Today’s world is a global village. The long
process of liberalising the multilateral trading system based on the theory
that “Free Trade is the First Best Policy” any economy can opt for, got initiated
way back in 1947 with the signing of the General Agreement on Tariff and Trade
(GATT).
As of today, the multilateral trading
system is guided by the multilateral rules set under the World Trade
Organisation (WTO), the successor to GATT formed in 1995. It aims for a “Freer and Fair” Multilateral
Trading Regime (MTA).
The fair trading regime is expected to
usher in all round development for the masses of the participating countries –
a development changing the lives of the present generation, along with
sustaining the benefits for the future generations to come. That is, the MTS is
strongly linked to the social, economic and environmental dimensions of
“Sustainable Development”.
That trade expands markets and choices
while lowering prices, thereby benefitting all economic agents of the economy
cannot be denied. However, the pace at which it will happen and the process
that needs to be followed depends on the respective economies we consider. To
adjust to the pace and the process, comes the importance of the national
policies, both in economic and other fields. At this juncture, the economic,
social, environmental areas are interlinked.
India initiated its liberalisation process
from mid-80s of the last century, focussing on the area of Foreign Investment.
The liberalisation process got strengthened in the 90s. The WTO gave a further
push to the process, India being a founder member to the organisation. Along
with getting market access in 122 countries, the country also had the
responsibility and thus pressure of giving increased market access to those
countries; not to forget that the number was steadily increasing. Not only was
there the issue of giving increased market access, in came the obligation of
making the national policies compatible to WTO.
A series of policy adjustments were
required; this got followed by structural adjustments. The promised benefits
were not clearly visible in many aspects. The underlying reason in some cases
are the nature of the benefits while in some other cases, the diplomatic
tackling of the MTS by “other members” to grab a bigger share of the cake.
Along with these, the more important issue is the juncture at which the economy
was at that point of time. Were all our sectors ready to face foreign
competition? Were all our policy suitable to handle the pressure of getting
integrated to the rest of the world? Did our socio economic structure had the
safety-net designed to safeguard the society and the economy from the strong
initial thrust of globalisation.
To get into a detailed discussion of the
above issues, let us make an attempt to dis-integrate the globalisation process
under the MTS we have referred to. Globalisation implies integration of the
economy to the rest of the world. To integrate to the rest of the world,
liberalisation of the national economy is needed. The components of the
liberalising the economy targets the following areas:
1. Reducing import and export barriers, i.e., liberalising the external
sector
2. Addressing the internal policies which implies
a. Reduced government control over domestic market, i.e. liberalisation
of the domestic market
b. Privatisation of public sector organisations
c. Making domestic policies compatible with International Obligations
The above process is expected to result in
structural changes, thereby leading to some adverse implications on the various
segments of the economy in the absence of safety net created through proper
policy implementation. Now, it needs to be understood that in a populated
developing country like India creation of a safety net through Government is
not sustainable in the long run. Proper policies, directed to the specific
segments emerges as the key ingredient to survive and prosper in the present
age of globalisation.
India is a predominantly agrarian economy. This
does not imply that the manufacturing and service sectors are of less
importance or there has not been improvement in technology, manufacturing and
service sector. But there is some crucial differences between the agriculture
and non-agriculture sectors in India in the context of the globalisation
regulated by the MTS. In the first place, even today, more than 50 percent of
Indian population depends on the agriculture sector for their livelihood. This
makes the sector stand out as the primary one to get its due attention of
safeguard from the adverse implications of globalisation. In the second place
comes the composition of the Indian agricultural sector. The sector is
dominated by marginal, small and medium level farmers. Also, traditionally,
Indian agriculture sector, being a family oriented sector, labour productivity
has been relatively low. Being a family oriented sector, investments in this
sector is not very high. A major part of the sector still follows traditional
way of production. All these factor have resulted in this sector getting a
certain extent of support from the government in different aspect s through
different government policies.
In the next place, it is the way
agriculture has been treated in the WTO makes the sector different from the
non-agricultural sector. It is not just the issue of reducing import barriers
in the form of tariff that has been negotiated in the WTO. Negotiations in this
sector rotated around a complex net of tariff, tariff quota, subsidies, both
export and domestic along with issues of food safety and food security.
These two sets of issues have resulted in
globalisation bringing down quite severe adverse implications for the Indian
agricultural sector.While the reduced subsidies implied some positive impacts
on Indian agro exports through increased global prices, privatisation and
liberalisation of the domestic market coupled with lack of proper safety net
through policies brought in adverse implications for the sector. The severe
adverse implications became most visible through the suicide cases of farmers
throughout the country. Data trend also reveals a declining trend in
agricultural growth of the country. So, it becomes apparent that liberalisation
is yet to bring in some net positive impact on this sector.
This critical scenario calls for a detailed
analysis of the sector, which would be taken up gradually. In this issue paper
the major issues are considered, on which detailed analysis will be taken up in
an attempt to come up with policy suggestions.
One of the major issue which has
traditionally disturbed the agricultural sector is that of debt. This issue has
intensified with the process of liberalisation through privatisation of the
market (which includes the input market of agriculture like seeds and fertilisers
and pesticides) and erosion of government subsidies. Coupled with lack of
proper policy initiative and infrastructure specifically designed for the
sector in general and the agro categories in particular have led to the farming
sector getting into a debt trap. The Increased global prices of agro products
as a result of decreased subsidies led farmers shift to cash crop production,
thereby bringing in adverse implication in terms of food production on one hand
and increased cost of production on the other. The liberalisation of the agro
market through decreased restrictions at the border led to increased
competition from global producers which in many cases could not be faced by
domestic producers.
At this juncture certain points need to be
considered. It cannot be denied that globalisation brought in adverse
implications for Indian agro sector. However, in this era of globalisation, it
is not possible for a country to move away from it. What is required is
domestic policies directly addressing the adverse situation. To elaborate a bit
we consider the case of Indian Edible Oil.
“From 70s to the late 80s, India was a
heavy importer of edible oils. In 1986– 1987, India produced 3.9 MT of edible
oils, and imported 1.5 MT (28% dependency). However, thanks to the Technology
Mission on Oilseeds, the total oilseed production soared from 11.3 MT in
1986–1987 to 21.5 MT in 1993 (10.5% average annual growth). Imports fell to a
negligible 0.35 million tonnes. In 1998, as a temporary shortage of edible
oils, combined with unchecked hoarding drove up prices, the government
liberalised imports. At the same time the US flooded the world market with
soyabean and soya oil, further driving down international prices of soyameal
and all edible oils. As a result India has become the largest edible oil
importer in the world. 43% of the total edible oil available in the country is
imported [17]. As the acreage under oilseeds decreases, with farmers reeling
under the price collapse, further imports are envisaged.” (Vandana Shiva 2004)
In the above case, it cannot be denied that
the globalisation coupled with the western world leaving no stone unturned to
grab the bigger share of the cake lead to the disaster. However, the unchecked
hoarding driving up the prices could have been tackled if the proper tracking
system along with the policy would have been in place. That the prices are
increasing due to unchecked hoarding could have been identified and dealt with
instead of liberalising imports at that point of time. In the case of a
temporary shortage, the relevant WTO provision of restricting exports to deal
with it could have been used.
The case is a dated one. Still it is
brought in here just to initiate a discussion that there can be situations
where a domestic initiatives might be designed to fight the adverse impact.
That globalisation brings in adverse implications
for certain economic agents, especially the weaker sections of the society
cannot be denied. However, it also brings in opportunities. Moreover, global
initiatives from various segments are initiated to address the issues of the
weaker sections.
After the Millennium Development goals
(MDG), the global Community through United Nations (UN) are gearing up for the
Sustainable development Goals (SDG) to be initiated in 2015. The resource
document proposes “End Hunger, Achieve Food Security and Improved Nutrition and
Promote sustainable Agriculture” as a goal (SDG2). (65th annual UN
DPI/NGO Conference Outcome Resource Document). Under Actions, recommendations
and partnerships of SDG2, it proposes
“A SHIFT to sustainable agriculture and
food systems, food security and nutrition is essential, and key actions to this
end include the following:
· Small-scale food producers
empowered
·
Hunger and all forms of
malnutrition ended, and full access to food ensured
·
Inclusiveness in
decision-making on sustainable agriculture, food security and nutrition
·
Food systems established which
are sustainable, diverse and resilient, less wasteful, restore soil fertility
and halt land degradation
·
Trade policies reshaped and
food price volatility mitigated.
For this shift to take place, governments,
international organizations, private sector, academia and civil society must
work together in order to mobilize the finance, research, technology and
capacity building needed, and shape the enabling environment such as trade, policies,
and multi-stakeholder partnerships.”
The SDG2 addresses the concerns which
touches the problems coming out in the agro sector of the Indian Economy.
Building on the contribution that trade can
make to sustainable development, WTO Staff working Paper ERSD -2014-07, Thoughts on how trade, and WTO
rules can contribute to the post-2015 development agenda by Michael
Roberts paper “offers thoughts on 10
contributions that trade, and WTO rules, can make to the post-2015 development
agenda”. Roberts further states that “the
list is indicative, not exhaustive” In
practice, trade and WTO rules contribute in many other ways than the 10
outlined in this paper the complex way in which trade and WTO rules
interact with a diverse set of issues ranging from development financing and
green growth to decent work, food security, health systems and poverty
eradication. These contributions are
organized around three headings: WTO rules as part of the enabling environment
for the achievement of the post-2015 development agenda; the role that trade,
and WTO rules, can play in meeting possible specific goals (including possible
Sustainable Development Goals); and the contribution that Aid for Trade can
make to financing the post-2015 development agenda (see Table 1).
Table: indicative contributions that trade
and WTO rules can make to the post-2015 development agenda
Heading
|
Specific Contribution
|
I.
Trade rules as part of the
"enabling environment"
|
1. WTO as a "Global Public Good"
2. Achieving an "inclusive" multilateral
trading system.
|
II.
The role that trade, and WTO
rules, can play in meeting possible specific goals
|
3. Eradicating poverty
4. Promoting inclusive growth
5. Promoting the goal of sustainable growth
6. Trade as one of the elements to achieve food
security
7. The interface between trade policy and public
health
8. A "rights" based system, balanced with
"obligations" and dispute mechanisms
|
III.
The Contribution of aid for
Trade
|
9. Promoting financing through trade and investment
- the role of Aid for Trade 10. A data revolution to improve trade statistics
and track trade's contribution to development
|
Source: Author.”
The above paragraph brings in a suggestive
features that can be considered when addressing the issues in Indian Agro
sector.
We need to accept the fact that at this
point going away from globalization is not a viable option for India. What the
situation and the time demands is being a part of the process while formulating
specific sector oriented policies to address, decrease and gradually eradicate
the negative impact of the same.
Reference:
1. S. Vandana, “The Future of food: countering globalization and
Recolonization of Indian Agriculture”, Futures 36 (2004) 715-732
2. 65th
Annual UN DPI/NGO Conference Outcome Resource document, August 2014.
3. Roberts. Michael, “Thoughts on how trade, and WTO rules can
contribute to the post-2015 development agenda”, 2014, WTO Staff working
Paper ERSD -2014-07
