The Hindu Business Line : Preoccupation with subsidies

India’s continuing refrain of opposition to Western farm subsidies ignores the changed reality of the country itself becoming a recurrent importer of food.

India’s defiant stance against the pressures of the developed world was one of the reasons for the collapse of the multilateral trade negotiations under the Doha Round of the WTO, the central issue being the scope of protection for farmers in the developing world. The distinction between developed and developing country farm economics is sharp. The level of farm support extended by OECD countries is massive, to say the least — $370 billion, representing over 1 per cent of OECD area GDP; and this when less than 4 per cent of the population in major industrial countries such as the US and the European Union is engaged in agriculture. Contrast that with an emerging economy such as India, where agriculture is a livelihood issue for over 60 per cent of the population. Unbridled market access to highly subsidised farm goods from industrial countries can potentially thwart any hope of farm resurgence in essentially agrarian economies. As domestic producers need protection from unfair competition from imports, genuine safeguard measures are essential.

But there are other dimensions too. First, gone are the days of huge farm subsidies depressing the global farm market; the low agricultural prices regime came to an end two years ago. Agri-markets are expected to remain strong in the foreseeable future in the wake of land constraints, water shortage, climate change and consumption demand growth. Only under exceptional circumstances, and temporarily, will global agri-commodity prices retreat to levels seen earlier this decade. The world runs the risk of a further rise in food prices if subsidies are dismantled. Poor, food-import-dependent countries would be the worst hit.

India is largely a consuming economy; not exactly self-sufficient, but attempting to be one. It is a marginal player in the world market, with no targeted export programme. Given the extremely sluggish growth in India’s farm output, on the one hand, and rising consumption demand, on the other, food imports are seen as inevitable in the short to medium term. In addition to pulses, wheat and edible oils that are imported currently, rice and coarse cereals, and even sugar and cotton (India currently exports these) are candidates for import in the future. A rise in the international prices of these commodities (resulting from phase-out of subsidies) will not serve India’s import interests. Perhaps the Indian government lost sight of the current context and stuck to its five-year old text of opposing farm subsidies, ignoring the paradigm shift in global agricultural markets. While it may be politically expedient and even glamorous to attack OECD farm subsidies at international forums, the government must introspect. The time may be right to ask what the government has done to empower and equip the average Indian farmer to take advantage of a changing global field.

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