PART II
Indian agriculture and scenario for 2020(continue)

Appendix 3 India and international trade of agricultural commodities

The gap/surplus between domestic production and consumption is expected to be complemented by trade in agricultural commodities and hence by the world production and consumption trend. Trade in agricultural commodities has suffered significantly from declining prices in the recent past, although this is not expected to be a sustained trend. During the last 40 years, real prices of agricultural commodities, relative to prices of all manufactured goods, have declined significantly, even as nominal prices have risen. Real prices have fluctuated considerably around the long-term downward trend. According to the Commodities and Trade Division of FAO it appears that the balance between supply and demand of agricultural commodities has improved and with it the prospects for higher commodity prices after the sharp and persistent decline during the late 1990s.

In spite of the recent strengthening, agricultural commodity prices generally remain close to historically depressed levels; their longer term decline relative to the prices of manufactured goods continues. The link between rising international prices and the opening of international markets and reduction of subsidies cannot be underemphasized. The estimations given above depend critically on how the international prices play out.

What will happen to international commodity prices?

It has also been argued that prices of agricultural commodities will continue to decline relative to industrial products as technological advances reduce costs and make it possible to expand production at a rate that outstrips both population growth and increases in demand spurred by rising incomes. Prices of some commodities have also been driven lower by oversupply, fuelled by intense global competition in production, reduced transportation costs and new technologies that have increased productivity and introduced synthetic alternatives to some commodities. In some cases, the emergence of major new producers has also affected market balance (for example, Viet Nam in coffee exports between 1985 and 2001). Moreover, export subsidies and subsidies to producers in some developed countries have also depressed world prices for many agricultural products grown in temperate zones, reducing the export earnings of developing countries that export commodities such as cotton, sugar and rice.

However, trade liberalization and technological change have played a part in diminishing price variability by reducing the incidence of supply-side shocks. Trade liberalization has permitted a wider range of countries to participate in world commodity markets, reducing the relative importance of the supply situation in any one country, while technological advances have reduced the vulnerability of some crops to climatic influences. The low price levels reached in recent years have themselves limited the scope for extensive variability, at least downwards.

Although real prices for all agricultural commodities have declined over the past 40 years, the rate of decline has varied from one commodity to another. Some developing countries have managed to take advantage of these trends by shifting production and trade into higher-value sectors. By doing so, they have reduced their dependence on products whose prices have fallen more sharply and remained highly erratic. However, in general, developing countries — being major exporters of agricultural commodities — suffered from decline in terms of trade between agriculture and industry. A decline in the agricultural terms of trade can be counteracted by increases in the quantity produced and exported so as to maintain or increase the real value of export earnings.

In fact, for developing countries as a group, increases in the quantity of agricultural exports have more than offset the effect of declining real export prices, such that the real value of their export earnings has risen by nearly 30 percent in the last two decades (source: FAO). In other words, their “agricultural income terms of trade” have increased.

However, the evolution of the terms of trade varied considerably among less-developed countries (LDCs) and other developing countries. For LDCs, export earnings failed to increase, and rising import prices further eroded their purchasing power.

In this context, the information provided hereunder discusses by various commodities India's position vis àvis the rest of the world.

Rice

Rice has become one of India's largest agricultural commodity exports and India is currently among the top three exporters of rice in quantity terms. From 1997 to 2001 India was among the few countries whose exports increased both in quantity and US$ terms. Among the major world importers, Indonesia, Philippines, Papua New Guinea, Malaysia, Islamic Republic of Iran, Nigeria and Saudi Arabia are in India's vicinity, but so are the major exporters — China, Thailand and Viet Nam. However, as India's share in the world market is not likely to change much, India does not appear, prima facie, to pose much of a threat as a competitor to these countries.

From 1997 to 2001, the growth of rice exports in terms of value shows a declining trend. However, in terms of volume it registered a positive value. The export unit price (US$/tonne) declined sharply from US$418 to US$247/tonne. Developing countries are the major suppliers of rice in the world. Major importers according to total import from 1997 to 2001 were Indonesia, Philippines, Papua New Guinea, Islamic Republic of Iran, Nigeria, Saudi Arabia, the Russian Federation and Brazil. The world import growth rate is only 0.84 percent. Rice being a food product is inelastic in nature. The world price is falling but imports are not increasing rapidly. Quite interestingly, the world import unit price is falling but remains higher than the export price. The difference gives an idea of difference between the cif (cost, insurance, freight) and fob (free on board) values or in other words cost of transport, insurance, etc.

India is the third (second in some years) exporter of rice in the world in terms of quantity (1997–2001). India exports maximum semi- or wholly milled rice. India's export share in the world market was around 20 percent on an average between 1997 and 2001 although there are considerable year-to-year fluctuations. Thailand and China are India's main competitors.

Table A3.1. Top ten importers and exporters of rice

Source: Personal Computer Trade Analysis System (PCTAS), UNCTAD.

Table A3.2. Top ten destinations of India's export of rice*

* HS. 10630 semi-milled or wholly milled rice, polished or glazed.
UAE - United Arab Emirates.
Source: Indiatrade, CMIE.

Table A3.3. Rice export and import unit prices, US$/tonne of major exporters

Source: PCTAS, UNCTAD.

India's export growth rate from 1997 to 2001 was -13 percent whereas the world growth rate was 5.5 percent, China's 19 percent and Thailand's 8 percent. India's export unit price is rising whereas the world price is falling. India's major destinations are Saudi Arabia, Bangladesh, the United Kingdom, Kuwait, South Africa, United Arab Emirates and the United States. India's price was almost 30 percent higher than the world price in 2001 when calculated from the importer's side. However, India was able to sell at a cheaper price to the United Kingdom and Saudi Arabia. India is expected to remain as a net exporter of rice and will occupy a significant position as an exporter supplying more than 10 percent of world exports.

Wheat

India is currently a minor exporter of wheat and products. This share is expected to fall further. Though domestic production is likely to increase, the increases in consumption are likely to reduce the potential surpluses. Overall India's share of the world wheat pie is insignificant and expected to remain so in net terms.

Major exporters of wheat in the world are the United States, Canada, France, Argentina, Germany and the United Kingdom. Most countries are experiencing a negative growth rate in terms of values and some also in terms of quantity exported from 1997 to 2001. World growth rate in terms of export values was -6 percent during this time. The United Kingdom is experiencing -23 percent growth in terms of export values and -18 percent in terms of quantity. Argentina (4 percent) and Germany (5 percent) experienced positive growth in terms of quantity. Major wheat importers in the world are Italy, Brazil, Japan, Islamic Republic of Iran and Egypt. World import growth was 1.36 percent from 1997 to 2001. Brazil registered 8 percent growth during this time. Japan and Egypt had negative growth. The export unit price is coming down for most of the major exporting countries.

Table A3.4. Export unit prices, US$/tonne

Source: PCTAS, UNCTAD.

Table A3.5. Top ten exporters and importers of wheat

* USA, PR, USVI (United States, Puerto Rico and US Virgin Islands).
Source: PCTAS, UNCTAD.

India is not a significant exporter. Its export share in the world has not yet reached even 0.5 percent except in 2000 when it touched 0.8 percent. However, India's export is experiencing a high growth rate (165 percent between 1997 and 2000 in terms of quantity). The export unit price of India stood at 112.18 in 2000 which is much lower than major exporters. This also has a declining tendency. Periodically India has also imported wheat. However, there is no significant trend in this. India's import constituted around 1.33 percent of the total world import of wheat from 1997 to 2001. India's import unit price is more or less at par with the world's except in 2000 when it rose to US$253/tonne (US$148 as the world import unit price).

India is projected to be a net exporter of wheat although it will remain an occasional importer in future. This will depend on rise in consumption and production shortages in some years. In another 15 years, India's position as a net exporter will deteriorate owing to the internal demand factor.

Maize

Major exporters of maize are the United States, Argentina, France, China, Hungary and Brazil. The world export growth rate from 1997 to 2001 was 4 percent. Brazil experienced 97 percent growth of export followed by Italy (10 percent), Germany (9 percent) and Hungary (7 percent). China's growth rate was -2.45 percent and for the United States this was 3.38 percent. The United States supplied almost 60 percent of total world export of maize followed by Argentina (14 percent), France (10 percent) and China (8 percent). The world unit price is declining. Major importers of maize in the world are Japan, Republic of Korea, Mexico and Spain. World import growth during this time was 3.84 percent. Canada (30 percent), Mexico (30 percent) and Egypt (16 percent) had higher import growth rates. Perhaps Canada and Mexico took advantage of being members of NAFTA and imported much from the United States (top exporter). India is an insignificant importer (less than 0.1 percent of world imports). However India's import growth was 264 percent from 1997 to 2000. India mainly imports from China (49 percent in 2001) and the United States (43 percent in 2001). India imports at price of US$302/tonne from the United States while its export unit price to the world was around US$103 in 2001.

Table A3.6. World export and import unit prices, US$/tonne

Source: PCTAS, UNCTAD.

Table A3.7. Top ten exporters and importers of maize

* USA, PR, USVI (United States, Puerto Rico and US Virgin Islands).
Source: PCTAS, UNCTAD.

Edible oil and oilseed

The major exporters are Malaysia, Indonesia, Argentina, the United States and Germany. In terms of value, the world export growth rate from 1997 to 2001 was -9 percent. In terms of quantity export Malaysia experienced 9 percent, Indonesia 9 percent, the United States -6 percent and Brazil 8 percent growth. However there appears to be a long-term fall in prices. In quantity terms as well as in nominal terms, India is likely to become an even more important player in edible oil and oilseed imports. In its vicinity, Philippines, Malaysia and Indonesia are the largest international suppliers and likely to remain so if the five-year trends are anything to go by. India is likely to become an important trade partner for these countries where edible oils and oilseed are concerned.

The products include crude and refined oil, kernels, seeds of soybean, groundnut, olives, palm, sunflower, cotton, coconut, rapeseed, linseed, maize, castor and sesame seed.

Major exporters are Malaysia, Indonesia, Argentina, the United States and Germany. In terms of value, the world export growth rate during 1997 to 2001 was -9 percent. In terms of export quantity, Malaysia experienced 9 percent, Indonesia 9 percent, the United States -6 percent and Brazil 8 percent growth. There has been a significant fall in prices. Possibly this has triggered a negative growth in terms of values. Quantity exported increased, prices fell but overall value did not increase. This indicates that products have low elasticity. The import unit price varies significantly from country to country. However, it also has a declining trend in general.

Table A3.8. Top ten exporters and importers of edible oils

* USA, PR, USVI (United States, Puerto Rico and US Virgin Islands).
Source: PCTAS, UNCTAD.

Major importers are India, China, the United States, the Netherlands, Germany and the United Kingdom. Being the major exporter of oilseed, the United States imports specific products like sesame, palm and coconut oil significantly. Malaysia also imports soybean, palm and groundnut products. Between 1997 and 2000 the import growth of India (48 percent) was significant. The Netherlands (21 percent) and Islamic Republic of Iran (13 percent) registered high import growth during 1997 to 2001. India is mainly importing from Malaysia (25 percent), Indonesia (31 percent) and Argentina (28 percent). India was importing almost 32 percent of Malaysia's, 25 percent of Indonesia's and 13 percent of Argentina's world export of edible oil from 1998 to 2002. India is importing on an average lower than or at par with the world average unit price. India is projected to remain as a major importer of oilseed in the future. Import demand is expected to rise by almost 300 percent by 2020.

Table A3.9. Export and import unit prices, US$/tonne

Source: PCTAS, UNCTAD.

According to FAO, in the last few years, prices of oilseed have improved steadily from the low levels recorded in 1999 to 2000 and producers have responded with a robust increase in production. The increase in prices was triggered mainly by sustained growth in demand that outstripped the expansion in supplies. With demand firm and stocks at relatively low levels, both global output and prices for oil-crop products are expected to continue to rise in the short term.

Sugar

The major exporters of sugar in terms of quantity were Brazil, Cuba, France, Thailand, Germany, Colombia and India between 1998 and 2002. Most of the other exporters experienced negative growth. Brazil was supplying more than 25 percent and India 4.45 percent of world exports in 2002. However rapid economic growth is likely to increase domestic requirements. India therefore is not likely to be among the major exporters by 2020. As many of the large importers, namely, Republic of Korea, Malaysia, China and Japan are in Asia, easier export opportunities are in store for Thailand. Provided other countries do not emerge as sugar exporters.

Major exporters of sugar in terms of quantity were Brazil, Cuba, France, Thailand, Germany, Colombia and India between 1998 and 2002. Brazil's export growth rate during this period was 13 percent and India's 180 percent. Most of the other exporters experienced negative growth. Brazil supplied more than 25 percent and India 4.45 percent of world exports in 2002. The sugar price has been volatile. In 2002, export unit prices for some countries increased. Major importers in the world are the Russian Federation, Malaysia, Republic of Korea, Japan, the United Kingdom, China and Indonesia. From 1998 to 2002, Malaysia's import registered growth of 90 percent. China is also registering high import growth of 16 percent.

India's major export destinations are Sri Lanka (14 percent of total exports during 1998 to 2002), Malaysia (13 percent), Bangladesh (11.5 percent) and Indonesia (10 percent). India's sugar exports are projected to have many variations and the net exporter's position will deteriorate in future which will be mainly attributable to rise in internal demand and decline in productivity.

Table A3.10. Top ten exporters and importers of sugar

Source: PCTAS, UNCTAD.

Table A3.11. Sugar — export and import unit prices US$/tonne

Source: PCTAS, UNCTAD.

Vegetables and fruit

Major exporters of fruit and vegetables are Spain (15 percent of world exports), the United States (12 percent), the Netherlands (9 percent), Mexico (8 percent), Italy (7 percent) and France (6 percent). The world average growth rate of exports from 1997 to 2001 was only 0.38 percent. Mexico registered 8.5 percent and Chile 5 percent growth. Most of the other top exporters experienced a negative growth rate. India supplied around 1.5 percent of world exports and registered a growth of 7.30 percent from 1997 to 2001. India is projected to remain as a net exporter of fruit and vegetables.

Top importers from 1997 to 2001 were Germany (around 15 percent of world import), the United States (15 percent), the United Kingdom (9 percent), Japan (8 percent) and France (9 percent). India's import share was close to 1 percent but the import growth rate was negative from 1997 to 2000.

Table A3.12. Top ten exporters and importers of fruit and vegetables

* USA, PR, USVI (United States, Puerto Rico and US Virgin Islands).
Source: PCTAS, UNCTAD.

Fish

Although India has a large coastline, and a significant population dependent on fishing, it accounts for a small percentage of world fish and products exports. This share is not likely to change much. Aquaculture has not really taken off in India to the extent that is possible. Much of the fish “production” continues to be non-mechanized; processing and canning plants are absent, cold storage and transport facilities are also poor. Although India is likely to remain a net exporter of fish products, it is going to remain a marginal player. Inasmuch as fish consumption is likely to double in East Asia in the next few decades, the markets are present for India to benefit from (FAO 2002a).

Major exporters of fish are Norway (10 percent of world exports), the United States (8 percent), Canada (7 percent), Thailand (7 percent) and China (6.5 percent). World export growth from 1997 to 2001 was only 1.29 percent. Chile (9 percent), China (8 percent) and Canada (5 percent) had relatively high growth. India supplied around 3 percent with a growth of 4 percent from 1997 to 2000. Major importers in the world are Japan (28 percent), the United States (18 percent), Spain (8 percent) and France (6 percent). World import growth during 1997 to 2001 was only 2 percent. However, Japan experienced a negative growth (-3 percent) whereas Republic of Korea had 14 percent import growth. India is not an importer of fish. However, it is expected that in another 15 years India will increase its fish import significantly. However, the country will remain a net exporter but the share will be insignificant.

Table A3.13. Top ten exporters and importers of fish

* USA, PR, USVI (United States, Puerto Rico and US Virgin Islands).
Source: PCTAS, UNCTAD.

Meat (including cattle)

India is currently an insignificant exporter of poultry, pork, beef, lamb, goat meat and mutton, having slightly less than 1 percent of the world market. Although production is likely to increase significantly, India is unlikely to become a significant world supplier of this category of commodities.

Poultry

Major exporters in terms of quantity were the United States (40 percent), Brazil (13 percent), France (11 percent), the Netherlands (11 percent), China (5 percent) and Thailand (4 percent) during 1997 to 2001. India's exports are not significant being less than 0.005 percent of world export. The world export growth rate is 6.6 percent. Among the major players Brazil (18 percent), Thailand (21 percent) and Germany (13 percent) had high export growth. Export unit price generally had a declining tendency with a rise in 2001. Major importers in terms of quantity are Hong Kong Special Administrative Region (19 percent), the Russian Federation (16 percent), Japan (10 percent), China (10 percent) and Germany (8 percent). India is not an importer. World import growth during 1997 to 2001 was 6.6 percent. Among the top importers China (36 percent), Mexico (10 percent) and France (8 percent) registered high growth.

Table A3.14. Top ten exporters and importers of poultry

* USA, PR, USVI (United States, Puerto Rico and US Virgin Islands).
Source: PCTAS, UNCTAD.

Pork

Major exporters in terms of quantity are Denmark (21 percent), the Netherlands (18 percent), the United States (10 percent) and Canada (9 percent). World growth of quantity exported was 6.23 percent during 1997 to 2001. Among the major exporters Spain (17 percent), Germany (27 percent), Canada (16 percent) and the United States (10 percent) had substantially high export growth rate. Periodically India also exports in the world market. From 1997 the export unit price declined but rose again 2001. Major importers in terms of quantity are Germany (15 percent), Italy (14 percent), Japan (11 percent), the United Kingdom (8 percent), the Russian Federation (8 percent) and Mexico (5 percent). India is not an importer of pork. The world import growth rate was 8 percent during 1997 to 2001. Among the major importing countries Mexico (25 percent), the United States (14 percent), Greece (43 percent), Hong Kong Special Administrative Region (9 percent) and the United Kingdom (9 percent) had higher import growth rates.

Table A3.15. Top ten exporters and importers of pork

* USA, PR, USVI (United States, Puerto Rico and US Virgin Islands).
Source: PCTAS, UNCTAD.

Beef

Major exporters in terms of quantity are the United States (20 percent), Australia (18 percent), Germany (8 percent), Canada (8 percent), New Zealand (6 percent) and Brazil (4 percent). India also exports 3 percent on an average. But in 2001 its export figure declined to a very insignificant level. India's major export destinations are Malaysia (around 35 percent), Philippines (30 percent), United Arab Emirates (8 percent) and Armenia (10 percent). World export growth is -1.08 percent. Among the major exporters, Brazil (61 percent), Canada (10 percent) and India (18 percent) had a positive growth rate whereas France (-21 percent), Ireland (-11 percent) and New Zealand (-23 percent) had a negative growth rate. The export price is more or less constant with slight variations. However, at the country level variations are greater. Quite interestingly, India's export unit price is significantly lower than the world average. India's low export volume may be because of product quality and lack of SPS compatibility in developed country markets.

Table A3.16. Top ten exporters and importers of beef

* USA, PR, USVI (United States, Puerto Rico and US Virgin Islands).
Source: PCTAS, UNCTAD.

In terms of quantity, major importers are the United States (17 percent), the Russian Federation (15 percent), Japan (11 percent), Mexico (7 percent) and Greece (3 percent). World import growth rate during 1997 to 2001 was 1.31 percent. Among the major importing countries, Mexico (22 percent) and the United States (8 percent) had high growth rate and Germany (-17 percent), the Russian Federation (-9 percent) and Italy (-7 percent) had negative growth rate. Import unit prices increased in some countries but decreased in others. Overall the world import unit price remains constant with a slight dip in 2001.

Table A3.17. Beef — export and import unit prices, US$/tonne

* USA, PR, USVI (United States, Puerto Rico and US Virgin Islands).
Source: PCTAS, UNCTAD.

Other meats

This includes lamb, mutton and goat meat. Major exporters during 1997 to 2001 were New Zealand (34 percent), Australia (32 percent) and the United Kingdom (9 percent). India is not an exporter. In terms of quantity, world export growth rate during 1997 to 2001 was -5.47 percent. New Zealand (-21 percent) and the United Kingdom (-25 percent) had a negative growth rate. Australia registered a positive growth rate of 6 percent. The world export unit price has increased. For New Zealand it was a significant rise. In terms of quantity, major importers are France (25 percent), the United Kingdom (17 percent), the United States (7 percent), Saudi Arabia (6 percent) and Mexico (6 percent). The world import growth rate in terms of quantity was only 0.75 percent during 1997 to 2001. Mexico (23 percent) and the United States (15 percent) registered a high growth rate among top importers during this time. Other countries have a negative growth rate.

Table A3.18. Top ten exporters and importers of other meat (not including beef/poultry)

* USA, PR, USVI (United States, Puerto Rico and US Virgin Islands).
Source: PCTAS, UNCTAD.

According to FAO, the international market for meat continues to be disrupted by animal disease outbreaks. During the first half of 2004, approximately one-third of global meat exports was affected by outbreaks of avian flu or by identified cases of bovine spongiform encephalopathy (BSE). Import bans on poultry and beef from disease-affected countries are leading to higher prices for products originating from disease-free zones. Constrained export supplies of meat are also pushing up prices for other animal protein products. The rise in prices is perhaps due to supply shortages in the global market.

Plant-based fibre

Though India exports raw cotton and jute, it is a net importer of plant-based fibre. The large exports of cotton garments are important. Moreover, all indications are that India is going to become an even more important exporter of cotton garments. The net result is that by 2020, India will account for an estimated 18 percent of the world's imports. The only large cotton exporter in the geographical vicinity is Australia, with all other Asian countries (barring Pakistan) being large importers.

Milk and milk products

Milk and milk products are likely to be among the most rapidly increasing consumption items given their high income elasticities across the income spectrum. This is likely to overpower domestic production increases. The country is therefore likely to become a net importer of milk and products. However, it will be a marginal importer accounting for barely 0.3 percent of the world market.

Forestry

It is estimated that about half of the forest area worldwide can be used for wood supply. But wood is only one component; food products such as spices, nuts, ornamental plants, some animal products, bark, medicinal plants, organic chemicals (including those for industrial uses) are others. However wood and products remain the largest import items currently and are likely to form the bulk of the imports in the future. As the bulk of the exporting countries are in the western hemisphere and Australia, opportunities for East and Southeast Asia are expected to exist but are unlikely to be exploited.

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World Trade Organization (WTO). Various years. Annual reports.

Notes

¹ Inaugural Address by Dr Manmohan Singh, National KVK Conference, 27 October 2005, National Agricultural Research Centre, Pusa, New Delhi.

² Even at 4 percent annual growth in agriculture and 10 percent growth in non-agricultural sectors the share of agriculture would be around 10 percent.

³ Strictly speaking, NSS (National Sample Survey) data are on expenditure rather than income.

⁴ The decadal rate of population growth from Census 1991 to Census 2001 is 2.14 percent.

⁵ The last official figures of 28.1 percent are for 2003–2004.

⁶ We are grateful to Jikun Huang and Jun Yang of the Center for Chinese Agricultural Policy, Chinese Academy of Sciences for the GTAP forecasts.

⁷ These five-year plans began with the First Five Year Plan, for the period 1951 to 1956. India follows a fiscal year system, from 1 April to 31 March of the succeeding year. There were three deviations from the five year plan trajectory, during three annual plans between 1966 and 1969, an annual plan for 1979–1980 and two annual plans between 1990 and 1992.

⁸ These are GNP figures. GDP figures are marginally different, at the first decimal place. The 4.2 percent in 2002–2003 was because of a relatively disastrous agricultural performance and the spectacular 8.5 percent in 2003–2004 was because of the low 2002–2003 base.

⁹ More accurately, there is no single national poverty line. The poverty line varies from state to state.

¹⁰ There has been a debate about comparability problems between the NSS surveys of 1993–1994 and 1999–2000. For present purposes, we can ignore this debate. It is sufficient to note that attempted corrections reduce the degree of poverty reduction by a factor of about one-third. However, the remaining two-thirds is also a substantial decline. The new NSS survey for 2004–2005 will enable us to obtain a better picture, when the data eventually become available.

¹¹ The rural/urban classification is a Census one and does not always reveal the true extent of deprivation. Certain parts of rural India are integrated into the urban mainstream, but other parts are not.

¹² Large NSS surveys are roughly held at five-year intervals. Before 1999/2000, the last one was in 1993–1994.

¹³ Computed from the GDP in constant 1993–1994 (and not current) prices figures given in Economic Survey 2004–2005.

¹⁴ Computed from CSO (Central Statistical Organization) figures.

¹⁵ Within agriculture, there are different subcomponents — foodgrain (rice, wheat, coarse cereals, pulses), commercial crops (oilseed, cotton, jute and mesta, sugar cane), plantation crops (tea, coffee, natural rubber), horticulture and livestock, poultry and fisheries. Most of the policy discussion however tends to focus on crop output, and within that, on foodgrain, especially rice and wheat.

¹⁶ Though these could not be attributed directly to land reforms alone.

¹⁷ 6.51 percent of area cultivated by small and marginal farmers was under oilseed in 1970–1971, increasing to 6.71 percent in 1980–1981 and 9.22 percent in 1990–1991.

¹⁸ Note that though differentiation in cropping strategies and technologies were built in, institutional and delivery mechanisms were largely similar.

¹⁹ We are grateful to an anonymous referee for this comment.

²⁰ There are several levels at which one can articulate these concerns. For the Tenth Plan (2002–2007), there was the report of the Steering Group on Agriculture and Allied Sectors (SGAAS). This was the Task Force on Agriculture, set up in September 2000. Mention should also be made of the Sharad Joshi Task Force, which also had similar points to make.

²¹ In particular, the drought of 2002 raised questions about the reliability of agriculture-related statistics, such as production, yields or state-level investments. In addition, the drought raised questions about the quality of early warning systems (or their lack) and monsoon data and methods used to gauge impact of deficient rainfall on crops. There are also questions about the efficacy of disaster management systems, which seem to be predicated on historical famine relief operations.

²² Terms of Trade, V.N. Misra, State of the Indian Farmer, Vol. 15, Ministry of Agriculture and Academic Foundation, 2004. In this study, the terms of trade were found to be unfavourable to agriculture between 1952–1953 to 1964–1965, favourable between 1967–1968 to 1977–1978, unfavourable between 1978–1979 and 1990–1991 and quite favourable between 1991–1992 and 1999–2000. Favourable agricultural terms of trade may affect the rural poor adversely, but this is a separate issue.

²³ This is actually a five-year moving average, ending at the year indicated.

²⁴ Without appropriate water-harvesting techniques, rainwater runs off. Check dams are poorly constructed and the emphasis has been on creating waterbodies on the surface rather than on converting surface flow to subsurface flow.

²⁵ For fertilizer usage, this seems to be a law of diminishing returns argument. For water, the link with deceleration in the 1990s is less clearly stated. Excessive water usage is encouraged by artificially low prices. Extrapolated, there is the argument that prices are such that environmental costs are not internalized. But was there greater internalization of such costs in the 1990s? Or was there a greater switch to more water-intensive crops?

²⁶ It must however be noted that the gross capital formation data in agriculture do not include general investment in rural infrastructure for items such as roads, rural electrification, warehousing, etc. Further investment in R&D, development of marketing networks, grading packaging, etc. are also not included here. These are both within the private as well as public sector. For instance initiatives such as Market Development by the Ministry of Agriculture. (We are grateful to an anonymous referee for this point.) All inclusive and comprehensive data on much of these issues for rural areas are not available.

²⁷ This argument is not explicitly stated in SGAAS, although it figures implicitly. It is explicitly stated in the APTP, Planning Commission, September 2001.

²⁸ However, the point should also be made that most expenditure (90 percent) is on salaries and very little is spent on actual research.

²⁹ Revamping cooperatives is an integral element in pushing credit to agriculture. See, Report of the Task Force to Study the Cooperative Credit System and Suggest Measures for its Strengthening, August 2000. This is the Jagdish Capoor Committee.

³⁰ In 1998–1999, aggregate budgetary subsidies of the central and state governments are estimated to be about 13 percent of GDP at market prices, and 85 percent of the combined revenue receipts of the centre and states. Of the total subsidies about 20 percent was for agriculture. In other words agriculture subsidies accounted for about 2.6 percent of India's GDP. See Srivastava et al., March 2003, Budgetary Subsidies in India: Subsidising Social and Economic Services, National Institute of Public Finance and Policy, New Delhi Also, Gulati and Narayanan, The Subsidy Syndrome in Indian Agriculture, 2003, Oxford University Press, New Delhi.

³¹ We would like to thank Jikun Huang and Jun Yang of the Center for Chinese Agricultural Policy, Chinese Academy of Sciences for the GTAP forecasts.

³² “Dreaming With BRICs: The Path to 2050,” Dominic Wilson and Roopa Purushothaman, Global Economics Paper No. 99, Goldman Sachs. This is actually the first BRIC report. There have been two subsequent ones.

³³ One should mention that Q1 for 2005–2006 has GDP growth of 8.1 percent and most forecasts of growth in 2005–2006 are now around 7.5 percent.

³⁴ Legitimizing tenancy is a weaker option.

³⁵ The shift to the watershed approach was a recognition of such environmental problems and the success of such land development programmes varies regionally, with greater success in the west and the south. But watershed development programmes are implemented by too many departments, with conflicting guidelines. Not only is harmonization necessary, project beneficiaries need to participate in decisions taken.

³⁶ Data are for the period 1990–1991 to 1996–1997.

³⁷ These inevitably lead to inter-state disputes.

³⁸ Some of these are addressed by the RBI Advisor y Committee on Flow of Credit to Agriculture and Related Activities from the Banking System (chaired by V.S. Vyas), which submitted its report in June 2004. There are also issues of stamp duties on land mortgages and freeing up land markets.

³⁹ Economic Survey 2004–2005. Credit is also extended through Kisan Credit Cards (KCCs) and 43.6 million cards had been issued up to March 2004, the scheme having started in 1998–1999.

⁴⁰ Where the consumer pays below the costs of procurement, storage and transportation.

⁴¹ But one should note that because of income increases, there has been a consumption shift to high value products, a point that SGAAS makes.

⁴² The overall marketed surplus/output ratio went up from 33.4 percent in 1950–1951 to 64.1 percent in 1999–2000.

⁴³ For all agricultural commodities, the marketed surplus handled by cooperatives is 10 percent, that by public agencies 10 percent and that by private trade 80 percent.

⁴⁴ Punjab and Haryana may be exceptions and Tamil Nadu, Kerala and Gujarat can be added to this list. Out of 7 161 regulated markets, grading facilities are available only in 1 321. Some states, such as Karnataka, have amended APMC Acts.

⁴⁵ Acharya gives a figure of 7 percent for foodgrain, 30 percent for fruit and vegetables and 10 percent for spices as being lost before reaching the market.

⁴⁶ ITC's e-Choupal and choupal sagar experiments can be mentioned, but there are other such experiments also.

⁴⁷ There are specific recommendations for the Prevention of Food Adulteration (PFA) Act, which we are ignoring.

⁴⁸ There is a separate point about India being adequately represented at international bodies that frame such standards. SPS standards may act at NTBs, but in addition, there is no question that Indian standards fall short. For instance, one can mandate that all food-processing units should have GMP/HACCP certification.

⁴⁹ In passing, poultry is classified as neither agriculture, nor industry, and thus suffers on both counts.

⁵⁰ Droughts and cyclones. Drought-prone areas are Gujarat, Rajasthan, Madhya Pradesh, Maharashtra and parts of Punjab, Haryana, Uttar Pradesh, Karnataka, Tamil Nadu, Andhra Pradesh, Bihar and West Bengal. See, Risk Management, Bharat Ramaswami, Shamika Ravi and S.D. Chopra, State of the Indian Farmer, Vol. 22, and Natural Disaster Management, A.R. Subbiah, State of the Indian Farmer, Vol. 21, Ministry of Agriculture and Academic Foundation, 2004.

⁵¹ In publicly funded R&D, there has been an exclusive focus on rice and wheat. But one should also mention that most new areas (such as biotechnology) are in the private sector. Consequently, public-private partnerships rather than the public sector alone, provide the key.

⁵² The Kelkar Task Force on Direct Taxes argued for taxation of agricultural income on the grounds of horizontal and vertical equity. That apart, there is a conduit for tax evasion since non-agricultural income is disguised as agricultural income. The proposal was for a tax rental arrangement between the centre and the states under Article 252 of the Constitution, whereby the centre would collect tax on agricultural income and pass it on to the states. See, Report of the Task Force on Direct Taxes, Ministry of Finance, December 2002. The Task Force estimated that because of the threshold, 95 percent of farmers would be below the personal income tax net. Political economy has ensured that this taxation proposal is redundant. In the absence of the rural sector being taxed, it is impossible to extend the number of income tax assessees from the present figure of around 30 million.

⁵³ Within the CSS category, one should specifically mention the Swarnajayanti Gram Swarozgar Yojana (SGSY) for self-employment of the rural poor, the Sampoorna Gramin Rozgar Yojana (SGRY) which is a wage employment scheme, the rural housing scheme known as Indira Awas Yojana (IAY), the National Social Assistance Programme (NSAP) with ingredients of old-age pensions and death benefits and the Annapurna scheme, which provides for subsidized food.

⁵⁴ There are many more. APTP says there are more than 200 centrally sponsored schemes (CSSs).

⁵⁵ NSS data for the 58^th round (July–December 2002) on village facilities is an example, covering five heads of proximity to administrative centres, access to the rest of the economy, physical and social infrastructure, coverage of government support programmes and presence of private initiatives.

⁵⁶ From 1 January 1995, the Uruguay Round agreements entered into force and the historical GATT was subsumed under the WTO umbrella.

⁵⁷ Two other agreements also have indirect implications for agriculture. First, there is the agreement on TRIPs (trade-related intellectual property rights), with provisions on geographical indications (GIs) and plant and seed varieties. Plant and seed varieties have to be protected through patents, or through a sui generis system, which can be weaker in the sense of providing less protection to the patent holder. There is the agreement on SPS measures, which allows standards. There is documentation that SPS standards act as NTBs (non-tariff barriers). Milk, fruit and groundnut exports from India can be mentioned.

⁵⁸ The threshold is 5 percent for developed countries and 10 percent for developing countries. LDCs have no commitments in agriculture.

⁵⁹ There is a difference between developing and developed countries in terms of the reductions required and in terms of the timeframe over which reductions have to be brought about.

⁶⁰ TRQs have low tariffs for imports below a threshold and higher tariffs for imports above that threshold.

⁶¹ There are separate commitments on value and volume of export subsidies.

⁶² UNCTAD and WTO Annual Reports are good sources. Depending on the source of the estimate, 90 percent of welfare gains from market access liberalization were supposed to come from agriculture. These are welfare gains rather than trade gains and hence, accrue to consumers in developed countries also, through lower prices. But the export or trade gains to developing countries are not insubstantial.

⁶³ This is in addition to the regular safeguards clause and is a special feature of the AOA.

⁶⁴ The argument is simple. Protectionist pressures in the EU, Japan, Republic of Korea and even the United States, are extremely complex.

⁶⁵ The papers in WTO Agreement and Indian Agriculture, edited by Anwarul Hoda, Social Science Press and ICRIER, 2002, represent a comprehensive survey.

⁶⁶ They vary from year to year though. Also, the text has been kept simple. There are separate reduction commitments for product-specific and non-product-specific support.

⁶⁷ The efficiency of present public expenditure on agriculture in the form of input subsidies is an internal reform issue.

⁶⁸ Existing export subsidies are not agriculture specific. Introduction of agriculture-specific export subsidies will also run into the fiscal constraint problem.

⁶⁹ Implying QRs on balance of payments (Article XVIIIB of GATT) grounds. QRs through Articles XX and XXI of GATT continue.

⁷⁰ There is a long list, encompassing public investments, R&D, extension services, credit, insurance, infrastructure, procurement and distribution, input subsidies, contract farming, export and import controls and restrictions on inter-state movements. All of these have been mentioned earlier.

⁷¹ There are also WTO-linked issues connected with fertilizer imports and the viability of domestic fertilizer plants, especially the ones that produce urea.

⁷² Though there are other arguments as well…“On the other hand, agricultural trade has not been reformed in true spirit. Despite the framework of commitments in the Uruguay Round, prevalence of high subsidies rendered the trade arena iniquitous for different stakeholders. Secondly, the volatility of prices in the international market had caused border deprotection beyond available tariff levels.Thirdly, different countries have varying concerns, primarily on account of their production profile and trade interests. India's commodity production profile is highly diversified with a very large population dependent on agriculture for its livelihood. In the past few years, the terms of trade in agriculture have already become weak due to differentiate behaviour of prices in the domestic market, which is not as insulated from the rest of the world.” We would like to thank an anonymous referee for this argument.

⁷³ See, South Asia Development and Cooperation Report, 2002 and 2004, Research and Information System for the Non-Aligned and Other Developing Countries and Nisha Taneja, Muttukrishna Sarvananthan, Binod Karmacharya and Sanjib Pohit, “Informal Trade in India, Nepal and Sri Lanka,” in, Mohsin Khan editor, Economic Development in South Asia, Tata McGraw Hill, 2005.

⁷⁴ Consider, for instance, the export to GDP ratio, exports meaning exports of goods, as well as services. In 2003, this was 14 percent for Bangladesh, 22 percent for Bhutan, 14 percent for India, 85 percent for Maldives, 17 percent for Nepal, 20 percent for Pakistan and 36 percent for Sri Lanka (UNDP 2005). Conversely, the import (goods plus services) as a ratio of GDP was 20 percent for Bangladesh, 43 percent for Bhutan, 16 percent for India, 66 percent for Maldives, 29 percent for Nepal, 20 percent for Pakistan and 42 percent for Sri Lanka (UNDP 2005).

⁷⁵ In 2004–2005, India's aggregate exports were US$79.247 billion and India's aggregate imports were US$107.066 billion (RBI 2004–2005). These are trade figures through the Directorate General of Commercial Intelligence and Statistics (DGCI&S), used by the Ministry of Commerce, and cover merchandise trade alone. They exclude services. In addition, they exclude trade of goods that do not require customs clearance. This is more of an issue for imports than for exports. However, it is unlikely that goods trade not requiring customs clearances ever figures in trade with other SAARC members. It is fair to argue that this import figure is slightly misleading. In 2004–2005, 27.9 percent of India's import basket consisted of crude petroleum and products and these should be excluded to obtain a better idea of SAARC shares. If this is done, imports from the SAARC region as a share of total non-POL (petroleum, oil, lubricants) imports increase to 1.2 percent. India's present cycle of reforms dates to 1991.

⁷⁶ However, fish products are not covered by the WTO agreement on agriculture.

⁷⁷ There continue to be quantitative restrictions on exports of agricultural products, apart from trade of some products being channeled (canalized) through designated state trading agencies.