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G. Chandrashekhar

It is unclear what moral authority countries such as the US have to demand tariff reduction. It is indeed ironical that far from removing existing distortions, the New Farm Bill 2002 of the US is widely seen as the one to further distort global agricultural trade.

MUMBAI, March 14

THE US Ambassador, Mr Robert D. Blackwill, wants India to effect a steep cut in farm tariffs. "If India increased access to its market for US agricultural goods, it would provide for all segments of Indian society greater consumer choice and resultant lower prices. This surely would be a good thing," he is reported to have said recently.

What he did not specify but left to people's imagination was who the beneficiary of the "good thing" will be. A market of one billion consumers is surely exciting for every supplier of goods and services.

After removal of quantitative restrictions on imports, the only protective instrument available is tariffs; and India is using the tariff mechanism reasonably effectively to protect domestic producers from unfair competition from imported goods.

In the last couple of years, there have been overt and covert attempts by so many to crack the burgeoning Indian market open by pressuring the Government to reduce tariffs. Mercifully, and for a change, the Government has not succumbed.

India produces a large variety of agricultural commodities, including essential food items such as grains, oilseeds and sugar, fibres such as cotton as also plantation crops such as tea, coffee, pepper and rubber. As two-third of the population is dependent on agriculture and allied activities for livelihood, it is critical that the policy makers bestow maximum attention to this largest private sector enterprise.

Indeed, in India, agriculture is not an enterprise, but a livelihood issue. It is totally unlike in developed countries where agriculture is highly commercialised - it is agribusiness - and only a small fraction of population is dependent on it.

Countries that highlight the benefits of market access and consumer welfare must first ask themselves whether they practice what they preach. The US, among others, provides a classic example of granting massive amounts of agricultural subsidies that depress international prices and rob growers in many developing countries of their livelihood.

With most of the developed world - the US, the European Union, etc. - paying scant regard to the Doha Development Agenda, it is unclear what moral authority countries such as the US have to demand tariff reduction. It is indeed ironical that far from removing existing distortions, the New Farm Bill 2002 of the US is widely seen as the one to further distort global agricultural trade. While the Indian Government has done well to ignore the suggestion of the US Ambassador, it is necessary for the policy makers here to introspect. Tariffs, no doubt, are necessary to protect the interests of Indian farmers and small businesses. But high tariffs are only a temporary shield to ward off threat from low priced and highly subsidised imports.

Policy initiatives for making Indian agriculture competitive are imperative. In most crops, production growth trails population and income growth resulting in shortages and dependence on imports. Entrenched imports are no good for the economy.

In the last four years, the contribution of agriculture to GDP growth has been far from impressive. That nature was unkind in three out of last four years may be advanced as an acceptable excuse. But that would hardly help.

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