A PROJECT REPORT ON

WTO AND INDIAN ECONOMY

(AGRICULTURAL IMPLICATIONS)
SUBMITTED

TO THE UNIVERSITY OF MUMBAI

AS A PARTIAL REQUIREMENT FOR
COMPLETING THE POST GRADUATION OF
M.COM PART I (BANKING AND FINANCE)
SEMESTER -1
SUBMITTED BY:
VAIS ARTI SHANTILAL
ROLL NO: 53
UNDER THE GUIDANCE OF

SIES COLLEGE OF COMMERCE AND ECONOMICS,

PLOT NO. 71/72, SION MATUNGA ESTATE
T.V. CHIDAMBARAM MARG,
SION (EAST), MUMBAI 400022.

CERTIFICATE
This is to certify that Mr.__________________________________
__________________________________________________________
of M.Com (Banking and Finance) Semester I (academic year
2014-2015) has successfully completed the project on
______________________________________________________under the
Guidance of Dr. __________________________________________.
_________________
(Project Guide)
___________________
(External Examiner)

___________________
(Course Co-ordinator)
___________________
(Principal)

Place: _____________
Date: ___________
2

DECLARATION

I, __________________________________________________
Student of M.Com (Banking and Finance) Semester I (academic year
2014-2015) hereby declare that, I have completed the project on

______________________________________________________________.
The information presented in this project is true and
original
to the best of my knowledge.

___________________
Name:
Roll No.:

Place: _____________

Date:_____________ACKNOWLEDGEMENT

I would like to thank the University of Mumbai, for

introducing M.Com (Banking and Finance) course, thereby giving
its students a platform to be abreast with changing business
scenario, with the help of theory as a base and practical as a
solution.
I

am

indebted

to

the

reviewer

of

the

project

Dr.

Aakalyanaramanmy project guide who is also our principal, for her

support and guidance. I would sincerely like to thank her for all
her efforts.
Last but not the least; I would like to thank my parents for
giving the best education and for their support and contribution
without which this project would not have been possible.

______________________

Name :
Roll no:

SERIAL NUMBER

TOPICS
DECLARATION

PAGE NUMBER

ACKNOWLEDGEMENT

WORLD TRADE ORGANISATION

ORIGIN& EVALUATION OF GATT

PRINCIPLES OF WTO

8-9

WTO OBJECTIVE AND FUNCTION

10

INDIA AND WTO

11

INDIAN ECONOMY

12

SECTORS OF INDIAN ECONOMY

13

INDIAN AGRICULTURE

14-19

IMPORTANCE OF AGRICULTURE IN
INDIAN ECONOMY

20-27

TRENDS IN PATTERN OF CONSUMPTION

AND LIKELY DEMAND AND FOOD
GRAINING

28-30

WTO AND INDIAN AGRICULTURE

31-34

A STUDY OF REASON FOR FARMERS

GRIEVANCES

35-41

CONCLUSION

42-43

BIBLOGRAPHY

44

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,
Switzerland
Established: 1
January
1995
Created
by: Uruguay
Round
negotiations
(1986-94)
Membership:153
countries
(as
of
23rd
July
2008)
Budget:
155 million Swiss francs for 2003Secretariat staff: 560
Head : 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 20 th 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
7

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
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 nonmembers 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 nontariff 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.
10

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)

11

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 $46
billion in 2007. Indias foreign exchange reserves are over US$ 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.

12

SECTORS OF INDIAN ECONOMY

There are three major sectors in Indian Economy
Agriculture
Agriculture 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.
Industry
Index 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.
Services
The 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.

13

INDIAN AGRICULTURE
Indian 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 onequarter 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 (fertilizers, 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
Indias 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.
14

(b) To create opportunities for expansion of agricultural exports by securing

meaningful market access in developed countries.

Use Distribution of India's Geographical Area

After 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 Pattern
Cropping 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 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 Holdings
Small-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 Productivity
Indian 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
15

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 India
Marketing 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, fertilizers, 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 Indebtedness
According 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
16

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 Credit
Sources 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.
Indias 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
17

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
Indias 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 QRs 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 Policies
India, 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
18

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).

19

Export Subsidies
The 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.

IMPORTANCE OF AGRICULTURE IN INDIAN ECONOMY

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.

20

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.

21

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.
22

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 Indias 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 programmers. 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.
23

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 partsproduct-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-minims
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
24

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 members 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.

25

NATIONAL AGRICULTURE POLICY, 2000

On 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 continued

for providing timely and adequate credit to farmers.

26

27

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. Indias share of
worlds 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
28

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 Indias 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 Term
As 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
29

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. Indias
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

INDIAS 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.
30

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.
31

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.

Indias 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 Indias 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 Indias trade
performance. The trade ratios for Indias 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
32

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 muslin 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 QRs.
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, Indias
33

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 shortterm 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.

34

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.

NO.OF FARMERS
400
300

NO.OF FARMERS

200
100
0
YES

NO

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
35

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.

NO. OF FARMERS
150
145
140
135
130
125
120

NO. OF
FARMERS

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.

36

90
80
70

LESS THAN
10000

60
50

0-3 ACRES

40

3-6 ACRES

30

6-15 ACRE

20

1
12
10

1000015000
1500025000
GREATER
THAN
25000

10
0
LESS THAN 10000

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.

NO. OF FARMERS
150
145
140
135
130
125
120

NO. OF
FARMERS

37

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.

NO. OF FARMERS
200
180
160
140
120
100
80
60
40
20
0

NO. OF
FARMERS

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.

38

NO. OF FARMERS
350
300
250
200
150
100
50
0

NO. OF
FARMERS

YES

NO

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.
39

NO. OF FARMERS
300
250
NO. OF
FARMERS

200
150
100
50
0
YES

NO

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.

PERCENTAGE
8%5%
17%

28%

STRONGLY
AGREE

AGREE

NEUTRAL

DISAGREE

STRONGLY
DISGREE
43%

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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.

140
120
100
80
60
40
20
0

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

41

Conclusion
1. 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.
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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
WEBSITES:
1. http://www.wto.org/
43

2. http://www.cii.in/
3. http://indiainfoline.com/
4. http://naas.org/
5. http://gtad.wto.org/
6. http://www.isapindia.org/
7. www.slideshare.net/shrayjali/implications-of-wto-on-india
8. en.wikipedia.org/wiki/Agreement_on_Agriculture

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