. Today, even after 69 years of independence, agricultural sector is still the main stay of the Indian economy. It provides employment to about 48.9 percent population, contributes 17.4% of GDP (Economic Survey, 2015-16). Some important agricultural products are exported (rice, tea, coffee, cashew, spices, tobacco, leather, etc) and hence a good foreign exchange earner for our country. Agricultural sector also plays a vital role in forward and backward linkages, it is also a source of raw material for agro – based industries including sugar, textiles, processed food, food products, paper, jute and provides market for capital goods like trackers, pump sets, other machinery and inputs like fertilizers, pesticides, insecticides and light consumer goods. During the first three Five Years Plans, agriculture was given prime importance by policy makers to overcome the food shortage created by the partition of the country. Since then the nation has been investing huge resources in agricultural sector, in terms of investment subsidies and minimum support prices. However, the rate of growth of public investment in agricultural sector was negative during the decade of 80’s and 90’s. The technology led investments in agriculture have made the country self-sufficient and a leading producer of several agricultural commodities in the world. The green revolution in food grain crops, the yellow revolution in oil seeds, the white revolution in milk production, the blue revolution in fish production and the golden revolution in horticultural crops bear ample testimony to the contribution of agricultural research and development that took place during the post independence period. Despite all the contributions being one of the largest producers of variety of crops, the productivity levels of agricultural sector is not commensurate and has remained much below the global level. The main contributors to this unbalanced growth are institutional and technological factors. The lack of irrigation facilities, inadequate use of fertilizers, limited use of high yielding seeds, inadequate plant protection, improper harvesting techniques, and lack of farm mechanization. As regards the institutional factors such as failure of land reforms, fragmentation of land holdings, absentee landlordism, improper marketing facilities, lack of financial and credit assistance for reinvestment in agriculture and cob-web of rural indebtedness. These are some of the factors, which still exist, and proliferate negative effect on farm productivity. The answer lies in the question itself. The present policies should be effectively implemented so that the economic surplus is generated. The process can trickle down to the poorest of the poor farmers and the much-desired rate of growth in agriculture sector can be generated. Declaring agriculture sector as the thrust sector in the Exim Policy of India, formation of NABARD, APEDA are some of the steps taken by the government in right direction to bring Indian farm sector on a global level. The sheer fact that agriculture at last came within the multilateral trading system during the Uruguay Round of trade negotiations, more than forty years after the creation of the General Agreement on Tariffs and Trade (GATT) and at the birth of its successor, the World Trade Organization (WTO) in 1995, is widely acknowledged as an achievement, a positive step forward. At international level, according to World Trade Organization (WTO) report 2015 on International Trade statistics shows that export and import of agricultural products from India was almost US$ 43 billion & 27 billion, respectively and the share of India in value terms was 2.5 % and 1.5 % respectively in export and import of agricultural products. India has improved
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  its ranking upto 10th at globally. India makes it self-sufficient in agriculture sector (food grains) after the green revolution, which makes it possible to export agricultural products. Due to favorable support of agriculture policy, India became stable in the export of agricultural products. Agriculture sector is very important for the economic growth and development and because it provides food grains and employment to its population, also important for industrial development because these various products are used as a raw material for industries such as Sugarcane, Cotton, Oil seeds, Jute etc. Globalization of Indian agriculture means, exposure of Indian agriculture to international market forces through free exports and imports· of agriculture and allied products. As a matter of fact, India is already committed to the globalization of agricultural sector. Globalization of the agricultural sector provides a lot of opportunities to share the international market as well as it exposes the agricultural sector to competition from foreign supplier in the domestic market and force the domestic production to adopt more efficient techniques of production. India is likely to benefit from the globalization of the agricultural sector. It is the opinion of many that exports from India are likely to increase significantly if the Government follows the policy of globalizing the Indian economy. The export of agriculture and allied products earn foreign exchange, provides much needed competition in products and helps to realize economies of scale, which helps the domestic consumers. Continuous and sustained export of agriculture and allied products encourages modernization of production and marketing. As we are in the changing world as well as global trade agreement and development of institutions like the World Trade Organization (WTO), the emerging world trading system may claim to change the terms of trade in favour of agriculture and traded goods from India. The present study will be undertaken to consider agricultural trade as the key sector to Indian economic development. It covers the periods before WTO and after WTO. i.e., The period 1975- 76 to 1994-1995 (Pre-WTO period) and the year 1995-96 to 2014-15 (Post-WTO period). Objectives: 1. To study the trends of agricultural trade in India during pre and post WTO regime 2. To compute the terms of trade in Indian agriculture 3. To examine the comparative advantage in India’s agricultural trade. 4. To study the instability of India’s agricultural trade and suggest appropriate policy measures for improving the agricultural trade Brief resume of work in India and abroad A brief review relevant to the study is presented below: Ramesh Chand and Tewari (1991) used the data of Food and Agricultural Organization of the United Nations (FAO) to analyze the trends in agricultural exports for the period 1970- 1973 to 1985-1988. According to their findings agricultural exports as a proportion of the total export declined from 38.0 per cent in 1970-73 to 25.6 percent in 1985-88. During the same period, imports declined from 33.9 per cent to 15.3 per cent. Taking individual commodities as in 1985-88 the highest share in total agricultural exports was recorded for coffee, tea, cocoa i.e.
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  35.0 per centfollowed by 14 per cent for foods and vegetables. There was an increasing trend in the shares of both in 1980's. About imports, vegetable oil accounted for the highest proportion in 1985-88 followed by fruits and vegetables. The share of both these commodities recorded an increase in 1980's. Ratna Reddy and Badri Narayanan (1991) analyzed the trade in exports of Indian agricultural goods for the period 1962-85. They found a continuous decline in the share of agricultural exports from 44 per cent in 1966 to 28 percent in 1985. Similarly, there was a decline in the share of agricultural imports from 29 per cent to 10 per cent. Singh, Prasad and Dinger (1992) studied trends in agricultural trade for the period 1970- 71 to 1990-91. They found that the share of agricultural exports declined from 31.72 per cent in 1970-71 to 19.40 per cent in 1990-91. Similarly, the agricultural imports declined from 27.0 per cent to 2.61 per cent in the same period. Bhattacharya (2004) in his analysis discovered that India's trade surplus in agriculture is due to the higher growth of export of non-traditional commodities viz. fruits, juices, vegetables, processed fruits and beverages etc. On the other hand export incomes had been somewhat offset by the continuing dismal performance of India's traditional products like cashew, nuts, tea, coffee, tobacco, spices, etc. Chand (2005) in his analysis found India's agricultural export performance in the new scenario had indicated that the decline in value of India's agricultural exports in the post WTO period is more or less decline in world trade in agriculture. Ramphul (2007) used FAO trade yearbook data and least square growth model and nominal growth model had analyzed the trends and patterns on India's agricultural trade in pre and post WTO phase. He had found in his analysis that in the WTO regime, the average annual growth rates of India's agricultural exports and imports had decreased but it is worst for agricultural exports. Due to this net agricultural export had reduced and self-reliance in agriculture had badly affected the performance of import and export of agriculture and allied products. This indicated that Agreement on Agriculture (AOA) had not encouraged an expansion in India's net farm trade. He further observed that the main part of overall exports growth during the period 1990-2004 was the result of the expansion of world market for the countries agricultural exports products and active expansion of market share of its agricultural exports. The reason might be that the decrease in agricultural export rate due to the deceleration in agricultural growth. There could be other reason also, the huge amount of domestic subsidies provided by developed countries to their farmers. The study suggested that to protect the productive efficiency of Indian agriculture based on true comparative advantage; India needs to maintain its agricultural tariff rates at WTO final bound level. Technical programme of work Place of work: Department of Agricultural Economics Facilities available: Yes
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  The present studywill be based on secondary data, which will be collected from various published and unpublished sources. The data will be collected for the period 1975-76 to 2014-15. However, the present study will cover the periods before WTO and after WTO. i.e., the period 1975-76 to 1994-1995 (Pre-WTO period) and the years 1995-96 to 2014-15 (Post-WTO period) Method of Least Squares The trend of agricultural trade growth of major agricultural commodities from 1975-76 will be obtained by using the method of least squares. This method is an algebraic device and widely used. It gives us a straight line from which the sum of the deviations on either side will be equal to zero. Growth rates will also be calculated. Terms of Trade (TOT) The Terms of Trade of agricultural trade in India will be calculated through following equation. TOT = EQ – IQ Where EQ = Export quantity IQ = Import quantity Balassa’s Revealed Comparative Advantage (Export Performance Ratio) The performance of major agricultural commodities’s export, import during the WTO period and the comparison of the performance during the Pre-WTO and WTO period will be calculated by using the Revealed Comparative Advantage (RCA) analysis. RCA Indices will be used to find out the products in which the country has comparative advantage, by comparing India’s major agricultural commodities trade with world average. Coefficient of variation (CV) The extent of variability in the growth rate of trade of major agricultural commodities over the years, will be analysed through coefficient of variation. C.V = S.D Mean ∗ 100 Where C.V = Coefficient of variation S.D = Standard Deviation References Ramesh Chand and S.C. Tewari (1991), "Growth and Instability of Indian Exports and Imports of Agricultural Commodities", Indian Journal of Agricultural Economics, April-June,, Vol.XLVI, No.2, p.l59. Ratna Reddy, V and Badri Narayanan K. (1992), "Trade Experience of Indian Agriculture: Behaviour of Net Export Supply Functions for Dominant Commodities", Indian Journal of Agricultural Economics, January- March, VOL.XL VII. No.1, p.49. Singh, Prasad and Dinger (1992), "Indian Agricultural Policy in the Context of New Trade and Industrial Policy", Indian Journal of Agricultural Economics, July -Sept. 1992, VOL XLVII, No.3, pp.357-359. Chand Ramesh (2005), "India's Agro Export Performance and Competitiveness in Changed International Scenario" in Hanumantha Rao, C.H., Bhattacharya B.B. and Siddharthian N.S. (Editors), Indian Economy and Society, Academic Foundation; New Delhi. Bhattacharya, B.B. (2004), "Agricultural Exports", Academic Foundation Publication, New Delhi. Ramphul (2007), "WTO and India's Agricultural Trade: An Empirical Analysis" in Manoj Shankar Gupper (editor), WTO and Indian Economy, Serials Publications, New Delhi.