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CHAPTER-VII

RECAPITULATION, SUGGESTIVE MEASURER AND FUTURE PROSPECTS


We may now briefly summarize the discussions presented in this study. During the past 13
years India has undertaken several policy reforms to create an enabling environment for
opening up of the economy and liberalization of agricultural trade, as a part of broad
economic reforms programme initiated during the nineties, and to meet its commitments as a
WTO member country. The formation of World Trade Organisation as a multilateral trade
regulatory authority in 1995 to catalyse the philosophy of free trade has raised serious
question marks on the concept and philosophy of free trade itself. Theoretically, the principal
mandate of the WTO is to promote an open, equitable and non-discriminatory multilateral
trading system based on the principle of comparative advantage. However, implementation of
WTO frame work and its agreements, have led to serious problems resulting into non
agreement on a number of issues as they seem to follow the principle of discrimination and
unequal exchange. The failure of recent round of Cancun Summit to arrive at a consensus
with regard to Agreement on Agriculture is a clear pointer. The three pillars of AOA, i.e.,
increasing market access, reducing domestic support (specially the subsidies on farm inputs)
and curtailing export promotion measures (like export subsidies) under the WTO framework
of negotiations, as of now, do not warrant for any argument and concessions to the
developing countries with regard to the issues of self-sufficiency, food security and poverty
reduction through agriculture. This has led to serious policy dilemma and dichotomy in the
country as regards to the objectives of a sound agriculture policy.
While India seems to have acted under pressure and presumptions to highlight the need for
reducing the domestic support, crop diversification and export enhancing measures, the
objective situation has always demanded a food security approach as nearly eighty per cent of
the farmers belong to small and marginal category, hardly having any competitive strength
and economic security. The growth rates in agriculture sector have already started declining
and the food grain situation appears to be worse today despite the surplus production. The
dichotomy becomes more acute when the issue of agriculture is viewed in relation to poverty
reduction, which not only requires government support to the farm sector but also direct
intervention calling for asset redistribution and land reforms and extending protection to the
farmers and agricultural labourers. The issues of asset redistribution and land reforms have
totally been relegated in to background ever since the export frenzy approach to agriculture
growth took primacy. While the export frenzy approach is based on large farm economics, the
issues of food security, environmental sustainability and preservation of bio- diversity require
a completely decentralized approach in which the local institutions and the class of small and
marginal farmers may have the adequate and effective participation. It is apparent that under
Indian conditions the issue of agriculture growth, with or without WTO, cannot be separated
from the issue of agrarian relations which determine the level of food security, environmental
sustainability and poverty.
The issue of environmental sustainability in Indian context cannot be separated from the issue
of food security as the loss of bio-diversity has been one of the prime causes for food
insecurity. The loss of bio-diversity has made small and marginal farmers more vulnerable
after globalization despite the fact that this group had been the traditional protector of plant
varieties in the country.

WHAT NEED TO BE DONE?


The basic questions is: What needs to be done? There are two levels at which action has to be
taken. First is the international level and the second is the domestic level.
At the international level, resistance has to be built against the developed countries so that a
level playing field is available to goods and services exported by India and other developing
countries. The net impact of the protective and discriminatory policies of the US and OECD
countries is to corner all benefits of globalisation in their favour Human Development Report
(2003) opines: " But in the long-run low prices dampen incentives to invest, which leads to
stagnation of an important sector of the economy (viz. agriculture) on which many poor
people depend. That leaves the rich countries farmers as the sole true beneficiaries of
subsidies, with a multitude of losers across the globe."
At the international level, combined pressure of developing countries is bound to make an
impact. With an improvement in relations with China after prime Minister Vajpayee's
successful visit, if these two big countries belonging to the developing world, mobilize
support from Brazil, Pakistan, Bangladesh, Vietnam. Philippines, Africa, etc, it could
represent the voice of two-third of the people of the world. Developed countries will
ultimately have to yield to the basically logical stand of these countries so that the benefits of
globalisation should be equitably shared between the developed and the developing world.
In case, the developed and rich countries do not listen to the pleading of the developing
countries to adhere to the norms and agenda agreed for reduction of tariffs and subsidies, then
there are two alternatives left. Developing countries should decide whether they would like to
continue to be members of the WTO or whether they should also take recourse to retaliatory
measures. History provides ample evidence that when the voice of reason and logic was not
listened to, then the only alternative left was to retaliate. Since agriculture subsidies in India
are much less than the 10 per cent of the GDP level stipulated by the WTO (they are around 3
per cent), there is enough scope to raise them as a retaliatory measure. But such a course is
likely to give a serious jolt to the movement towards globalisation, but if such an eventuality
is forced on developing countries, they have to use the bitter pill to save the livelihood of the
farmers who depend exclusively on agricultural exports. Late prof.P.R. Brahmananda went so
far to assert in one of his lecture: "We have to think of domestic interests as paramount. If we
have to leave WTO for the interests of our farmers. I would not mind it."
India's agricultural imports were of the order of US$ 1.86 billion in 2000-01, but they
increased to $2.29 billion in 2001-02. If the surge continues, then the interests of Indian
farmers would be seriously affected. Economic Survey (2002- 03) makes a forthright
statement:" India has considerable flexibility to counter flooding of the Indian market by
cheap agriculture imports through the imposition of tariffs (bound rats) under WTO. WTO
permissible tariff rate reasonably high: 112 per cent for nuts, 150 per cent for sugar and
coffee, 100 per cent for tea and cotton. 70 to 100 per cent for food grains, 45 to 300 per cent
for edible oils and 40 to 50 per cent for fruits. Countervailing duties can also be imposed to
counter questionable subsidies given to agriculture products by the exporting countries apart
from having the option of acting under safeguard provision to counter the sugar of imports. In
budget 2001-02, import duties were raised for many agri products such as tea, coffee, pulses
and edible oils. In 2002- 03 budget, the import duties were raised for pulses (from 5 to 10 per
cent, tea and coffee (from 70 to 100 per cent), natural rubber, pepper, cardamom and clove

(from 35 to 70 per cent)." So far India has followed the agreement on Agriculture very
honestly, but honest implementation should not be treated as a sign of weakness. In case the
US and OECD countries persist in their nefarious game of protective tariffs, quotas and
subsidies for their farmers. India and other developing countries may be left with no choice
but to retaliate. But this mean the start of a process which may result in the dealing of
globalisation world over.
However, this does not mean that at the domestic level, India has no action to take to improve
its agriculture. In fact, the reform process is guilty of neglecting agriculture. In agricultural
infrastructure, the most important irrigation. The reform process emphasized the role of the
private sector in promoting irrigation. But the experience of the Ninth plan as documented in
the Tenth plan reveals that the private sector invested in irrigation technologies which were
mainly extractive such as tube wells. But these investment are not sustainable unless
appropriate investment are made in rain-water harvesting and recharging of ground water
resources. However, data as provided by CSO reveals that in gross capital formation in
agriculture, the share of the public sector declined from 33 per cent in 1994-95 to merely 23.5
per cent in 2000-01. In absolute terms, public sector investment declined from Rs. 4.947
crores in 1994-95 (measured at 1993-94 prices) to just Rs. 3,919 crores in 2000-01. Although
private sector investment improved, but it did not fulfil the function of rain water harvesting
and recharging of ground water resources.
In boosting agri exports, some success has been achieved, but agri-exports which reached $
6.004 million in 2000-01, declined to $ 5.871 million in 2001-02. Economic Survey (200003) indicating the main reasons for Indian export continuing to be in the range of 13-14 per
cent of total export states : "Main reason is poor export infrastructure, low level of agriprocessing, grading, quality control and poor or lack of quality branding and Packing.
Infrastructure specific to agri exports, such as storage, and fast track inland and mechanical
port handling facilities is also a limiting factor."
Another important area which needs attention is to make agricultural credit available at lower
rates of interest. There is no doubt that the total flow of institutional credit to agriculture
which was of the order of Rs. 31,956 crores in 1997-98 has more than doubled to Rs.82,000
crores in 2002-03. This is really herartening, but the rate of interest charged on loans ranges
between 14-18 per cent. This implies that the benefit of declining rates of interest has not
been passed on agricultural borrows. On account of the efforts of former agriculture Minister
Mr. Rajnath Singh, the Finance Ministry agreed to reduce interest on farm loans up to Rs.
50,000 to 9 per cent. This step, though in the right direction, is still inadequate, moreso, in
veiw of the fact interest on housing loans has been reduced to 8.5 to 10 per cent, its
imperative on the part of the Government to bring down interest rates on all agriculture loans
short-term, medium-term and long-term. Accepting the need to reduce interest rate on
agricultural loans. Former Prime Minister Atal Behari Vajpayee on 27th July 2003 announced
: "Crop loans, below Rs. 50,000 will be charged nine per cent interest and banks are being
asked to charge the rate of interest below the PLRs for agricultural loans up to Rs. two lacs."
It may be noted that the Current PLR for most banks is between 11 to 12 per cent.
The upshot of the entire analysis is that whereas the developed countries want to penetrate the
markets of developing countries in agriculture, they continue to use tariffs, quotas and
subsidies to help their farmers. There has been no perceptible change in the policies of the
United States and OECD countries. To share the benefits of globalisation in an equitable

manner, it is imperative that developed countries bring about reductions in tariffs and
subsidies and eliminate quotas so to permit a level playing field for developing countries.
Moreover, as estimated by the European Commission, half of all subsidies go to just 5% of
large farms.
If under the banner of globalisation. WTO intends to build a more equitable and just world
order, then at forthcoming ministerial meet at Cancun in September 2003, it has to apply
pressure on developed countries so that the principle of comparative cost becomes the basis
of trade in agriculture, rather than the principle of access to subsidies.
POLICY SUGGESTIONS:
It was expected that agriculture would the main beneficiary of macroeconomic policy
changes brought about by economic reforms in 1991 and of multilateral trade liberalisation
after setting up of WTO 1995. The above the discussion has brought out that these reforms
failed to bring about the expected benefits to the Indian peasantry. The main reason for this is
the deceleration of agriculture growth during the 1990s which adverse consequences for the
farmers directly as well as through decline in employment. Therefore, the first most important
task would be to revive the growth process in Indian agriculture. The main reason for
deceleration of agricultural growth was slow down of public investment in agriculture.
Experience of the 1980's and 1990's should teach the Indian policy makers that public
investment in rural infrastructure continues to be of paramount importance. It can be
complimented but not fully replaced by private investment. Hence there is a need to
accelerate public Investment In agriculture. Furthermore, the existence of very precarious
fiscal situation is primarily responsible for a decline in public infrastructure investment in
general and in agriculture in particular. This situation will have to be reversed through hard
policy decisions for regenerating agriculture growth.
Second, a related serious development in agriculture is the deceleration of yield growth rates
of many crops. This calls for huge Investment in research and technology, which has been
neglected for quite some time. The need is to put in place a vibrant indigenous research
system. Agriculture research has now assumed much greater importance in view of the fact
that international research is rapidly getting privatised and the role of the CGIAR Institution
like CYMMIT and IRRI is becoming far less important. A much larger proportion of research
result Including seeds and other scientific inputs are likely to be supplied by the
multinationals at exorbitant prices. Complete dependence on multinational for supply of
seeds including genetically modified seeds would become extremely costly and beyond the
reach of small farmers. Since this would entail huge cost to the economy. It is important to
harness resources for research within the country and to undertake large investment in
indigenous R&D.
Third, a near collapse of employment growth in agriculture during 1993-94 to 1999-2000 is a
direct consequence of slowdown in agriculture and increasing capitalisation this sector.
Further, the employment growth in non-farm sector was also not high enough to absorb all
surplus labour force. Leading therefore, to a slowdown in diversification. There Imbalance
can only be corrected through large acceleration in both the overall and agricultural growth.
Fourth, it is to be recognised that India being founder member of the WTO is bound to
undertake further economic reforms in agriculture. These would include removal of barriers
to both external and internal trade in agriculture commodities through tariff reduction,

abolition of internal restrictions to trade, opening future markets, and protecting patent right
etc. Some of the WTO commitments would have to be met over a given time period. India
should not only try to improve its bargaining position in the next round of negotiations it
should also try to improve its competitiveness in many agriculture commodities through
increase in their productivity . India has also to take steps to reverse those policies like
continues hike in administered prices that make its exports non-competitive.
In this context it is important that the Commission on Agriculture Costs and prices should
also keep in mind the border prices which are relevant for the purpose of export
competitiveness. Attempt should be made to turn the income rather than barter terms of trade
in favour of agriculture. Once again, this can be done not through hike in administered prices
only through increase in productivity.
Fifth, there is also need to accelerate growth of agricultural exports from India. As reforms in
agricultural sector are likely to open up export possibilities. Given trade liberalisation by the
developed countries. India has a huge potential for increasing its agricultural exports. But this
would need large investment in processing power, communications, marketing transport and
other infrastructure.
Sixth, there is a need to undertake some important institutional reforms consolidation of
holdings and gradually freeing the lease market. But this reform should be preceded by
careful record of existing occupancy tenants in order protect their interests of. On the other
hand the suggestions by industrial interests, kulak lobby and some liberalisers for their
abolition notwithstanding, nothing should be done to dilute the legislation on ceilings on land
holdings. This is because a country where small and marginal farmers constitute 70 per cent
of the landholders. It would be disastrous to endanger their only source of livelihood.
Finally, there is a need to take some institutional measures that help the small and marginal
farmers in sharing the potential gains of growth and increase in export. A proactive policy
should be designed to involve the small and marginal farmers and the landless labour in
deriving benefits of increased agricultural exports through innovative institution like
integrated cooperatives like the mother dairy and other service cooperative contract farming,
etc. Special efforts should also be made to develop new technologies for the farming sector
and reach these to the small farmers for enabling them to diversify their production towards
high value commercial and export commodities. The efforts on the production front should be
supplemented by creation of institution like trading houses, market intelligence service and
creation of network of Information on national and international prices. There is also a need
to create necessary infrastructure in processing marketing and granting of produce.
Investment in information infrastructure through market committees would percolate the
information to the local levels.
The clear lesson is that while liberalising the economy policy makers should remember that it
is only agricultural growth. Which determines the fortunes of a vast majority of farmers in
India and also makes a dent in their poverty. The post liberalisation polices that have
neglected Public investment in rural infrastructure are primarily responsible for the steep
deceleration in agricultural growth. The present policies of fostering elite centred growth
without according a very high priority to agriculture would lead to the creation of a dual
society. And a dual society can have serious repercussions on the future of policy in a
democratic country like India. It has also to be understood that a market driven liberalisation

process in agriculture is invariably strongly biased towards rich farmers and prosperous
regions. The local level activists and the peasant movement would have to intervene
effectively and play a crucial role in assuring that the interests of small farmers and of
disadvantaged regions are protected and they are also enabled to gain from trade
liberalisation.
It has to be underlined that globalisation offers both opportunities and challenges. The
opportunities consist of participating in the benefits of world trade and growth. The
challenges lie in ensuring that a majority of working people in rural and urban India are also
enabled to partake these benefits and that these are not cornered by a small of elite
population.

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1.

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3.

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4.

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Economics Times

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