Crying foul over spilled milk. That is exactly what India is trying to do at the World Trade Organisation (WTO). I am talking of the reports of India's isolation at the WTO on the paramount issue of food security. After having signed in on the dotted line at the Bali WTO Ministerial in December 2013 to usher in trade facilitation, which the US/EU were very keen on, and without seeking any definite decision on food subsidy, India is now crying hoarse.
"India has made it clear that state-funded welfare schemes for the poor are non-negotiable, and it is willing to take the blame for delaying the WTO's 'trade facilitation' agreement rather than hurt the interests of small farmers," reports the Hindustan Times (India toughens stance on food subsidy at WTO. July 21, 2014. http://bit.ly/1nYi0YC). The news report rightly mentions that developed countries are pressing for early adoption of the trade facilitation agreement, which would give them greater market access but are avoiding discussions on issues such as public stock-holding of cereals for food security.
But this was known even at the time of the Bali WTO Ministerial. The then India's Commerce Minister Anand Sharma had made the right noises in the media but when the final moment came, he readily signed the trade facilitation agreement. All he could wrest in the bargain was a four year 'Peace Clause' for the food subsidy issue that is crucial for not only India's food security but also food self-sufficiency. I think there is first a dire need to bring in an accountability clause in the trade policy for our trade negotiators. Commerce Minister must be held responsible for the lapses he/she makes in trade agreements.
Having said that, I am amused at India's double talk at Geneva. While India is threatening not to ratify the agreement (along with South Africa) in reality it has already made budgetary provisions for facilitating trade. Finance Minister Arun Jaitley has provided in his budget for Rs 11,000-crores (or Rs 110,000 million) for development of ports and at the same time announced a single window clearance for imports. So, the threat for not ratifying trade facilitation treaty is in reality an empty threat. For all those who follow the trade diplomacy, the best way to exert pressure is to slow down on implementation of the decision on trade facilitation, which India has failed to do.
On the food subsidy also, I think the noise that India is making at the WTO has nothing to do with the autonomous liberalisation that it is pushing for domestically. Read a news report in the Hindustan Times today (Govt to unleash food reforms to fight subsidies, inflation, July 21, 2014), it says: In an attempt to tackle runaway prices and subsidies, the NDA government has decided to gradually avoid purchasing more grains than are needed to distribute to the poor; while asking states not to offer market distorting cash incentives to farmers." Read it carefully and you realise that India is already going ahead with the WTO take on food subsidy.
1. In a recent directive, the Ram Vilas Paswan-headed food ministry asked states to stick to minimum support price (MSP) announced by the Centre and avoid padding these up with their own sops and cash bonuses. This is in line with India's WTO commitment at Bali where it has promised not to further increase the MSP support (emphasis are mine). And then the report explains: MSPs are the guaranteed prices at which the state buys produce from farmers. higher MSPs boost farm income but fuel price rise. According to an RBI study, a 10% MSP hike raises short-term wholesale inflation by one per cent.
2. If states breach these norms the Food Corporation of India -- the country's main food security agency -- would not be obliged to acquire grains beyond levels necessary for the public distribution system as well as emergency reserves. Using the threat of not allowing food procurement by FCI makes the decision binding in the months to come.
These are not the only two policy changes that are expected. With the idea of a creating a national market, as spelled out in the Economic Survey 2014), setting up of an organisation over and above the Agricultural Produce Market Committees (APMC) is aimed at making the APMC mandis redundant. Once the APMC mandis are dismantled, the question of providing a higher procurement price to farmers will be negated. When there are no mandis where will the procurement price be paid? In any case, this kharif season, Govt has raised the MSP for paddy by a mere Rs 50 per quintal (or by 50 paise per 100 kgs), which for all practical purposes is like freezing the MSP.
India can't blame the WTO for what it is unilaterally doing at home.
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