page1 INDEX 1. WORLD TRADE ORGANISATION ? GATT ? Principles of WTO ? Objectives & Function2. INDIA & WTO3.

INDIAN ECONOMY4. INDIAN AGRICULTURE ? Agricultural Trade ? Agricultural Support Policies ? Importance Of Indian Agriculture5. AGREEMENT ON AGRICULTURE ? The Three Boxes: Green, Amber and Blue ? Trend In Pattern Of Consumption ? Implication Of Agreement : Short Term and Long Term6. WTO & INDIAN AGRICULTURE ? India s Commitment ? India s Agricultural Trade Under WTO Regime7. A STUDY & ITS FINDINGS8. SUGGESTIONS 9. BIBLIOGRPHY 2 ACKNOWLEGEMENT We would like to acknowledge and express our sincerest gratitude for the efforts and timely guidance of our professor Mrs. Neelam Shetty of ManagerialEconomics for providing us the opportunity to study the impact of W TOagreements on the Indian economy especially focused on the agricultural sector .We would also like to thanks and express our gratitude towards professor Mr.Agnelo Menezes of economics from the Bachelors of Arts faculty and hisstudent from XRCVC Master Prashant Lindayat. Each and every team member gave in his best to make sure that this report hasall the necessary inputs and is completed on time. We definitely had aknowledgeful and enriching experience. 3 WORLD TRADE ORGANISATION The WTO provides a forum for negotiating agreements aimed at reducingobstacles t o international trade and ensuring a level playing field for all, thuscontributi ng to economic growth and development. The WTO also provides alegal and institut ional framework for the implementation and monitoring of these agreements, as we ll as for settling disputes arising from their interpretationand application. Th e current body of trade agreements comprising the WTOconsists of 16 different mu ltilateral agreements (to which all WTO members areparties) and two different pl urilateral agreements (to which only some WTOmembers are parties).World Trade Or ganization as a Multi-lateral organization facilitates the freeflow of goods and services across the world and encourages fair trade amongnations. The result is that the global income increases due to increased trade andthere is supposed to be overall enhancement in the prosperity levels of themember nations. To put it

in brief WTO encourages a multi-lateral tradingsystem within its member countri es.Over the past 60 years, the WTO, which was established in 1995, and itspredec essor organization the GATT have helped to create a strong andprosperous international trading system, thereby contributing to unprecedentedglobal econom ic growth. The WTO currently has 153 members, of which117 are developing countri es or separate customs territories. WTO activities aresupported by a Secretariat of some 700 staff, led by the WTO Director-General.The Secretariat is located i n Geneva, Switzerland, and has an annual budget of approximately CHF 200 million ($180 million, 130 million). The three officiallanguages of the WTO are English, French and Spanish.Decisions in the WTO are generally taken by consensu s of the entiremembership. The highest institutional body is theMinisterial C onference, whichmeets roughly every two years. AGeneral Councilconducts the orga nization'sbusiness in the intervals between Ministerial Conferences. Both of the se bodiescomprise all members. Basic DetailsLocation: 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 2003 Secretariat staff : 560 Head : Director-General, Supachai Panitchpakdi 4 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 Tradeorganization), whi ch came into being on 1 st January 2005. As an organization ithas vast powers and functions than what its a ncestor GATT (General Agreementon Tariffs and Trade) had, the objectives and goa ls of both being broadly thesame. GATT came into existence in the year 1948, aft er long negotiations toform an organization called ITO immediately after the Sec ond World War didnot materialize. The ITO was supposed to be the third internati onal organizationin the "Golden Triangle" that was supposed to come into existen ce, the first twobeing IMF and World Bank.To begin with 23 countries became fou nder GATT members (officially,"contracting parties"). GATT remained the on ly multilateral instrumentgoverning international trade from 1948 until the WT O was established in 1995.There were several controversies on whether the GATT h ad actually contributedto enhancement of world trade and did it serve its purpos e of a multi-lateraltrading organization. The liberalization of international tr ade during GATT erain its true sense was always debatable. However, it is very c lear that over theperiod of 47 years of its existence, GATT was successful in in itiating a processof tariff cutting in several groups of manufactured goods. Mor eover thesignatories in the GATT increased from 23 to more than 100 in a short s pan,ratifying the fact that being in the system was proved and considered morebe neficial than not being in it.On the other front, the internal and domest ic economic problems andfluctuations made some economies to go back to increa se the levels of protection and increase trade barriers to enable faster domesti c growth andrecovery. The problem was not just a deteriorating trade policy envi ronment, butsome other serious issues. GATT negotiations did not include service s andagricultural 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 theinsufficiency of the GATT principles to cover the expanding aspects of ever evolving global trade. As a result, these loopholes were taken as advantage byma ny trading countries, resulting in a lopsided development of world trade.These a nd other factors convinced GATT members that a new effort to reinforceand extend the multilateral system should be attempted. That effort resulted inthe Uruguay Round, the Marrakesh Declaration, and the creation of the WTO 5 PRINCIPLES OF WTO The agreements of WTO cover everything from trade in goods, services andagricult ural products, these agreements are quite complex to understand,however all these agreements are based on some simple principles; Non-Discrimination This is a very simple principle which advocates that every member country must treat all its trading partners equally without anydiscrimination, meanin g that if it offers any special concession to onetrading partner, such concessio ns need to be extended to its other tradingpartners as well in entirety. This pr inciple effectively gets translated into"MFN" or the Most Favored Nation. Howeve r, this principle is relaxed incertain exceptional cases, such as if country X h as entered into a regionaltrade agreement with another country Y, then the conce ssions extended toY country need not be extended to other non-members of the agr eement.Besides these developing countries facing Balance of Payment problemsalso get concessions, and if a country can prove unfair trade it can retainits power to discriminate.The Non-discrimination principle is also translated as a princi ple thatwould ensure "National Treatment" to all the goods, services or theintel lectual property that enters any other countries national borders. Reciprocity This Principle reflects that any concession extended by one country toanother ne ed to be reciprocated with an equal concession such that thereis not a big diffe rence in the countries Payments situation. This wasfurther relaxed for develo ping countries facing severe Balance of Payments crisis. This principle alo ng with the first principle wouldactually result in more and more liberalization of the world trade as anycountry relaxing its trade barriers need to extend it to all other membersand this would be reciprocated. Thus progressive liberalizat ion of theworld trade was aimed at by WTO. Transparency The multilateral trading system is an attempt by governments to make thebusiness environment stable and predictable. Thus this principle ensured that there is lots of transparency in the domestic trade policies of member coun tries. Moreover, the member countries are required to sequentiallyphase out the non-tariff barriers and progressively reduce the tariff barriers through negotia tions.Thus, these principles were primarily to serve the purpose of freer and fa ir tradeand also to encourage competitive environment in the global market. This wasfurther 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 flowsm oothly, freely, fairly and predictably; to meet its objective WTO performs thefo llowing 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 andtraining programs Technical assistance and training for developing countries. Co-operation with other International OrganizationThe goals behind these functio ns are set out in the preamble to the MarrakechAgreement. 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 theworld's resources in ac cordance with the objective of sustainable development,and while seeking to prot ect and preserve the environment. The preamble alsospecifically mentions the nee d to assist developing countries, especially the leastdeveloped countries, secur e a growing share of international trade. INDIA AND WTO India is one of the founding members of WTO along with 134 other countries.Vario us trade disputes of India with other nations have been settled throughWTO. India has also played an important part in the effective formulation of major tr ade policies. By being a member of WTO several countries, are now tradingwith In dia, thus giving a boost to production, employment, standard of livingand an opp ortunity to maximize the use of the world resources. It is expectedthat reductio n in export subsidy and domestic support to the agricultural sector by the devel oped countries may lead to a decrease in production in thosecountries and, there fore, will give scope for expansion of exports from thedeveloping countries.Indi a, with its cheap labour, diverse agro climatic conditions and largeag ricultural sector can definitely gain through expansion of international trade i nagricultural products. However, the concerns relating to quality of products fo r seeking markets in the advanced countries needs to be addressed on an urgentba sis.(Source : Ministry of Agriculture) INDIAN ECONOMY The economy of India is the fourth largest in the world, and is the tenth larges tin the world Growth in the Indian economy has steadily increased since 1979,ave raging 5.7% per year in the 23-year growth record 6 Indian economy has posted an excellent average GDP growth of 6.8% since1994. Ind ia has emerged the global leader in software and business processoutsourcing ser vices, raking in revenues of US$12.5 billion in the year thatended March 2004. A griculture has fall to a drop because of a bad monsoon in 2005. There is aparamo unt need to bring more area under irrigation.Export revenues from the sec tor are expected to grow from $8 billion in 2003 to$46 billion in 2007. India s fo reign exchange reserves are over US$ 102 billionand exceed the foreign reserves of USA, France, Russia and Germany. This hasstrengthened the Rupee and boost ed investor confidence greatly.A strong BOP position in recent years has resu lted in a steady accumulation of foreign exchange reserves. The level of foreign exchange reserves crossed theUS $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 (M 3) (up toDecember 10, 2004) increased by 7.4 per cent (exclusive of conversion o f non-banking entity into banking entity, 7.3 per cent)Economicsexperts and vari ous studies conducted across the globe envisage India and Chinato rule the world in the 21st century. SECTORS OF INDIAN ECONOMY there are three major sectors in Indian Economy 7 Agriculture Agriculture and allied sectors like forestry, logging and fishing accounts for 2 5% of the GDP. It employs almost 58% of the total work force. It is the largeste conomic sector and plays a significant role in the overall socio-economicdevelop ment of India. Due to steady improvement in irrigation, technology,modern agricu ltural practices the yield per unit area of all crops has increasedtremendously. 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 largestsector here holds the textile industry. Automobile sector has also demonstratedthe inh erent strength of Indian labor and capital. The three main sub sectors of indust ry viz Mining & quarrying, manufacturing, and electricity, gas & water supply r ecorded growths of 5%, 8.8% and 7.1% respectively. Services The service sector is the fastest growing sector. It has the largest share in th eGDP accounting for about 48% in 2000. Business services, communicationservices, financial services, community services, hotels and restaurants andtrade service s are among the fastest growing sectors. INDIAN AGRICULTURE Indian agriculture was backward in every respect on the eve of Independence in19 47. It was characterised by feudal land relations, primitive technology, and 8 the resultant low productivity per hectare.The First Five year Plan (1951-56) ac corded the highest priority to theagricultural sector to tide over the difficult food problem created by the partitionof the country. Since then, agriculture ha s occupied an important place in everysuccessive plan. The nation has invested h uge resources for the development of agriculture under various plans. Two m ajor components of agriculturaldevelopment strategy have been: subsidies on inputs and Minimum support price for output.Agricultural sector occupies a key position in the Indian economy. Itprovides employment to about 65 per cent of the working po pulation of India.Around one-quarter of India's national income originates from the agriculturalsector.Agricultural products like cereals (mainly rice), tea, co ffee cashew, spices,tobacco and leather are important items of India's exports a nd hence foreignexchange earnings. Agriculture is also the source of raw materia l for agro-basedindustries including textiles, cigarettes, jute, sugar, paper, p rocessed foodstuffs and vanaspati. Moreover, agricultural sector provides market for capital goods(tractors, pump sets and other agricultural machinery), inputs (fertilisers,insecticides), an d light consumer goods.Development of the agricultural sector depends, to a larg e extent, on suchcore industries as power, petroleum, fertilizers and machine to ols. Thus, there isa degree of inter-dependence between agriculture and industry

. Needs of India India s basic objectives in the ongoing negotiations are:(a) To protect its food a nd livelihood security concerns and to protect alldomestic policy measures taken for poverty improvement, rural developmentand rural employment.(b) To create op portunities for expansion of agricultural exports by securingmeaningful market a ccess 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 9 occupying 2.4 per cent of total world area. It has a land frontier of 15,200kilo meters and its sea coast runs to the length of 6,100 kilometers . Cropping Pattern Cropping pattern refers to the distribution of cultivated land among differentcr ops grown in a country. Cropping pattern reveals the nature of agriculturalopera tions, e.g. the importance of food crops vis--vis cash crops.Cropping pattern is influenced by a host of factors which can be broadlyclassified into two categori es: (a) physical factors and (b) economic factors.Among the physical factors, th e important ones are soil conditions, extent of rainfall and type of climate. Th e economic factors include relative prices of agricultural commodities, size of the farms, availability of inputs, demandconditions, system of land holding and government policy regarding exports andimports, taxes and subsidies.There are tw o main agricultural seasons in India: (a) kharifunder whichcrops are planted at the onset of the Southwest monsoon in June-July andhar vested in September-October, (b) rabi under which crops are planted usuallybetween October and December and harvested between March and MayIndia is a large country with diverse climatic, soil and te rrain conditions. Awide variety of crops are grown in different parts of the cou ntry. Small-sized Agricultural Holdings Small-sized holdings are a disturbing feature of the Indian agriculture. Theaver age size of farms has become smaller over the years and the trendcontinues. One important reason for this trend is the fast growing populationwhich has advers ely affected the per capita availability of land after Independence.The pressure of population along with some social and economic factors hasdecreased the size of agricultural holdings in India. Low Productivity Indian agriculture was backward and stagnant at the time of Independence.Ever si nce the launching of the First Five Year Plan (1951-56), agriculturalsector has received the prime attention of the Government in the overall strategyeconom ic development. As a result, farm productivity has increased over yearsand the c ountry has achieved high degree of self-sufficiency in terms of' foodgrains and raw material for agro-based industries.Although per hectare yield of major crops has increased over the last four decades yet it is far below the international levels. System of Marketing of Agricultural Produce in India 10 Marketing is the last link in the chain of production process. An efficientmarke ting system which ensures reasonable return to the producers is essentialto indu ce them to produce more.During the pre-Independence period, Indian agriculture w as backward andstagnant and there was hardly any marketable surplus. Therefore, the system of marketing, though defective, did not attract much attention. Howev

er, in thepost independence period and particularly after the green revolution, agriculturalinstituting has become a prime concern for the planners. Due to incr ease inagricultural productivity, the marketable surplus has increased; necessit atingreforms in the existing system. The objectives of these reforms are to ensu re: 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 ind ustries Rural Agricultural Credit in IndiaCredit Needs of the Indian Farmers Need for agricultural credit arises because modern farm technology is costlyand the personal resources of the farmers are inadequate. Provision of agr icultural credit, as an input, is essential for widespread use of improvedagricu ltural methods.Credit requirements of the farmers may be classified (a) on the b asis of propose, and (b) on the basis of time. They need credit for productive a s well asfor unproductive purposes. Productive purposes include all such activit ies whichhelp in the improvement of agricultural productivity such as purchase o f inputsand permanent improvements in land. Unproductive credit needs includece lebration of marriages and other social and religious functions and litigation.C lassification based on time period has three categories. Farmers need creditfor short period (up to 15 months) for the purchase of seeds, fertilisers, fodder fo r livestock etc. They need credit for medium term (15 months to 5 years) for the purchase of agricultural tools and implements, cattle, and digging andrepairing of wells. They also require long-term loans (more than 5 years) for thepurchase 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 i n the urban sector were indebted. The average value of debt per indebtedhousehol d 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 ruralhouseholds wa s noticed in Tamil Nadu (28.7), and Kerala (28.5). Thepercentage of rur al households reporting indebtedness was lowest for Assam 11 (4.8). Kerala (29.7) topped the list in the urban sector whereas Assam (4.3)reco rded the lowest figure. Widespread rural indebtedness is the result of lack of c redit 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 coopera tive societies, commercial banks andother government agencies. Non-institutiona l sources comprise moneylenders,landlords, relatives etc. A. Co-operative Societies : Co-operative societies form an integral part of the rural credit system in Ind ia. They are the main source of institutional creditto the farmers. These so cieties are chiefly responsible for breaking themonopoly of moneylenders i n providing credit to the agriculturists. There arearound 1 lakh such societies in the country at present.The rising over dues have reduced the borrowing and le nding activities of these societies. Moreover, these societies have paid inadequ ate attention to theneeds of landless workers and rural artisans. Influential pe ople in the villageshave been the main beneficiaries of co-operative Credit. The RBI has repeatedlyexpressed concern in this regard because non-repayment of loa ns by the existingowners can adversely affect recycling of funds and the credit chances of theprospective borrowers. B. Moneylenders: There are two types of moneylenders in rural areas:(a) Agriculturist moneylende rs who carry on the business of money lendingalong with farming, and (b) profess ional moneylenders whose only occupationis money lending. Although the relative importance of moneylenders hasdeclined over the years, they are still an importa nt source of credit for the ruralle, particularly the small farmers and the arti

sans.Moneylenders are popular because, unlike government agencies, they givecred it for every purpose. They are easily approachable by the credit seekers andther e are not many formalities in transacting a loan. However, the malpracticesadopt ed by the moneylenders to exploit the needy farmers cannot beoverlooke d. D. Kisan Credit Cards : The introduction of Kisan Credit Cards (KCCs) wasa significant innovation in t he rural credit delivery mechanism. However, theoutreach of the KCCs to cover al l eligible farmers under the scheme has beenhampered by the lack of updated land records, small landholdings an illiteracyof borrowers. India s Agricultural Trade: Some Recent Trends Exports 12 India has been both an importer and exporter of agricultural commodities for ave ry long-time. An examination of trends in exports of various commoditiesduring r ecent years suggest that many commodities like rice, meat products,processed foo ds, fish, fruits and vegetables registered very high growth ratesduring the nine ties. On the other hand some traditional exports like tea, cottonwere not able t o sustain their growth rates after the liberalisation. Marineproducts were the l argest export earner while oil meals were also a major itemin early 1990s. Recen tly oil meal exports have suffered and cotton exports havecollapsed. Imports India s agricultural imports have displayed extreme fluctuations. In recent years, imports of only two items, namely, pulses and edible oils have recordedconsisten tly 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 tonneswere importe d, surged to over 2 million tonnes in 2001-02 and has been close tothat level si nce then, essentially reflecting shortage of domestic production. Asin the case of agricultural export items, concerted efforts are required to raisethe product ivity and production of pulses in the domestic sector.In fact the gaps between a gricultural exports and imports have been narrowingdown in recent years. Althoug h India abolished its QR s in 2001, this has notresulted in any surge of agricultu ral imports. There is an increase in growth butthis is mainly because of large i mports of edible oils. Recently there has alsobeen a sharp increase in imports o f cotton, raw wool and rubber.India has a large potential to increase its agricu ltural exports in a liberalizedworld provided it can diversify a significant par t of its agriculture in to highvalue crops and in agro-processing. This would de pend first on undertakinglarge infrastructure investment in agricultural and agr o processing as also inrural infrastructure and research and development. India has not only to createexport surplus but also to become competitive. The potenti al for exports wouldalso depend on freeing of agricultural markets by the develo ped 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. Theseinstrum ents can broadly be clubbed in to three categories: domestic policies 13 import policies and export policies. Domestic policies comprise a wide range of policy instruments like inputsubsidies on fertilizers , power, irrigation water, public investment indevelopment of water res ources surface and groundwater, governmentintervention in markets, direct pay ment 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 , generalservices (such as government transfers to

agricultural research and development,extension services, training and agricult ural infrastructure etc) Import policies refer essentially to border protection through trade barriers suchas quantitativ e restrictions, quotas and tariffs on imports which in the processcreate a wedge between domestic and world market prices. Export policies include those that either promotes exports (through instrumentslike subsidies an d marketing arrangements that make exportable of a countrymore competitive) or t hose policies that constrain exports (often throughcanalization and restriction of exports and export taxes etc). Usually however import policies etc are discus sed in the context of Input Subsidies The major components of input subsidy are: power, irrigation water andfertilizer s .Subsidy -on both irrigation and power is defined as the differencebetween the cost of providing the service and the charge levied for the servicefor the tota l quantum of that particular input used. In case of power therefore itincludes t hat difference between the unit cost of power supply to all sectorscombined and the average tariff rate charged from agricultural users for eachunit of power an d multiplied by the quantity of power supposedly supplied toagriculture. Irrigat ion subsidy is defined as the difference between the cost of supplying water to farmers for irrigation and charges levied on water .Viewed interms of pure domes tic economy, the input subsidies have often been accused of causing most harmful effect in terms of reduced public investment in agricultureon account of the er osion of investible resources, and wasteful use of scarceresources like water an d power. Further, apart from causing unsustainable fiscaldeficits , these subsid ies by encouraging the intensive use of inputs in limitedpockets have led to low ering of productivity of inputs, reducing employmentelasticity of output thro ugh the substitution of capital for labour andenvironmental degradation s uch as water logging and salinity .It is therefore 14 imperative to reduce these subsidies for stepping up public investment inagricul tural research and extension, canal irrigation and rural electrification. Thered uction in subsidies would also have a favourable impact on the efficiency of inp ut use, equity and environment. While subsidy reduction is one way to findresour ces for increasing public investment in agriculture, current and capital thatlea d to distortions and deleterious effects on natural resources and croppingpatter n. In fact, there is scope for significant reduction in the cost of subsidythrou gh better designing of the programmes and delivery mechanism. Further merely rol ling back subsidies and diverting these to agricultural investmentcannot solve a ll the problems of agriculture (Government of India: 2005). 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 mediumproducers, qu ality building and assurance measures, credit guarantee andinsurance to exporter s at better terms etc. The export subsidy is being given inthe form of exemption of export profit from income tax and subsidies on cost of freight on export shi pments of certain products like fruits, vegetables, andfloriculture products. IMPORTANCE OF AGRICULTURE IN INDIAN ECONOMY The direct contribution of the agriculture sector to national economy isreflecte d by its share in total GDP, its foreign exchange earnings, and its role insuppl ying savings and labor to other sectors. Agriculture and allied sectors likefore stry and fishing accounted for 18.5 percent of total Indian Gross Domestic 15 Product (GDP) in 2005-06 (at 1999-2000 constant prices) and employed about58 per cent of the country's workforce (CSO, 2007). It accounted for 10.95percent of

India s exports in 2005-06 and about 46 percent of India'sgeographical ar ea is used for agricultural activity. OVERVIEW Yields per unit area of all crops have grown since 1950 due to application of mo dern agricultural practices and provision of agricultural credit and subsidiessi nce Green revolution in India. However, international comparisons reveal thatthe average yield in India is generally 30% to 50% of the highest average yieldin t he world. PROBLEMS The low productivity in India is a result of the following factors: Overregulatio n of agriculture has increased costs, price risks and uncertainty. Government i ntervenes in labour, land, and credit markets. India hasinadequate infra structure and services Illiteracy, general socio-economic backwardness, slow progress inimplementing land reforms. Inadequate or inefficient finance and ma rketing services for farm produce.The average size of land holdings is very smal l due to land ceiling acts and insome cases, family disputes. Such small holdi ngs are often over- manned, resulting in disguisedunemployment and low pr oductivity of labour. AGREEMENT ON AGRICULTURE 16 Introduction After over 7 years of negotiations the Uruguay Round multilateral tradenegotiati ons were concluded on December 1993 and were formally ratified inApril 1994 at M arrakesh, Morocco. The WTO Agreement on Agriculture wasone of the main agreemen ts which were negotiated during the Uruguay Round.The WTO Agreement on Agricultu re recognizes free and market orientedtrading 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 tariff s.Tariff bindings are to be reduced under this agreement. That is to say, non-ta riff barriers such as quantitative restrictions and export and import licensing etc. areto be replaced by tariffs to provide the same level of protection. Least developedcountries are exempted from tariff reductions, whereas develope d anddeveloping countries are to reduce tariffs over a period of time. India ha salready reserved the right to impose high levels of import duties of 100%, 150% and 300% on primary products, processed products and edible oils respectively.Th e Quantitative Restrictions can easily be replaced with high import tariffs inca se there is need to restrict import of these commodities for ensuring welfare of our farmers. Therefore, ability to restrict import of any commodity is notconst rained in any manner by the provisions of the Agreement 17 MARKET ACCESS Where tariff bindings are too high, current market access has to be maintainedas the amount of exports to other countries at preferential tariff rates. However, market access provisions do not apply when the commodity in question is atraditi onal staple in the diet of a developing country. Tariffication means that all non -tariff barriers such as... 1.Quotas. 2. Variablelevies. 3. Minimum import price s. 4. Discretionary licensing. 5. State tradingmeasures.ii) The second element r elates 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 ma intain current levels (1986-88) of access for eachindividual product. Where the current level of import is negligible, the minimumaccess should not be less than 3% of the domestic consumption, during the baseperiod and tariff quotas are to be established when imports constitute less than3% of domestic consumption. This

minimum level is to rise to 5%by 2004 inthe case of developing countries. Howev er, special Safeguards Provisions allowfor the application of additional duties when shipments are made at prices belowcertain reference levels or when there is a sudden import surge. The marketaccess 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 aregiven the colours of traffic lights: gree n (permitted), amber (slow down), red(forbidden). In agriculture, things are , as usual, more complicated. TheAgriculture Agreement has no red box, alth ough domestic support exceeding thereduction commitment levels in the amber box is prohibited; and there is a bluebox for subsidies that are tied to programmes that limit production. There arealso exemptions for developing countries 18 THE THREE BOXES:GREEN,AMBERANDBLUEThe Green Box In order to qualify for the green box , a subsidy mustnot bend trade, or at most ca use minimal distortion.These subsidies have to be government-funded (notby charg ing consumers higher prices) and must notinvolve price support. They tend to be programmesthat are not directed at particular products, andinclude direct income supports for farmers that are not related tocurrent production levels or prices . Green box subsidies are thereforeallowed without limits, provided they comply wi th relevant criteria.They also include environmental protection and regional dev elopmentprogrammes. 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 inthe green box because they believe that some of these, in certain circumstances,cou ld have an influence on production or prices. Some others have said that thegree n box should not be changed because it is already satisfactory. Some say thegree n box should be expanded to cover additional types of subsidies. The Amber B ox All domestic support measures considered to distort productionand trade (with so me exceptions) fall into the amber box, whichis defined in Article 6 of the Agri culture Agreement as alldomestic supports except those in the blue and green box es.These include measures to support prices, or subsidies directlyrelated to pro duction quantities.These supports are subject to limits: de minimis minimal suppor ts are allowed(5% of agricultural production for developed countries, 10% for de velopingcountries); the 30 WTO members that had larger subsidies than the de min imislevels at the beginning of the post-Uruguay Round reform period are committe dto reduce these subsidies. 19 The reduction commitments are expressed in terms of a Total AggregateMeasurement of Support (Total AMS) which includes all supports for specifiedproducts together with supports that are not for specific products, in one singlefigure. In the c urrent negotiations, various proposals deal with how much further these subsidie s should be reduced, and whether limits should be set for specificproducts rathe r than continuing with the single overall aggregate limits. In theAgriculture Agre ement, AMS is defined in Article 1 and Annexes 3 and 4. The Blue B ox The blue box is an exemption from the general rule that allsubsidies linked to p roduction must be reduced or keptwithin defined minimal levels. It covers paymen ts directlylinked to acreage or animal numbers, but under schemeswhich also limi

t production by imposing production quotasor requiring farmers to set aside part of their land. Countriesusing these subsidies (and there are only a handful) sa y theydistort trade less than alternative amber box subsidies. Currently, the on lymembers notifying the WTO that they are using or have used the blue box are:th e EU, Iceland, Norway, Japan, the Slovak Republic and SloveniaAt the moment, the blue box is a permanent provision of the agreement. Somecountries want it scrap ped because the payments are only partly decoupled fromproduction, or they are p roposing commitments to reduce the use of thesesubsidies. Others say the blue bo x is an important tool for supporting andreforming agriculture, and for achievin g certain non-trade objectives, andargue that it should not be restricted as it di storts trade less than other types of support. The EU says it is ready to negoti ate additional reductions in amber boxsupport so long as the concepts of the blu e and green boxes are maintained.The Agreement also imposes constraints on the l evel of domestic supportprovided to the agricultural sector. In India s case, it m ay have in future someimplications on minimum support prices given to farmers an d on the subsidiesgiven on agricultural inputs. The Agreement allows us to prov ide domesticsupport to the extent of 10% of the total value of agricultural prod uce. India isnot providing any export subsidy on agricultural products. The Agr eementallows unlimited support to activities such as (i) research, pest diseases control,training, extension, and advisory services; (ii) public stock holding f or foodsecurity purposes; (iii) domestic food aid; and (iv) income insurance and foodneeds, relief from natural disasters and payments under the environmentalas sistance programmes. Moreover, investment subsidies given for developmentof agri cultural infrastructure or any kind of support given to low income and 20 resource poor farmers are exempt from any commitments. Most of our major rural and agricultural development programmes are covered under theseprovisions . Therefore, the Agreement does not constrain our policies of investmen ts in these areas.Domestic support measures that have, at most, a minimum impact on trade("green box" policies) are excluded from reduction commitments. Such po liciesinclude general government services, for example, in the areas of research ,disease control, and infrastructure and food security. It also includes directp ayments to producers, for example, certain forms of "decoupled" (fromproduction) income support, structural adjustment assistance, direct paymentsunder environm ental programmes and under regional assistance programmes.Provisions of the Agre ement regarding domestic support have two mainobjectives first to identify acce ptable measures that support farmers andsecond, to deny unacceptable, trade dist orting support to the farmers. Theseprovisions are aimed largely at the develope d countries where the levels of domestic agricultural support have risen to extr emely high levels in recentdecades. De minimal support is the only form of supp ort available to farmers inmost developing countries.All domestic support is qua ntified through the mechanism of total AggregateMeasurement of Support (AMS). AM S is a means of quantifying the aggregatevalue of domestic support or subsidy gi ven to each category of agriculturalproduct. Each WTO member country has made ca lculations to determine itsAMS wherever applicable. For developing countries, th is percentage is 13%.AMS consists of two parts?product-specific subsidies and no n-product specificsubsidies. Product-specific subsidy refers to the total level of support providedfor each individual agricultural commodity, essentially signi fied by procurementprice in India. Non-product specific subsidy , refers to the total level of supportfor the agricultural sector as a whole, i.e., subsidies o n inputs such as fertilizers ,electricity, irrigation, seeds, credit etc .There are three categories of supportmeasures that are not subject to reduction under the Agreement, and supportwithin specified de-minimis level is allowed. These th ree categories of exemptsupport measures are:1. Measures which have a minimum im pact on trade and which meet the basicand policy specific criteria set out in th e Agreement ( the Green Boxmeasures in the terminology of WTO). These measur es include Governmentassistance on general services like (i) research, pest and disease control,training, and advisory services; (ii) public stock holding for f

ood securitypurposes; (iii) domestic food aid (iv) direct payment to pr oducers likegovernmental financial participation in income insurance and safety nets, relief 21 from natural disasters, and payments under environmental assistanceprogra mmes .2. Developing countries like India which meet the criteria set out in para graph 2of Article 6 of the Agreement ( Special and Differential Treatment ). Example sof these are (i) investment subsidies and (ii) agricultural input services gene rallyavailable to low income Farmers EXPORT SUBSIDIES Such subsidies are virtually non-existent in India as exporters of agriculturalc ommodities do not get direct subsidy. It is also worth noting that developingcou ntries are free to provide three of the listed subsidies, namely, reduction of e xport marketing costs, internal and international transport and freight charges. Under the Agreement, export subsidies are defined as "subsidies contingent onexp ort performance" and the list covers export subsidy practices such as directexpo rt subsidies contingent on export performance; producer-financed subsidiessuch a s government programmes which require a levy on production which isthen used to subsidise the export of the product; cost-reduction measures suchas subsidies to reduce marketing costs for exports including costs of international freight; internal transport subsidies applying only to exports;subsidies on inco rporated products i.e., subsidies on agricultural products suchas wheat continge nt on their incorporation in export products made of wheat etc.All such export s ubsidies are subject to reduction commitments in terms of boththe volume of subs idised export and budgetary outlays for such subsidies. Asindicated earlier, suc h 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 I ndia. The Agreement contains provisions regarding member s commitment toreduce Expo rt Subsidies. Developed countries are required to reduce their export subsidy exp enditure by36%. 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, othe r dairy products and meat, as well as all processed agricultural products such a schocolates and sausages. The coverage includes wines, spirits and tobacco 22 products, fibers such as cotton, wool and silk, and raw animal skins destined fo r leather production. Fish and fish products are not included nor are forestrypr oducts. NATIONAL AGRICULTURE POLICY, 2000 On July 28, 2000, Government of India announced a National AgriculturePolicy to include this vital sector of the economy in the ambit of economicreforms. Accord ing to Economic Survey , 2000-2001, "After the economicreforms in 1991-92 that removed the restrictive an d protective licensing regimefor industry, the policy focus turned to agricultur e. There is still the generalimpression that agriculture in India operates amids t a number of restraints andcontrols and that the farmers do not receive the ben efits of free trade ascompared to other sectors of the economy." The main elemen ts of the newagriculture policy are the following:Private sector investment in a griculture would be encouraged, particularly inareas like agricultural research, human resource development, post harvestmanagement and marketing. Catapulting ag ricultural growth to over 4 per cent per annum by 2005. Restrictions on the movem ent of agricultural commodities throughout thecountry would be progressively dis mantled. Appropriate measures would be adopted to ensure that agriculturists by a ndlarge, remain outside the regulatory and tax collection system. Rural electrifi

cation would be given high priority as a prime mover for agricultural developmen t. Progressive institutionalization of rural and farm credit would be continuedfo r providing timely and adequate credit to farmers. 23 Trend in Pattern of Consumption and LikelyDemand for Food grains There has been a slow down in the growth rate of direct demand for food grainsco nsumption on account of several factors. First the growth rate of populationhas accelerated. Second, with rise in per capita income and changing tastes andprefe rences, the food basket is getting rapidly diversified. With such adiv ersification of consumption, the income elasticity of demand for food grainshas declined perceptibly. The consumption patterns have been changing both inrural a s well as in urban areas. The patterns of consumption of food grains over the ye ars indicate a consistent fall in consumption of cereals both in rural aswell as urban areas. In contrast there has been a significant increase inconsumption of milk and milk products, edible oils, fruits and vegetables andmeat, egg and fis h. The available data shows that the food diversification hasoccurred in all exp enditure groups including the poorest, although the pooreststill spend a major p art of their income on food grains. The decline in pattern of consumption of foo d grains especially amongst the poor has also been attributedto several other fa ctors such as need for increased expenditure on fuel and lightand on miscellaneo us goods and services, the insufficient growth in availabilityof employment oppo rtunities, stagnating or declining real agricultural incomes,lack of purchasing power etc.The demand projections for food grains need to take in to account thep ossibility of a further fall in per capita demand on account of the likelydevelo pment of rural infrastructure and mechanization. Further since the rural-urban d ifferential in per capita consumption of food grains is quite high evennow, one should expect a significant decline in average per capita consumptionof food gra ins in the country with increasing urbanization. On account of allthese factors it would not be unreasonable to expect a further decline in per capita consumpti on of food grains say by 2020 at the same rate as witnessedover the last two dec ades. 24 Implications of the Agreement Indian agriculture is characterised by majority of small and marginal farmershol ding less than two hectares of land, less than 35.7% of the land, is under anyas sured irrigation system and for the large majority of farmers, the gains fromthe application of the science & technology in agriculture are yet to be realised.F armers, therefore, require support in terms of development of infrastructure asw ell as improved technologies and provisions of requisite inputs at reasonablecos t. India s share of world s agricultural trade is of the order of 1%. There is nodou bt that during the last 30 years, Indian agriculture has grown at a reasonablepa ce, but with stagnant and declining net cropped area it is indeed going to be ad ifficult task to maintain the growth in agricultural production. The implication sof the Agreement would thus have to be examined in the light of the fooddemand and supply situation. The size of the country, the level of overalldevelopment, balance of payments position, realistic future outlook for agricultural development, structure of land holdings etc. are the other relevantfactors that would have a bearing on India s trade policy in agriculture.Implications of the Ag reement on Agriculture for India should thus be gaugedfrom the impact it will ha ve on the following: i ) Whether the Agreement hasopened up markets and facilita ted exports of our products; and ii) Whether wewould be able to continue with ou r domestic policy aimed at improvinginfrastructure and provision of inputs at subsidised prices for achievingincreased agricultural production.

25 Implications - Short Term: Regarding freedom to pursue our domestic policies, it is quite evident that in t heshort term India will not be affected by the WTO Agreement on Agriculture.Indi a has been maintaining quantitative restrictions (QRs) on import of 825agricultu ral products as on 1.4.97. QRs are proposed to be eliminated within theoverall t ime frame of six years in three phases 1.4.97 to 31.3.2003. (All our trading par tners barring the US have agreed to this phase-out plan). Within theprovisions o f the GATT Agreement India has bound tariffs at high levels of 100%, 150% and 30 0% for primary products, processed products and edible oilsrespectively. Therefo re, the QRs can be replaced with high import tariff in casewe want to restrict i mports of these commodities.In India, for the present, the minimum support price provided to commodities isless than the fixed external reference price determin ed under the Agreement.Therefore, the AMS is negative. Theoretically, therefore, we could increase theproduct-specific support up to 10%.The agriculture sector has a typical lag lead relationship between the prices andthe produce. This acts as a deterrent. Whenever prices collapse, the farmersreduce the area under a pa rticular crop and in turn, the prices increase during thenext season/year. This cobweb phenomenon leads to equilibrium only in a closesector assumption. It will be quite ambitious to assume a certain level of priceelasticity of demand / sup ply, income elasticity of demand, the productiongrowth rates, resource allocatio ns and finally, the farmers response to themarket environment 26 Implications - Long Term As mentioned earlier, for a large majority of farmers in different parts of thec ountry, the gains from the application of science and technology in agriculturea re yet to be realised which would require infrastructural support, improvedtechn ologies and provision of inputs at reasonable cost. The Agreement onAgriculture thus recognised this and developing countries have been given thefreedom to impl ement such policies.Indian agriculture enjoys the advantage of cheap labour. The refore, despite thelower productivity, a comparison with world prices of agricul tural commoditieswould reveal that domestic prices in India are considerably les s with theexceptions of a few commodities (notably oilseeds). Hence, imports to Indiawould not be attractive in the case of rice, tea, sunflower oil and cotton. On thewhole, large scale import of agricultural commodities as a result of trad eliberalisation is ruled out. Even the exports of those food grains which areche aper in the domestic market, but are sensitive from the point of view of consump tion by the economically weaker sections are not likely to rise tounacceptable l evels because of high inland transportation cost and inadequateexport infrastruc ture in India. Through proper Tariffication, however, we willhave to strike a ba lance between the competing interest of 10% farmers whogenerate marketable surpl uses and consumers belonging to the economicallypoor sections of the society.It is also argued that because of increasing price of domestic agriculturalcommodit ies following improved export prospects, farmers would get benefitswhich in turn would encourage investment in the resource scarce agriculturalsector. With the decrease in production subsidies as well as export subsidies, theinternational p rices of agricultural commodities will rise and this will help inmaking our expo rts more competitive in world market. On the one hand, theprice incentive could be the best incentive and could give a strong boost toinvestment in agriculture as well as adoption of modern technologies andthereby to the raising of agricult ural production and productivity. On the other hand, the rise in domestic prices would put pressure on the public distributionsystem and accentuate the problem of food subsidy .India requires improvementin policies, infrastructure, institu tions and technology. India s agriculturalresearch system has stood several tests successfully in the past and has helpedthe country to tide over formidable food crises and other challenges

27 WTO AND INDIAN AGRICULTUREINDIA S COMMITMENT As India was maintaining Quantitative Restrictions due to balance of paymentsrea sons (which is a GATT consistent measure), it did not have to undertake anycommi tments in regard to market access. India does not provide any product specific su pport other than market pricesupport.In India, exporters of agricultural commodi ties do not get any direct subsidy.Indirect subsidies available to them are in t he form of-:(a) Exemption of export profit from income tax under section 80-HHC of theIncome Tax(b) Subsidies on cost of freight on export shipments of certain products likefruits, vegetables and floricultural products. What India should do? The most important things for India to address are speed up internal reforms inb uilding up world-class infrastructure like roads, ports and electricity supply.I ndia should also focus on original knowledge generation in important fieldslike Pharmaceutical molecules, textiles, IT high end products, processed food,install ation of cold chain and agricultural logistics to tap opportunities of globaliza tion under WTO regime.India's ranking in recent Global Competitiveness report is not very encouragingdue to infrastructure problems, poor governance, poor legal system and poor market access provided by India.Our tariffs are still high comp ared to Developed countries and there will bepressure 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.I ndia would do well to reorganize its Protective Agricultural policy in name of r ural poverty and Food security and try to capitalize on globalization of agricul ture markets. It should rather focus on Textile industry modernizationand develo ping international Marketing muscle and expertise, developing of Brand India ima ge, use its traditional arts and designs intelligently to give 28 competitive edge, capitalize on drug sector opportunities, and develop selective engineering sector industries like automobiles & forgings & castings, processedf oods industry and the high end outsourcing services.India must improve legal and administrative infrastructure, improve tradefacilitation through cutting down b ureaucracy and delays and further ease itsfinancial markets.India has to downsiz e non-plan expenditure in Subsidies (which are highlyineffective and wrongly app lied) and Government salaries and perquisites likepensions and administrative ex penditures.Corruption will also have to be checked by bringing in fast remedial publicgrievance system, legal system and information dissemination by using e-go vernance.The petroleum sector has to be boosted to tap crude oil and gas resourc es withinIndian boundaries and entering into multinational contracts to source o ilreserves.It wont be a bad idea if Indian textile and garment Industry go multi nationalsetting their foot in western Europe, North Africa, Mexico and other suc hstrategically located areas for large US and European markets.The performance o f India in attracting major FDI has also been poor andcertainly needs boost u p, if India has to develop globally competitiveinfrastructure and facilit ies in its sectors of interest for world trade.India has a large potential to in crease its agricultural exports in a liberalizedworld provided it can diversify a significant part of its agriculture in to highvalue crops and in agro-processi ng. This would depend first on undertakinglarge infrastructure investment in agr icultural and agro processing as also inrural infrastructure and research and de velopment. India has not only to createexport surplus but also to become competi tive. The potential for exports wouldalso depend on freeing of agricultural mar kets by the developed countries 29 India s Agriculture Trade under the WTO Regime

The trade regime of India prior to 1990 can be categorised as a restrictive trad eregime. In the export trends the structural breaks can be located at 1990 and19 95. The breaks in the exports can be attributed to policy changes during thosetw o years. Rice other than Basmati, which constitutes about 44 per cent of totalqu antity and 20 percent of total value of the exports, dominated the agriculturale xports during the years 1998- 97 and 1999-2000. Oil meals constitute about 35per 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 sh are of India s imports in the world imports stayed only at 0.50 per centlevel and that of exports hovered around 1 per cent. An important observationemerges here that even with the process of liberalisation there has not been anysignificant b reakthrough in India s trade performance. The trade ratios for India s agricultural sector indicate that it was a consistently net exporting sector from 1983 to 96 except during 1988. It is interesting that the trade ratios were infavour of exp orts in the agricultural sector. Larger share of imports as well asexports was a ccounted by the basic products rather than the processed products.Among the two, imports were dominated by processed products. This indicatesthat we could incre ase the processing facilities to increase the exports of processed agricultural products. In the recent modifications to QR there are alarge number of processed products that are likely to get a fresh impetus in theprocessing industry. Amon g the imports linseed oil, jute fibres, silk and milk and cream (dry), wheat and meslin cotton (lint) and coconut oil are the dominantimport commodities with hi gh rates of growth. But not all of them had highshare in the total value of impo rts. In fact, jute and fibres, linseed oil andcoconut oil showed high rates of g rowth but claimed only a small share inaggregate imports. These commodities with low share of import but high growthare likely to record a steep increase in the imports. One can feel that the importsof meat and meat products, dairy products , fish and crustaceans, baby foods,soya bean, rapeseed and other oils, and Fruit preparations (including preservedfruits and juices) will increase in their impo rt share.On the other side, the export trends are positive except in the case of tea, citrusfruits, soya beans, and canned meat and jute fibres. Out of these co mmodities inthe case of soybeans, canned meat and jute fibres, we have no histor y of largeexportable surplus and moreover the elasticity of export demand of the secommodities has also not been very high. But the case of tea and citrus fruits isdifferent. It is necessary to trace the reasons for the failure in increasing theexports. The inconsistency in aggregate trade is one of the major problems o f the sector. 30 With a declining import share and the export share rising since 1988, thepossibi lity of any import surges can be ruled out provided the tariff policy ismanaged properly. Their analysis of prices of agri-commodities indicated thecrops viz., tobacco, jute, pepper, wheat, rice, sugar must have higher level of prices due t o the removal of QR s. The import of the commodities viz., cereals,milk and milk p roducts, silk, pulses, rubber, lint cotton and vegetable oils mayincrease. But, the possibility of surges in imports could be dealt with proper tariff structure while the price level can also be managed through proper policymix. National Level While analyzing the impact of Agreement on Agriculture (AoA) at the nationalleve l, we need to look at it from four different perspectives. First, it is wellknow n that India has an extremely diversified agricultural sector. There areregions which are incapable of participating in international trade and mayrequire large investments to do so. These regions will be at the receiving endboth from the p oint of view of attracting investments towards agriculture as wellas the non-ava ilability of plough back surplus in advancing their agriculturesector. Second, I ndia has comparative advantages in a few commodities. Thisadvantage will certain ly help in increasing the exports of such commodities,provided we have continued positive international demand elasticity and there isa continued advantage betw

een the domestic and the world prices. Third, thereare non-traditional export co mmodities, which have to be watched carefully, andIndia has to take advantage of tapping the market for these commodities. Lastly,India s trade-in agriculture is characterised by its non-consistent, volatile natureacross markets in terms of t ime series. It will be necessary to stabilize this withsuitable measures. The im pact of Agreement on Agriculture (AoA) on thenational economy has to be viewed f rom three distinct perspectives. The initialreaction comes from the alteration i n the support regimes both in domesticsector as well as in the export sector. Th e aggregate measure of support isallowed at 13.33 per cent of the base level gro ss value of product with 86-88base. As India has not crossed this barrier and it is unlikely to cross this in near future, it does not cause great concern prese ntly for us. However, in order tokeep a check on the increasing budgetary defici t, it is necessary that theagricultural policy directs the support measures towa rds the Green Box policies.Specifically speaking, the country should take advantage of providing support tothe resource poor regions and designing schemes for redu ction of exportmarketing costs as well as the domestic and international freight charges byrecasting the present subsidy regime. In fact, these together will ma ke a largedifference in the value added to the exporters and can boost up the ex ports. In 31 case of commodities where we do not have advantage of lower domestic prices,expo rts will become uneconomical unless support measures are put in place for a numb er of commodities. In such cases, in order to sustain the current exporttrends, the commodities which require price or export support are coffee, cotton,tea, gr oundnut oil, copra, sugar, wheat and maize. In respect of all thesecommodities, the average prices for over fourteen years in the Indian wholesalemarket are hig her than those of the world prices. There are two likely outcomesof this:(i) The imports of these commodities may experience a sudden spurt with theremoval of Q uantitative Restrictions; and (ii) exports will go down significantlybecause of the price disadvantages. It is in this context that we have to takeadvantage of the commodities which can withstand such pressure. As far as thevariations in wo rld prices and Indian wholesale prices are concerned, we findthat the Indian who lesale prices fluctuate more violently as compared to theworld prices. Such inst ability in the Indian wholesale prices may cause spurts inimports and create dis incentives to the producers. It is, therefore, essential towatch the price fluct uations at least in a short-term perspective. The Food andAgriculture Organisati on (FAO) has projected that the world trade fromcountries to the developed coun tries is likely to have lower growth rates ascompared to the trade between devel oping countries. Therefore, it is necessaryfor us to concentrate more on the tra de with developing countries where theemerging market is quite strong. 32 A STUDY: Reasons for farmers grievances As WTO/AOA and suicide of the farmers, knowledge of WTO/AOA to thefarming commu nity, relationship between size of holding and income,relationship betwee n income and educational attainment and lastly the issuerelating to input subsid ies have been incorporated in the studyThe point wise discussion of all these as pects is being discussed one by one inthe following paragraphs. 1) Illiteracy Table -1 show that 29.6 percent of the farmers have knowledge of WTO/AOAand rest of the farmers was not even aware of WTO/AOA. This implies that our farming com munity is unaware and illiterate and we have to undertakeawareness programmes to educate the farming community about WTO andespecially AOA, so that they can r eap the benefits from WTO/AOA

""bar chart missing""" 33 2) Size of Land Holding In India, land continues to be of enormous economic, social and symbolicrelevanc e. The way in which access to land can be obtained and its ownershipdocumented i s at the core of the livelihood of the large majority of the poor,especially in rural and tribal areas and determines the extent to whichincreasingly scare natural resources are managed (Word Bank, 2007). The landreforms triggere d in the Indian economy with the first constitutional amendmentin 1951. The popu lation in India is increasing continuously for the last four decades, as a resul t of this; the size of land holding is shrinking. The literatureon this issue ha s stressed that land ceiling should be removed. Their argumentsin favour of this issue are based on the factors like economies of scale and alsothe need for cor porate farming. In order to have an insight into the size of holding of the farm ers the description of the primary survey is given in the 34 Table-2. The results of the field survey highlight that majority of the farmerso wned 3-6 acres of land in northern India. In case of large farm holding(above15 acre) the percentage of farmers is just 7.3 percent. The trend clearlyshows that majority of the farmers own less than 6 acre of land in India (see theTable-2). Thus, small sizes of holding are responsible for debacle of farmers anddue to t his they are not in position to sustain. Further, more and more farmersare not f inding farming as a viable profession.

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3) Relationship between size of Holding andIncome of the Farmers Size of land holding has a significant bearing upon the income level of thefarme rs. Moreover, big farmers keep themselves aware of the policy measurestaken at t he national and international level. To explore this issue empirically, anationw ide survey of about 5000 rural households was conducted. They wereinterviewed by National Council of Applied Economic Research (NCAER) inboth 1982 and 1999 to a ssess the extent to which cumulative land reformlegislation and/or implementatio n at the state level affected changes in theaccumulation of human and physical c apital and income levels for the samehouseholds over the 17 year period spanned by the data. The strong associationwas found in the land holding and the income of the farmers.The same issue has been addressed empirically in the present stud y constitutinga sample of 409 farmers in this case. Hypothesis was tested by app lying chi-square test to ascertain the association between size of land holding and incomeof the farmers. The results of the same are depicted in the Table -3 d epicts thatthe size of holding directly varies with the income of the farmers. T he calculatedvalue of chi-square was found to be 172.337, which was highly signi ficant atone percent level of significance, depicting significant association be tween levelof income and size of land holding.

35 ""bar chart again missing"""" 4)WTO/AOA and Suicide of the Farmers The ratio of suicide by the farmers is increasing day in day out. The issue of s uicide and WTO/AOA has been linked by the media and NGOs. The presentstudy shows that about 31.3 percent of theses pendent farmers believed thatWTO is responsib le for the suicide of farmers (see the Table-4). Further, 33.5percent said that WTO is not responsible for the same and another 35.2 percentwere found to be neu tral. From the primary survey it is difficult to concludewhether WTO/AOA is resp onsible for the suicide of the farmers or not. In thisregard, other researchers opined that the major cause of suicide of the farmers isdebt. WTO/AOA and suicid es of the farmer is still a pending issue because wehave not still realized the implications of WTO/AOA fully and moreover theresearch only on this aspect is de sperately required

""pie and bar chart missing""

36 5) Farming in the Era of Globalization Wheat and rice are the two main crops grown in the northern India for the lastfo ur 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 EconomicCooperat ion and Development (OECD) countries with high doses of subsidiesgiven by these countries to their farmers but Indian government is unable toafford so much reso urces which can be diverted to the farm sector (Rao, 2003).Table -5 explains the perception of farming community about competitivenessof wheat and rice in the i nternational market. The views of the farmers aredepicted in Table-5.The above t able clearly shows that majority of the farmers (81.66 percent) inthis region be lieve that they are not in a position to compete in the world markettill the gov ernment take concrete steps toward this direction. This implies thatIndian farme rs 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 Indianagr iculture because of the Minimum Support Price (MSP) and availability of marketin g facilities. But the same facilities for other crops are not readilyavailable. Food Corporation of India (FCI) is the main agency for procuring thecereals apar t from certain state agencies which are also procuring both cerealsfrom the mark et.

""bar chart again""

The above table clearly shows that majority of the farmers (81.66 percent) inthi s region believe that they are not in a position to compete in the world markett

ill the government take concrete steps toward this direction. This implies thatI ndian 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 Indianagr iculture because of the Minimum Support Price (MSP) and availability of marketin g facilities. But the same facilities for other crops are not readilyavailable. Food Corporation of India (FCI) is the main agency for procuring thecereals apar t from certain state agencies which are also procuring both cerealsfrom the mark et.

37 ""bar chart missing"" The Chief Minister's Advisory Committee on Agriculture Policy andRestruc turing (Punjab, October 2002) realized that all efforts made so far tointroduce alternatives to these crops have failed on the market front. It is,therefore, es sential the market clearance through minimum support price andprocurement system must be assured, if the production of alternative crops,especially the oil seed s and pulse crops, is to be sustained on a medium to longterm basis. The marketi ng of agricultural crops are becoming a major issueamong farmers, which has been raised in the primary study. The result of thestudy is given in Table-6. It als o shows that 76.2 percent of the farmers were of the opinion that there is no ma rketing facility for other than wheat and rice but23.7 percent of the farmers be lieved that market for other than wheat and rice isavailable. There is a need to provide marketing facilities for other commoditieslike pulses, grams oilseed s etc. If this is ensured, the prices of thesecommodities will tend to decline. This will also result in saving of huge foreignexchange reserves of the country. 7) Diversification in Cropping Pattern Depleting water table, stagnant income of the farmers, low productivity level ar eamongst few serious problems being faced by the Indian farmers. Apart fromthis, the marketing facilities are mainly available for wheat and rice to thefarmers though for certain other corps like cotton and sugar cane the facilitiesare also available. Many researchers like Swaminathan (2001), Shiva (2002)laid more stre ss on diversification in the cropping pattern from wheat and rice toother cash c rops to ease the situation. The Table -9 depicts the views of thefarmers regardi ng diversification.The survey shows that farmers in the region are more interest ed to adopt wheatand rice in their fields (Table -7 shows). The percentage of su ch farmers is 68.9percent and rests of the farmers are cultivating other crops i n addition to wheatand rice in their fields. 38 ""bar char missing"" 8) Inadequate Supply of Electricity Electricity is the main input used in the agricultural sector and this sector de pends heavily on adequate and incessant supply of electricity. The quality of el ectricity is inadequate at the time of agricultural operation in the field and a tpeak hours supply is not available and its highly irregular one. The farmers ar eforced to use diesel for propelling pump sets, which further enhances thecapita l-output ration in the agriculture sector. This ultimately diminishes thereturns of the farmers. Under such circumstances, there is a strong need toanalyze this issue from the point of view of farming community.The field survey shows that a

bout 80 percent of the farm community believesthat supply of electricity is not adequate at the time of sowing, whereas 12.2percent believe that it is adequate. Thus, there is a need to improve the qualityand quantity of electricity supplie d to agriculture sector especially during thesowing season. ""pie char missing""

39 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 tha temerged from the stud is that the electricity subsidy is of prime importance. I tmay be because it is the only subsidy which is readily available to the farmers . ""bar char again""

Hence, in the light of the above empirical analysis certain important conclusion sare emerged with are discussed in the following paragraphs.CONCLUSION FROM STUD YIt emerged from the study that the size of land holding is continuouslydeclinin g. More importantly, it was also established that the size of land holdingand in come are directly related. Another significant conclusion of the studypoints out towards a positive relationship between income and education levelof the farmer s. All the above relationship was tested with the help of Chi-squaretest techniq ue and was found to be significant at one percent level. Further,regarding the m arketing access it was found that the 40 SUGGESTIONS 1. The Indian economy is predominantly an agrarian economy and itsprosp erity depends upon the progress of agriculture. Agriculture sector isconsidered as the backbone of our economy and a majority of farmersdepend upon it for sust aining their livelihoods. They should be giveadditional incentives and provisio n of electricity, irrigation facilities andinfrastructural support, improved tec hnologies and provision of inputs atreasonable cost.Among the agricultural produ ction incentives, subsidies are considered to bethe most powerful instrument for accelerating the growth of agriculturalproduction. The subsidies should be equa lly distributed among the differentregions and groups of our society for achievi ng the goal of rapid growth inagricultural development .Provision of input subsi dies in agriculture has beenrecommended on the ground that it gives incentives t o the farmers to usenew technology. It also gives incentives to use these subsid ies and henceincrease production. However, they put a heavy burden on the stat eexchequer and reduce investable surplus and consequently the growth rate of the economy. Besides, they might generate inequalities in the distribution of incom e and may lead to distortions and inefficiency in the system.2. In the Pharma se ctor there is need for major investments in R &D andmergers and restructuring of companies to make them world class to takeadvantage. India has already an amend ed patent Act and both product andProcess are now patented in India. However, th e large number of patentsgoing off in USA recently, gives the Indian Drug compan ies windfallopportunities, if tapped intelligently. Some companies in Ind

ia haveorganized themselves for this.3. The most important things for India to address are speed up internal reformsin building up world-class infrastructure l ike roads, ports and electricitysupply. India should also focus on origina l knowledge generation inimportant fields like Pharmaceutical molecules, textiles, IT high endproducts, processed food, installation of cold chain an d agricultural logisticsto tap opportunities of globalization under WTO regime.4 . India should expand its exports of agricultural products in which it hastremen dous comparative advantage. The provisions of W.T.O offered ampleopportunities t o India to expand its export market. Export prospects arebrighter with soybeans, oilseeds, oil meal and cake, fruits and vegetables,and fruit preparations. Thus , high export prospects are seen with high valueproducts, horticultural products , and processed products, marine products 41` .India need not be extremely defensive and inward looking, as Indianagriculture has demonstrated strength which needs to be appropriately usedto compete in the global market, otherwise it will become a case of missedopportunity.5. The Gover nment should improve the livelihood pattern of small & marginalfarmers by enhanc ing their access to appropriate and affordable technologies,market related infor mation and linkages.6. Sustainability of extension services and expert advice th rough capacitybuilding exercises effectively bridging the rural-urban divide.7. Associate all professionals involved in different aspects of agriculture andrur al development through national and international networks.8. Promote financial sector inclusion for farmers and small & mediumenterprises in agri-sector th rough access to market capital and risk management tools.9. India would do well to reorganize its Protective Agricultural policy in nameof rural poverty a nd Food security and try to capitalize on globalization of agriculture markets. It should rather focus on Textile industry modernizationand developing internati onal Marketing muscle and expertise, developing of Brand India image, use its tr aditional arts and designs intelligently to givecompetitive edge, capitalize on drug sector opportunities, and developselective engineering sector industries like automobiles & forgings &castings, processed foods industry and the high en d outsourcing services.10.Biotechnological inventions are increasingly affec ting agriculturalproduction and trade. New genetically engineered varieties of crops haveincreased productivity and are more pest resistant. Therefore it is im portant,as it helps in increasing productivity which is of central concern to In dia. TheGovernment should support the use of biotechnology in agriculture.11.Ind ia blessed with its cheap labour, land, diverse agro climatic conditionsand larg e agricultural sector can definitely gain through expansion of international tra de in agricultural products.12.India has a large potential to increase its agric ultural exports in a liberalizedworld by diversifying, a significant part of its agriculture in to high valuecrops and in agro-processing.13.For countries like India, multi functionality of agriculture is best shownthrough its growth in are as such as food security, employment and theelimination of poverty in rural area s. Moreover, these issues are neither emotive nor undefined but are practical an d harsh realities which decisionmakers have to confront when addressing issues o f agricultural policies. Theneed to provide employment opportunities in pre-domi nantly rural agrarianareas is one of the main Non Trade Concern which we would l ike to seeaddressed.