Why WTO benefits eluded India
Source: By Dr S.S. Chhina: The Tribune
It seems an irreconcilable fact that a country with 16 per cent of world’s population should barely have 2 per cent share in world trade. However, joining the WTO was a compulsion for India because it could not afford to remain aloof from the other 125 countries with whom it was trading. Ostensibly, everything seemed prudent but the ideological ambience presented by the WTO was blurred. Though India is a predominantly agricultural country, it was heading towards industrialisation and urbanisation without being focused on rapid industrial growth. There were opinions that free trade would never be in favour of the Indian economy and it would further exacerbate the poor industrial sector.
The compulsion to adopt a protectionist policy was based on rationality and the doubts raised about it were quite reasonable. Since India was an agricultural economy, it was feared that a lack of protectionism would have adverse effects in case agricultural goods started selling in Indian markets. However, the doubts were being cleared by 2007 after the notion that the prices of agricultural goods are lower in international market was proved erroneous. In that very year, India imported wheat and its price was nowhere less than Rs 1,050 per quintal, whereas the procurement rate of wheat in India was only Rs 750.
In the same year, when India showed an impressive performance in the export of Basmati, the demand was made for the Sharbati and PUSA rice, which were like Basmati but denied export permission by the government. Later on, as a result of the pressure exerted by the Rice Exporters Association, export of these varieties was allowed and it was a step that was not only beneficial for exporters but also for the farmers. After applying the WTO provisions, all developing countries progressed at a higher rate as compared to the developed countries. Though the dominance and hegemony of the developed countries in industrialisation had given blurred results for developing countries, it was observed that wherever imports increased, exports too increased. Exports from developed countries have increased by 5.8 per cent, while those of developing countries have increased by 8.8 per cent, and imports have increased by 9.2 per cent. This created deficit in the current account. India had progressed at an average rate of 20 per cent after the WTO provisions were made applicable.
In 2009-10, the exports from India were $178.8 billion, with a deficit of $109.6 billion. In 2010-11, exports further increased to $251.1 billon, but imports increased to $369.8 billion, escalating the CAD to $198.9 billion. In 2013-14, from April to October, only the exports were to the tune of $179.37 and were -6.32 per cent in the same period of the previous year. However, the imports increased 3.80 per cent, with $270.05 billion. Invariably, the CAD is further escalating, causing more problems for the fragile economic situation.
Every country is conscious about prosperity and generation of employment through international development. Apart from the WTO, India is also a member of other organisations like SAARC and ASEAN and it also has bilateral trade agreements with a number of countries compatible for easy accessibility and smooth economic growth.
The decline in the value of Indian currency vis a vis the dollar could boost international trade because it becomes cheaper and more goods and services can be purchased by the same amount of money. For example, there was a time when a dollar could purchase goods worth Rs 40, now it can purchase goods worth Rs 60. Invariably, inflation has eroded the benefits offered through devaluation of the currency.
The inflation of agricultural goods has particuarly resulted because the higher cost of production juxtaposes the international competition with higher prices in the Indian market. Much could not be accomplished in the export of agricultural goods, but the share of these goods has decreased over this period. The situation in the international market has negated the belief that the Indian would be a sufferer. Inflation is a perpetual impediment and not only for the domestic consumer. International trade has to be controlled for the resurgence of the demand of Indian goods at the international level.
It would be sheer ineptitude to depend on the resilience of the Indian economy to settle on its own. Rather strenuous efforts are needed to avail the larger benefits offered by higher agricultural prices in the international market. Import substitutes can easily be developed in the agricultural sector for which very huge sums of foreign currency are paid. Sanitary and phyto-sanitary measures are applied in the guise of protecting plant, human and animal life to keep a check on export of Indian farm goods. These non-tariff barriers are a big concern in view of WTO commitments.
Marine products are the highest export earner for India but attract zero per cent duty in the USA and 5 per cent in Japan. The duty on these products in the European Union is around 7 per cent to 8.5 per cent. China, which is the third largest importer of fish from India, applies 21 per cent duty on it. Oil meals and cakes are the second biggest agricultural export of India. While Indonesia levies no import duty, it is 12 per cent in Singapore and 15 per cent in Bangladesh. India’s rice export attracts zero duty in South Africa, Bangladesh and Malaysia but 50 per cent in Philippines. India’s export policy in the past has reflected a greater concern for the consumer than for the farmer. Recently, the government has tended to show greater sensitivity to the interests of the farmer. There is needed to look into planning for exports by identifying the agricultural products as well as new markets being offered by WTO commitments.
It seems an irreconcilable fact that a country with 16 per cent of world’s population should barely have 2 per cent share in world trade. However, joining the WTO was a compulsion for India because it could not afford to remain aloof from the other 125 countries with whom it was trading. Ostensibly, everything seemed prudent but the ideological ambience presented by the WTO was blurred. Though India is a predominantly agricultural country, it was heading towards industrialisation and urbanisation without being focused on rapid industrial growth. There were opinions that free trade would never be in favour of the Indian economy and it would further exacerbate the poor industrial sector.
The compulsion to adopt a protectionist policy was based on rationality and the doubts raised about it were quite reasonable. Since India was an agricultural economy, it was feared that a lack of protectionism would have adverse effects in case agricultural goods started selling in Indian markets. However, the doubts were being cleared by 2007 after the notion that the prices of agricultural goods are lower in international market was proved erroneous. In that very year, India imported wheat and its price was nowhere less than Rs 1,050 per quintal, whereas the procurement rate of wheat in India was only Rs 750.
In the same year, when India showed an impressive performance in the export of Basmati, the demand was made for the Sharbati and PUSA rice, which were like Basmati but denied export permission by the government. Later on, as a result of the pressure exerted by the Rice Exporters Association, export of these varieties was allowed and it was a step that was not only beneficial for exporters but also for the farmers. After applying the WTO provisions, all developing countries progressed at a higher rate as compared to the developed countries. Though the dominance and hegemony of the developed countries in industrialisation had given blurred results for developing countries, it was observed that wherever imports increased, exports too increased. Exports from developed countries have increased by 5.8 per cent, while those of developing countries have increased by 8.8 per cent, and imports have increased by 9.2 per cent. This created deficit in the current account. India had progressed at an average rate of 20 per cent after the WTO provisions were made applicable.
In 2009-10, the exports from India were $178.8 billion, with a deficit of $109.6 billion. In 2010-11, exports further increased to $251.1 billon, but imports increased to $369.8 billion, escalating the CAD to $198.9 billion. In 2013-14, from April to October, only the exports were to the tune of $179.37 and were -6.32 per cent in the same period of the previous year. However, the imports increased 3.80 per cent, with $270.05 billion. Invariably, the CAD is further escalating, causing more problems for the fragile economic situation.
Every country is conscious about prosperity and generation of employment through international development. Apart from the WTO, India is also a member of other organisations like SAARC and ASEAN and it also has bilateral trade agreements with a number of countries compatible for easy accessibility and smooth economic growth.
The decline in the value of Indian currency vis a vis the dollar could boost international trade because it becomes cheaper and more goods and services can be purchased by the same amount of money. For example, there was a time when a dollar could purchase goods worth Rs 40, now it can purchase goods worth Rs 60. Invariably, inflation has eroded the benefits offered through devaluation of the currency.
The inflation of agricultural goods has particuarly resulted because the higher cost of production juxtaposes the international competition with higher prices in the Indian market. Much could not be accomplished in the export of agricultural goods, but the share of these goods has decreased over this period. The situation in the international market has negated the belief that the Indian would be a sufferer. Inflation is a perpetual impediment and not only for the domestic consumer. International trade has to be controlled for the resurgence of the demand of Indian goods at the international level.
It would be sheer ineptitude to depend on the resilience of the Indian economy to settle on its own. Rather strenuous efforts are needed to avail the larger benefits offered by higher agricultural prices in the international market. Import substitutes can easily be developed in the agricultural sector for which very huge sums of foreign currency are paid. Sanitary and phyto-sanitary measures are applied in the guise of protecting plant, human and animal life to keep a check on export of Indian farm goods. These non-tariff barriers are a big concern in view of WTO commitments.
Marine products are the highest export earner for India but attract zero per cent duty in the USA and 5 per cent in Japan. The duty on these products in the European Union is around 7 per cent to 8.5 per cent. China, which is the third largest importer of fish from India, applies 21 per cent duty on it. Oil meals and cakes are the second biggest agricultural export of India. While Indonesia levies no import duty, it is 12 per cent in Singapore and 15 per cent in Bangladesh. India’s rice export attracts zero duty in South Africa, Bangladesh and Malaysia but 50 per cent in Philippines. India’s export policy in the past has reflected a greater concern for the consumer than for the farmer. Recently, the government has tended to show greater sensitivity to the interests of the farmer. There is needed to look into planning for exports by identifying the agricultural products as well as new markets being offered by WTO commitments.
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