CHAPTER V
IMPACT OF THE NEW ECONOMIC POLICY ON THE
AGKICULTURAL SECTOR
Background
India continues to be predominantly an agrarian and rural economy
in terms of her population and work force even after more than five
decades of independence. About seventy per cent of the Indian population
still live in rural areas and nearly sixty five per cent of the total work force
are even now engaged in agricultural and allied activities'. Compared to
the share of work force, the share of agriculture on GI)P decreased from
48.6% in 1950-5 1 to 24.7'36 in 1997-98. More than 40% of the Indian poor
are in the rural areas2. Rural urban disparity in per capita expenditure and
social indicators is on the rise.
The average annual growth rate of per worker value added in
agriculture was lower in the post-reform period than in the pre-reform
period3. In view of the large size of the rural population and agricultural
work force, the extent of rural poverty and unemployment, and the everrising rural urban gap, ;agricultural growth and gains in agricultural
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productivity need special attention and treatment. Agriculture still holds the
key to ensure pro-poor gi-olvth, provide economic security, reduce poverty
and generate employment opportunities in a developing country like India.
In the New Economic Policy under the WTO-regime Indian
agriculture is getting integrated to global agricultural business. This would
have far reaching implications for Indian agriculture and thereby for the
rural population, their food .security, employment and poverty etc. It is for
the first time in the history of multilateral trade negotiations that
agriculture has been brought under the purview of the GATT of 1994. It
aims at eliminating distortions in global trade of agricultural produce by:
1.
Lowering domestic support to agriculture.
2.
Replacing all non-tariff barriers (NTBs) by bound tarifp rates and
eventually slashing down even tariff barriers.
3.
Providing access to markets of each inember country.
4.
Lowering export subsidies in agriculture trade.
It is often argued that such an integration of agriculture with global
market would provide an opportunity of level playing to all the members of
WTO. But the protagonists of such an argument conveniently forget that
the development stage. sectoral composition of income and work force,
marketable surplus and competitive capability of the developed, the
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developing and the least developed countries are not the same. In the
agricultural sector of tieveloping countries 60 to 80% population are
engaged in agriculture and only 2% of the population is engaged in agriculture
in developed countries in 1999.5 Unlike the developed countries where
agriculture is a business, in the developing countries agriculture is, to a
great extent, a means o:t' livelihood and part of a way of life. In 1997 the
respective shares in the global agricultural export of Western Europe,
North America. Asia, I.atin America, Central Europe, Eastern Europe and
the Middle East were 41%, 19%. 19.6%, 11.9%, 3.8%, 3.7%, and 1.0%
respectively. Clearly 60% of world agricultural exports are done by the
developed c ~ u n t r i e s . ~
The gap between the low-income economies and high-income
economies in terms of percapita GDP has increased only marginally during
the 90's from 1.6 1% to 1 .63%.7 The F.A.0 estimates suggested that there
are more than 800 million people in the world who are chronically undernourished. Agriculturall trade liberalization has not contributed positively to
world food security. Against this background of two widely different
paradigms, the developed and developing countries capabilities to gain from
the agreement on agriculture (AOA) differ widely. The problem is not as
simple as it is being visualized and propagated by the pro-WTO intellectuals,
economists. experts, pkmr~ers,fanners, politicians and administrators.
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According to the AOA, the member countries- both developed and
developing- are obliged to gradually open up their agricultural sectors to
world trade by removing all the trade distortions. As a signatory to the
GATT agreements 1994 and a founder member of WTO, India is
committed to implement various agreements and provisions pertaining to
AOA. These include commitments on
(1 )
Domestic supports
(2)
Market access
(3)
Export subsidies
(4)
Agreement on sanitary and phyto-sanitary issues. Trade related
intellectual property rights, social clauses and labour issues would
also have an impact on the Indian and the Kerala agriculture.
As a result of the commitment on domestic support. the upper limit of
total aggregate measuremei?t of support (AMS), both products specific and
non-products specific, for the developing countries such as India would be
10% of the total of agricultura! production. A developing country whose AMS
remains below 10% (5% in the case of developed countries) is not subject to
any reduction commitments These are the "de-minimize levels". Articles 6,
para 2 of AOA exempts non-product specific domestic support by the
resource-poor and low-income producers fkom AMS. Nevertheless domestic
support measures (such as '.green box and blue box" policies)8, that have a
minimum impact on trade are excluded from reduction commitments.
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Protection Provisions
With regard to market access, all the existing quantitative
restrictions and non-tariff barriers (NTBs) are to be replaced by the
"equivalent tariff barriers (bound tariff rates-BTRs) during the transitional
period, i.e., from 1st January 1995 to 31st December 2004. According to
AOA, the unweighted average reduction of 'bound rates' must be 36 per
cent (24 per cent for developing countries) with minimum cut of 15 per
cent for each commoditj (10 per cent for developing countries) over a
period of six years (10 years for developing countries) for developed
countries. Least developed countries are not required to reduce tariffs. The
minimum market access quota is to be expanded to 5 per cent of the total
domestic consumption wiih effect from 1st January 2005. However, there
are certain protection provi:sions in the form of "safety trigger" custom
duties, anti-dumping clauses and countervailing duty rights, e t c 9
The AOA prohibits export subsidies, unless they are specified in a
member's list of commitments. The agreement requires WTO members to cut
both the amount of export subsidy and the quantities of goods that receive
export subsidies. The developing countries are required to reduce the value of
export subsidies by 24 per cent (36% in the case of developed countries) of
the 1986-90 base period average and the quantity of subsidized exports is to
be reduced by 14 per cent (21% in the case of developed countries) over a 10
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year period"' (six years in the case of developed countries). Here, too, there is
limited flexibility. Least developed and net food importing countries are
exempted from such reduc:tions.
'rhe development of 'terminator seed technology' is going to be
another serious problern~ fbr the farmers of third world countries. The
patent under the heading of control of Plant Genetic Expression, dubbed as
terminator technology, vvas issued in the US on 3rd March 1998. Small
marginal and medium fanners, in particular, of the third world, cannot
afford to purchase seed for every sowing. Besides, developing countries
can face a serious problem from bio-engineered crops. The interest of the
MNC's, on the other hand, lies in expanding the range of inputs to be
purchased by the farmers. Trade related intellectual property rights (TRIPS)
measures under WTO would also influence agriculture of the developing
countries by way of patent of seeds and progent of milch animals.
Though the primary sector's contribution to GDP in India has
declined reaching at 38.7 per cent in 1991 their share in the total
agricultural workforce, declined from 72 per cent in 1951 to 60 per cent in
1991. In contrast, the share of agricultural labourers went up to 26.3 per
cent in 197 1 from 19.7 per cent in 195 1 and remained close to 26 per cent
in 1991," as is clear frorn Table 5.1. It is tantamount to the transformation
of significant proportion of the rural population into landless agricultural
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labourers. At the same rime, the global economy has achieved a remarkable
level of diversification and structural change
Table 5.1
Share of Agricultural Workers in Total Workforce in India
Percentage Share
--24.94
66.52
1981
1998-99
37.76
37.49
-64.70
62.51
59.74
Source: I . Governmenf oj' India (IYS5/, Ii~dian Labour sfixfi.slics 1995, Labour
Burruu, Shimla
2. Tha~narajukshi It 2griculfwe and economic refornu': Economic and
political wr&y Vo).B X V ,No. 33, 14-20-Augur1 199.9,p 2294
Considerably, the desired structural changes with respect to the
proportion of labour force and population dependency ratio have not taken
place. During the first two decades of planned economic development, the
proportion of labour force in agriculture remained stagnant, close to 70 per
cent, as is clear from 'I'ablc: 5.1. It came down to 66.5 per cent in 1981 and
64.8 per cent in 1991. It was 64.7 per cent even in 1998-99.12 Thus, the
labour shift from agriculture to non-agricultural activities over four decades
has been only five per cent. It was only 1.7 per cent during the eighties and just
0.1 per cent during the nineties. This, along with low labour productivity, is
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among the major limitations of Indian agriculture in particular and that of the
Indian economy in general. Ihis has given rise to an ever widening mal-urban
gap. Nearly three-fourths" of the Indian population still inhabit the rural areas,
about half of whom live in wretched poverty'4. "Despite all our achievements,
onsthird of our citizens still live below a modestly defined poverty line'.I5
Basic amenities continue to elude them. In a way, 65 per cent of the work force
engaged in agriculture contributed (consumed) 28 per cent of GDP in 1991 and
24.7 per cent in 1998-99, as is evident tiom Table 5.2.
Share of Agriculture in GDP and GCP
Table 5. 2
Sectoral Share of Agriculture in GDP (at Factor Cost) and Gross
Capital Formation (GCP)
Source: I
Government offndia. Indian Economic Survey (Various issues), New Delhi.
2 . Government of Indicr. ilgricultural Statistics at a Glance, 2000, New Delhi
P- provisional. q-qurck estimates, at 1993-94prices, a 1950-51 6- 1970-71,
c 1980-81. 1.1990-91.
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The share of the primary sector in GDP declined from 56 per cent in
1951-52 to about 28 per cent in 1995-96. The share of agriculture in
primary sector continues to he substantial. As against this, the share of
agriculture in gross capital formation (GCF) has declined considerably.
This bring out the fact that Indian agriculture, with 64.7 per cent labour
force, contributed only 2.1.;' per cent to GDP and about 5.5 per cent to GCF
in 1998-99. In fact, agri~culturehas certain upper limits beyond which it
cannot help the development of the economy. But the problem with the
Indian economy is that it has diversitied the sectoral share in GDP but not
the proportion of workforce. About 91 per cent of operational holdings in
1990-91 were less than four hectares (marginal 59.2%, small 18.8% and semimedium 13.1%).'~The future of these cultivators and landless agricultural
labourer (74.6 million) should really be a cause of wony and challenge to
Indian economists planners, policy-makers, political leadership and farmers
unions. This sizeable section of the rural population live virtually in subhuman conditions, with no future in the present situation and the emerging
scenario under the WTO regime. The new agricultural technology is biased
in favour of large farmers and against wage and small farmers, and has
aggravated inequalities."
As the economy's openness increases, the real
income of the lower inc'ome group becomes more vulnerable to external
shocks. The contraction in the real income of these groups implies a rise in
rural and urban poverty and a restricted access to food.'' Irrigated land
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produces much more than rain-fed land, the difference ranging from 30 per
cent in Bihar to 300 per cent in Maharashtra.
India's Position in World Agriculture
In terns of total arable land, population and production of major crops,
India is very well positioned in world agriculture. India has 11.8 per cent of
the total global arable lalid area and stands second. It also has the second
rank in the world with its 16.4 per cent share of population, it produces
10.6 per cent of the total world cereals and stands third. Its ranking in the
global community is second in the production of wheat (11.3%), rice
(21.5%) groundnut (26.7'%), sugarcane (21.4%) and vegetables (9.2%). In
tea (28.9%) and pulses it ranks first in the world. It stands third in the
world in cotton and fruits production with 14.5 per cent and 8.6 per cent of
global production. re~pectively.'~
All this has improved the per capita availability of cereals and
foodgrains in lndia over
;I
period of time, from 334 (in 1951) to 428 (in
1993) grams per day.'" However. compared to China, 730 grams per capita
per day in 1993. lndia is far behind. According to an estimate2', India's
population would rise to 1329.1 million by 2020. The projected food and
feed requirements in terms of cereals under three different scenarios, for 2020
is 257, 296 and 357 million tomes respectively, at 2,3.7 and 6 per cent
per capita income growth ri~tes*'.The available supply of cereals in 2020 is
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projected to be between ;!l9 and 321 million tonnes under eight different
scenario^.^'
Comparing requirements and availability, it seems that India
would hardly have any export surplus in cereals in future. Keeping in view
the present state of technology and rural infrastructure, it is not easy to raise
cereals production to the required projected level. If we fail, there can be a
serious threat to India's security. On the other hand the demand for foodgrains
in India is likely to decline by about 20 million tonnes in 2 0 2 0 . ~ ~
Table 5.3
Share of Major CropICrop Category in Total Cropped Area in India
during 1950-97
1970-71
1 1.O
Rice
Pulses
Foodgrains
Oilseeds
22.7
13.6
75.0
10.0
23.3
13.0
73.4
10.2
A
1980-81
12.9
1990-91
13.3
68.8
13.0
1996-97
13.4
65.8
15.0
-
Source. Compzrledfrom Governmen1 of India, /Agricultural Statistics at a Glance, 2000
Table 5.3 shows that, since the 1980s, there has been very little
diversification within fooclgrains in the share of cropped area. The relative
shares of Wheat. rice andl pules have remained about 13, 23 and 12 per
cent, respectively, of the total cropped area. However, taking all foodgrains
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together, their share in ithe total cropped area has decreased from 75.7 per
cent in 1960-61 to 66 per cent in 1996-97.25Clearly, the relative share o f
other crops in the total cropped area has increased over this period
indicates some sort of diversification. Some of this area has gone under
oilseeds.
Table 5.4
Return from Main Crops in Major Producing States in India (Rs. P e r
Hectare Over C2 Cost a t 1981-82 Prices)
Source: Economic Survey Vur6~u:iIssues
Looking at the net area sown, cropping intensity and net irrigated
area, it seems that there is great scope for increasing food grains production
and total agricultural prodiuction even the present level of technology .Out
of the net area sown ( 1 4 2 3 million hectares) in 1996-97 only 53.5 million
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hectares (37.656) are irrigated. The cropping intensity is just 132.7.
Besides, 32.7 million hectares additional area can be brought under
cultivation.'"videntl!i,
if the entire net sown area is irrigated, the
cropping intensity can be brought to near 200 million hectares and if
additional area is brought under cultivation, India's agricultural production
can be more than doubled even at the prevailing level of yield. But this is a
million dollar question. It requires a huge amount of investment in
irrigation, land reclamation, machinery and rural poverty and the refusal of
the government, under the pretext of liberalization, privatization and
globalization, to invest in such efforts. On the other hand, there are many
studies which advocate clevelopment of the agricultural sector and rural
econo~nyas the most impcrtant way to make a dent on rural poverty.27
Impact of Liberalisation on Indian Agriculture
Today Indian farmers and the farming system are in deep crisis. It is
threatening to deepen and further as a result of the removal of quantitative
restrictions (QRS's) has only facilitated the deepening of the crisis. The
EXIM policy of 2000-2001 and 2001 -2002 tried to safe guard the interests
of Indian producers by increasing the duty on only six agricultural items,
out of a total of 1428 items from which QRS have been removed in the last
one year.28 The prosperity that globalization was supposed to spread is fast
proving to be elusive.
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Impact of trade liberalization and globalization is ruining the farmers
of every state and the worst affected are the states of Punjab, Haryana,
Andhrapradesh, Karnataka, Maharashtra, and
eral la.'^ A number of farmers
have committed suicide. Drought has badly affected the farmers in the
state of Gujarat. Rajasthan, Chhattisgrh, Madayapradesh, Bihar, Jharkhand
and Orissa.
However. instead 'of addressing this situation in any serious manner,
the National Agricultural Policy tries to worsen the situation by advocating
for corporate control of Indian agriculture, withdrawal of subsidies to the
farmers and its redirection to the corporates, open market for all agriculture
goods to be dumped on Indian soil at the cost of Indian producers, bio
diversity conservation to facilitate intellectual property Rights for seed
companies and gene giants at the cost of farmers who will lose their rights
to save seeds
and the Indian researchers who will be denied to do
independent research to breed new varieties
and so on. The financial
budget and the hXIM policy of 2001-2002 have followed the line adopted
by the agricultural policy and have tried to further its wishes and desires.
The Agriculture Policy, the Financial Budget 2001, and the EXIM Policy
2000-2001 have been designed to further the interests of the big
corporations and are not for the Indians.
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National Agriculture E'olicy
The National Agric:ultural Policy was presented to the parliament in
July 2000. It is a clear surrender to the WTO-sponsored strategy of
integration of Indian agriculture with the global market.
It speaks of all thing and everything ranging from achieving a high
rate of growth exceeding 4% per annum, conservation of bio-diversity
equity across regions of farmers, water shed development, environmental
protection,
harnessing
of
traditional
knowledge,
liberalization
of
agriculture research, research and extension linkages, encouraging research
and introduction of new varieties in private sector through protection of
plant varieties. technology diffusion, liberalization of domestic market,
integration of agriculture trade in the global system, tenancy reforms,
development of lease market.. Enabling lease of land for agribusiness, contract
farming, accelerating the growth of agribusiness, creating employment in rural
areas, women's right in land, promotion of co-operative form of enterprise,
price support, crop insurance, use of information technology and many other
matters.
The National Agriculture Policy. comes at a time when there are
disturbing scenes of declining trend in foodgrains productivity, fast emerging
barriers to sustainability of Agiculture, depleting underground water
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resources and growing indebtedness of fumers. In the recent past, hundreds of
farmers have committed suicide in different parts of the country.
For nearly a decade, agricultural production remained stagnated.
The spectacular growth recorded in the post Green Revolution years in the
Punjab and Haryana have receded in the history. Among the multiplicity of
problems confronting agriculture, rapid fragmentation of land holdings is
keeping pace with increasing population. In 1976-77, the average size of
the holdings was estimated at two hectares and in 1980-81 it came down to
1.8 hectares. l'oday it stands at a meagre 0.2 hectares3'
It is very impressive to talk about a growth rate exceeding 4%. But
the recent history in this respect is very discouraging. The growth rate for
all crops taken together decelerated to 2.3% per annum during the period
1990-91 to 2% in 1997-98 compared with the rate of 3.5% per year during
the earlier period 1980-81 to 1990-91 .More serious, yield growth for all
crops together decelerated from 2.65% per annum during the 1980's to
1.38% per annurn during the 90's". This is a serious development which
has arisen as a result of neglect of public investment in R & D and extension
in agriculture. But with the: withdrawal of the role of the states from major
activities of economic planning and investment and, moreover, a greater
dependence on private sector research, the growth rate of 4% per annum
amounts nothing but wishfi~lthinking.
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The National Agriculture Policy states that "Agriculture has become
a relatively unrewarding profession due to generally unfavourable price
situation and low-valu~: addition". However, it fails to point out that
collapsing prices of agric:ulture commodities are a result of globalization that
has allowed dumping of subsidized import with the ren~ovalof quantitative
restrictions. The farm economy is becoming negative for producers because
liberalization has also led deregulated markets. Rising production costs and
declining prices are pushing farmers into debt and suicides, while the
corporations which sell inputs are showing increasing profits.
At a time when food production struggles barely to keep pace with
the rising population, fanners are being asked to diversify, produce crops
that are suitable for export and compete in the international market. With
the promise of cheap food available off the shelf in global market, the
focus has shifted from agriculture to industry, trade and commerce, from
the small and marginal famiers to the agri-processing companies, which
alone can bring in investment and add value to produce.
The cultivation of staple food crops is being replaced by cash crops,
tomatoes in place of wheat. durum wheat {for Bakery purposes) is
replacing wheat as a staple diet in Punjab and Haryana, flowers in places of
rice and so on. In Kerala, vast tracts of forest and paddy fields have been
converted in to rubber, coffee and coconut plantations. The structural
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transformations is not only confined to Kerala, it is happening in almost all
the states. The new agricultural policy is compatible with imperatives of
economic liberalization and globalization.
In order to promote corporatisation of agriculture, the Policy stated
that "the private sector participation will be provided to contract fanning
and land ceiling arrangements". This clearly means undoing of the land
reforms. This is fraught with dangerous consequences for 70% of land holders
who are small and marginal farmers. They would be reduced to the status of
landless labourers. with the difference that they would be left only with a
piece issue to them in lieu of the lease by the big corporate farming entity. It
will reduce Indian fanners to bonded labour, robbing them of their autonomy
and sovereignty. It will also threaten the food security of the country.
Such a policy will play havoc with Indian agriculture. After all,
what has not been understood is that any tinkering with agricultural sector
that encourages farmers to abandon their land and move to cities in search
of a livelihood is sure to lead the country into dark abyss.
Removal of Quantitative Restrictions-Doom for lndian Agriculture?
'Though not requir'ed under AOA on WTO India removed the
quantitative restrictions from 1429 items from first April 2000 to First
April 2001. QRS from 714 items has been removed under the export and
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import policy announced in New-Delhi on 3 1" March 2000. And on 3lSt
March 200 1. QRS from the rest 7 15 items have been removed, making
India a dumping ground for cheap, subsidised agricultural and dairy
products.
The agricultural situation in India became worse with the removal of
quantitative restrictions and because of the flooding of subsidised products
in the domestic market. Since our farmers continue to be denied of price
support and procuremen~t subsidies, the situation is going to be worse
because no solace has been provided under the latest budget to deal with
the surge of imports.
QRS were being maintained ever since 1947 on balance of payment
(BOP) grounds under the General Agreement on Tariffs and Trade (GATT)
to which India was a signatory. India participated in the 7-year long
Uruguay Round Negotiations (1986- 1993) which culminated in the signing
of the Uruguay Round Agreement in April 1994 and became a founder
member of the World Trade Organisation (WTO), which came in to being
in January 1995. India slubscribes to all the (WTO) Agreements, but
continues to maintain QRs on BOP grounds as per the provisions of Article
XVIII-B of GAT'I'. Till 31'' March 2000 the quantitative restridions were
maintained on balance of payment ground on 1429 items out of which 700
items were under Restricted List, 685 items were under SIL(Specia1 Import
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License) list and there were 44 items under Canalised list. In April 1999 about
1285 items were already :shifted to the open general license (OGL) list.
According to the commitment given by India to the developed
world, we had time till 2003 to remove all quantitative restrictions. This
commitment had been accepted by countries like European Communities,
Japan, Canada. Australia, New Zealand, and Switzerland. But on 28"
December 1999. India entered into a secret bilateral agreement with US
and consequently, removed Quantitative Restrictions from 714 items on lst
April 200 I.
A large number of these items are agricultural and dairy products.
With the removal of OR'S Indian markets are open for dumping of highly
subsidised products from IJSA and other developed countries forcing
domestic products to ruin, despair and destitution. The excessive imports of
edible oil have ruined the domestic producers of oilseeds, especially
mustard, soyabean, groundnut, and coconut. The mustard seed prices have
fallen sharply and this has affected the mustard seed production. In
comparison to last year, there is a sharp decline in acreage and production
of mustard seeds. The worst has happened with coconut in Kerala where its
prices have fallen by one-third in 1999-2000. Besides coconut, other crops are
also reeling under the fall of prices in every state. The prices of coffee, tea,
rubber, pepper, and arecanut have fallen sharply in Kerala, vegetables prices
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have plunged in Karnataka, prices of paddy have fallen across the country
forcing farmers to sell much below the minimum support price (MSP). The
financial Budget for 2001-2002 totally silent on policies to prevent the
collapse of faml prices of agricultural commodities was further worsened by
the withdrawal of support by the Food Corporation of India (FCI).
The dairy products are not untouched either. Prices of milk and milk
products have fallen in Punjab where majority of small and marginal
farmer's survival is based on dairy. The fanners are being forced to sell
their livestock. Last year in the Barnala animal market, more than 100,000
cattle were brought for sale. Due to the threat of cheep import of chicken
the prices of chicken have also fallen by 40%.
With the removal of QRs the Indian producers having a
"comparative advantage" on selected items, it is very difficult for Indian
producers to compete at the international level and simultaneously
destroying the agriculturill products by allowing heavy influx of cheap
imports. Even tariffs levied on the import of agricultural products are not
high enough to protect our domestic producers and the efforts of the
Finance Minister to increase the tariff on half a dozen agricultural items
referred to as "safeguarding the interest of our farmers" would not be of
much help. The effective customs duty on wheat is 50% while on broken
rice the duty is 0% including cereals like rye, oats, and barley. Though the
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duty on edible oil is increased to 75% to 85%, yet on soyabean oil, it is
45% and on crude soyabean oil it is only 35% which is very low.
However, according to India's proposal to the WTO Agreement on
Agriculture (AOA), the average tariff in OECD countries in 1993 was
214Y0 for wheat, 197% for barley, and 154% for maize. In certain
commodities the tariff peak reached 300% and above. In EU the out-ofquota tariff for bananas is Y SO%, in Japan these tariff range between 460%
and 600% for dried beans, peas, and lentils, in the US groundnuts have a
tariff range above 164%. Recently, Japan has levied a tariff of about
1000% on rice to protect its domestic rice producers. The Indian proposal
makes a demand for the ongoing review of the Agreement on Agriculture,
that to as a special and differential measure, the developing country
members should be allowed to maintain appropriate levels of tariff
bindings keeping in mind their development needs and the high distortions
prevalent in thc international markets. Yet the Financial Budget for 20022003 made a very dismal effort to raise the tariff marginally of hardly half
a dozen items as: safeguard mechanism for domestic production against
highly subsidized and cheap imports of agricultural products from
developed countries.
If industrialized countries have high agriculture tariff to protect its
producers and it' India is {arguing for high tariff in the 'Third World, our
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Budget should have reflected this position of high tariff duties. Instead, the
Finance Minister maintarned the effective duty on wheat at 50% on broken
rice and barley at 0% and a marginal increase for edible oil except
soyabean oil with very low at 35% to 45%. The ratio of imported soya oil
is increasing and it is expected to be dumped in large amount in India from
USA, Brazil, and Argentina, with the increase in duty on other edible oils,
especially palm oil. In these countries mostly in genetically engineered
soya is grown and the so:ya oil which will be imported in India from these
countries will be contaminated with genetically engineered soyabean. Most
of the European countries and even Thailand have banned the import of
any genetically engineered foods. But in India even our PFA departments
and the Rules are not equipped to check the hazards of the genetically
engineered foods.
With the removal of QRs we are being forced to import the
hazardous foods and products, contaminated with Mad Cow and mouth
disease, including their carcasses, and half carcasses and slaughter house
wastes (offal's) of sheep, pigs at a very low customs duty. The budget paid
no attention to increase the customs tariff on such items which would
spread health hazards and threaten the public health, besides contaminating
our environment and spreading these disease in our livestock. On the other
hand, the Europeans have refused to import hormone beef from the US in
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spite of a WI'O dispute ruling and in spite of US trade sanction. Now with
the removal of QRs, all these will be dumped in India. Therefore it is
imperative that we re-impose Quantitative Restrictions to save our farmers
and our agriculture.
lndia should not fear about trade sanctions because no trade sanction
could do more economic damage than the destruction being caused to
India's economy by the removal of QRs. Implementations of WTO rules
have become more costly than non-implementation. If Europe and the US
can impose QKs according to their domestic interests, why shouldn't India.
The cultivation of plantation crops like Tea, coffee, Rubber, pepper,
cardamom was initiated by the Europeans in India. They promoted these
crops to satisfy their own requirements. The soil, climate and the attitude of
the people helps the pron~otionof these crops in certain regions in India.
The farming community in these areas neglect food-crops to cultivate the
commercial crops. Initially the promoters of these commercial crops
provided a number of incentives to cultivators. Separate departments were
started by the Government of India for the promotion of these crops. These
crops enjoys sorne sort of protection from the Government. The price of
these crops are more or less free from too much fluctuations. Among the
various schemes launched by the Government of India for the promotion of
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commercial crops, the fixmation of the Rubber Board constituted under the
Rubber Act 1947 deserves special mention.
The function of the Rubber Board defined under the act were the
development of the rubber, assisting or encouraging scientific, technological
and economic research. 'Training farmers in improved methods of planting,
cultivation, manuring and spraying-Supply of technical advice to rubber
growers etc. As a result of the activities of the Rubber Board the area under
cultivation of rubber and the production of rubber and productivity of
rubber increased tremendously. The total area under rubber cultivation in
1956-57 was 12767 hectares. It increased to 558584 hectares in 1999-2000.
The total production of natural rubber increased from 23730 tonnes in
1955-56 to 622265 in 1999-2000. The productivity of rubber per hectare
The price of
increased from 175 kg in 1950-5 1 to 1600 kg in 1999-2000.~~
rubber per tonne also increased during the corresponding period. From
1976 to 1980 there was no variation in the price of natural rubber in India
markets. From 1980 onwards price of natural rubber in
and Internatio~~al
lndia was above the price of natural rubber in International market. This
trend continued up to 199 I . From 1991 onwards price of natural rubber in
lndia and the international market is more or less the same. This trend
continues today with minor variations. The price of natural rubber in India
is above the international prices of rubber at present.
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Figure 1
Crash of Prices of Major Agricultural Products of Kerala 19992001(Price per quintal)
Source: Agricult7ml survey D~sepika2002
Indian natural rubber enjoys more or less a protected market up to
the liberalization of the Indian economy in 1991. The protection granted by
Government of India to the natural rubber may not yield the desired results
due to the change in econo~nicpolicy. Now a days the prices of natural
rubber and other commercial crops are increasingly subject to the changes
in the prices of such commodities in the international market. As a result of
that most of the commercial crops have been experiencing a decelerating
phase after the liberalization of the Indian economy. Percentage increases in
the annual production in na8turalrubber, was 8.4% in 1996-97, it declined to
6.3 % in 1997-98, 3.6% im 98-99, 2.8% in 1999-2000.~' The production
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during 1999-2000 was 622265 tonnes as against 605045 tonnes in 1988-89.
The continued decline in p~.oductiongrowth rate can be ascribed to the lower
level adoption of short tern1 yield enhancing measures by the dominant small
holders on account of the continuing low price in the market.
i
Table 5.5
Average Market Price of NR (Rs.1100 kg)
7India
M0n:i991 ~~E~~~~~~~~
L F i
1
-
MY
June
Julv
(FOB price of RSS
3 in
-&,,
-
..
--
--
..--
3356
3248
I
37c7
JLd,
3198
3122 3061 -2909
..
)ecember
2867
200 l
2853
..
r
ebruary
2694
I
- -- 1
--
--
Source: Ruhber Bourd ruhhrr srutistics 2000
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2800
The slump in the demand growth of natural rubber during 1997-98
and 1998-99 generated surplus of natural rubber in the market, which in
turn resulted in declining rubber prices. Owing to the situation of surplus
stock of natural rubber in the domestic market coupled with the absence of
any signs of price recovery in the international market, Indian natural
rubber market continued to remain depressed during 1999-00 and 2000-01.
Conclusion
It is a fact that the farming community of our country has been
facing a serious crisis due to the liberalization policy pursued by Govt. of
India since 1990-91. All types of QRs were withdrawn by Govt. of India
due to the conditions stipulated by international financial institutions. This
is the main reason for the slump in the prices of agricultural products.
Therefore it can be concluded that the New Economic Policy adversely
affect the Indian Agricultural sector. A cross section of the Kerala Society
also is convinced that the agricultural sector in particular and the economy
in general of Kerala are adversely affected by the structural adjustment
programmes.
The primary study conducted by me also endorse it. The
respondents to the survey also support a paradigm shift. It is interesting to
note that in the survey a majority of respondents supported the Gandhian
model as against the Nehrmian and the NEP. The result of the primary
study and the conclusions attached to this chapter as Appendix I.
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References and Notes
I
Census report of 199 1, Government of lndia
Economic survey. ministry o f finance, Government of lndia various issues
Economic survey. ministry o f finance, Government o f lndia various issues
W T 0 specification for matimum duty(300%) imposed for agriculture commodities
5
World development report 2000-2001
6
World development report 2000-2001
7
World development report 2000-2001
W T 0 specification for lev:ying duties on agricultural commodities
9
World Trade Centre-1999
10
W T 0 Agreement on Agriculture
II
Economic Survey, Ministry o f Finance, Government of India, Various issues
Thamarajakshi. 1999
12
I3
Cerisus Report 199 91
l4
planning commission Report 1999
I5
Jayanthy Ghosh, C.P Char~drasekhar- The market that failed chapter - 13. Poverty
and Food Security
16
Government of lndia Agricultural Statistics at a Glance 2000, New Delhi
17
Vaidyanathan 2000
l8
Storm 1999
19
Government of lndia Report 2000
20
Economic Survey, Ministry o f Finance, Government of lndia various issues
2'
Government of lndia 2000
22
Bhalla 1999
23
Bhalla 1999
24
Rao 2000
25
Economic Survey Ministry o f finance, Government o f India various issues
26
Government of lndia Report 2000
27
Revallion, Martin 2002'
28
'Kerala agriculture most hit by Globalization' New Delhi, Oct 24: Kerala i s the most
adversely- affected in the agriculture and plantation sectors due to globalisation,
according to Union Agriculture Minister Ajith Singth.
In response to the State's plea for the inclusion o f plantation crop labour within the
scope of the Sampoorna Gramin Rozgar Yojana, Sing said there was no bar on
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including any crop under the scheme and that it was not lin~itedin any way. He
called for a political consensus on the WTO agreement on agriculture for pursuing
essential negotiation. In 1995 WTO agreement would come to an end in 2004. The
new agreement come into effect in 2005, for which negotiations are already begun.
A conference would bt: convened on October 29, in which leaders of political
parties, NGOs and others would be invited to discuss the various proposals to be
persuaded with the WTO Addressing a meeting of the Agriculture Ministers of
States and [Jnion Territories on "WTO agreement on Agrecnlent " here today, Singh
pointed out that unless domestic subsidies were reduced internationally, we would
not be able to benefit from lower tariffs. Kerala Agriculture Minister K.R Goweri
pleaded before the conference that essential livelihood-securing subsides should be
related. All the edible oils imported in to the country should have a common bound
rate of 300 per cent. There should be special safeguard measures to protect the
market price of domestically -produced editable oils, such as those from coconut,
Rubber and coir should be excluded from the list of industrial products and included
as agriculture products. Since many tea and coffee plantations were being closed
down, plantation labour should be covered by the Sampoorna Gramin Rozgar
Yojana. Measures should be taken for patenting Malabar pepper, Alappuzha
cardamom, ginger and me:dicinal plants. The proposed National Institute of Organic
Agriculture should be se~tup in Kerala. The report, to be obtained from the MS
Swaminathan Commission approved by the State Government to examine the
concerns of agriculture in Kerala, would be placed before the Centre.
29
Agriculture statistics at a glance government of India 2000, New Delhi
30
Economic survey, Ministry of Finance Government of India, various issues
3I
Economic survey, Minist?! oFFinance Government of India, various issues
32
Rubber statistics 2002, Rubber Board Kottayam
33
Rubber Statistics 2002, Rubber Board Konayam
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