India and WTO: Trade Performance

 

Kiran Bala Das1*, Dr. Ravindra Brahme2

1Research Scholar, School of Studies in Economics, Pt. Ravishankar Shukla University, Raipur CG

2Professor, School of Studies in Economics, Pt. Ravishankar Shukla University, Raipur CG

 

ABSTRACT:

This paper makes an attempt to examine the performance of Indian agricultural trade in World Trade Organization regime with regards to the selected parameters, i.e. export growth rate and standardization in agriculture growth rate. It is found that under the WTO regime India share in world agricultural trade increased. The standardization of trade growth initially improved then from last few year’s its dramatically fluctuating and deteriorated. In AoA regime the share of some important crop composition and trade reduced. In WTO regime, as a whole there is deterioration in agricultural trade.

 

KEYWORDS: Agricultural trade, Agreement on Agriculture, Export Growth Rate, Terms of Trade, Trade Performance.

 

INTRODUCTION:

India is traditionally known as an agricultural country, it comes under category of world largest economy rank 12th in the world. India Gross Domestic Product (GDP) growth 4.7% in 2013 and GDP per capita was $5,777. Agriculture share of GDP is 13.7%, which continuously declining for the last few decades. 49% of the work force are engaged in agricultural sector and nearly two third of the population depends upon agriculture for its livelihood, there is a wide gap between the number of employed population and GDP share in agriculture sector. India foreign trade followed the pattern common to all developing and underdeveloped countries exporting raw materials and food product and import manufactured goods, but for the last few decades now India’s export increases in the service sector and manufacturing sector and agricultural sector export decreases. Any change in India’s production and export of its product will directly affect the economy. Over the time the trade sector has grown faster and export performance depends on domestic economic policies and global factor. As a result of the end of the Uruguay round of the GATT negotiations (1947-1994), the negotiating states agreed to the establishment of a permanent international organization a formal institution replacing the previous treaty structure, it has 8 rounds of trade negotiation in which 8th round “Uruguay Round” is most important it give birth to the World Trade organization (WTO) which is a legal and permanent body. On 1st January 1995 WTO comes into force in order to administer the world trade organization agreement. WTO agreement is a capstone agreement containing various sub- agreements that all WTO members must accept. WTO comes with the bulk of the agreement for the member countries one of the important burning and negotiating agreement is the Agreement on Agriculture (AoA) which signed in 1994 and implemented on 1st January 1995.

 

 

Agriculture was not the subject of General Agreement on Trade and Tariff (GATT) but in WTO main stream negotiation basically on agriculture. The agricultural trade related provisions of AoA has three main categories and divided into three broad areas which are the pillars of AoA on which international trade of agricultural commodities take place. They are (i) Domestic support (Articles 6 and 7), (ii) market access (Article 4) and (iii) Export subsidies (Articles 8 to 12). These three weapons play a vital role to control trade distortion of developed countries.

 

Mukherjee (2012) explore the export performance of India in economic growth and found lots of constraints in manufacturing sector for achieving its potentials. Deodhar (2006) found that after WTO little improvement in terms of trade and agriculture will gain with the improvement in irrigation, transportation and on the research, he suggest a Swiss formula to reduce high tariffs.  Ramphul (2006) explored that in India the farm trade decreases and net terms of trade in agriculture are worse affected in WTO phase and the share of export to finance import is also very less. It implies that deterioration in the specialization of agricultural product as a whole. Bhattacharya (2004) find out in study that there is a high growth of nontraditional agricultural commodities in export then traditional commodities. Bhalla (2004) finds out high growth of import then the export from the agricultural sector.  Rajashri and Nagaraj (2014) explore that there is a decline in percentage share of agriculture export from 1991-92 to 2009-10 and change in structure of group of commodities.

 

India comes under developing countries and the impact of AoA also affects India so intensive study is required to find out the agricultural trade performance after WTO era. In earlier studies its observed that study of agricultural trade examines till 2003 and 2004 and majority of study is uncertain and countermine. This paper analyses the composition of export of major agriculture commodity in pre and post WTO regime with their percentage share in agriculture export and secondly it analyses the decomposition of India’s export growth rate, finally it summarizes the main findings and concludes.

 

OBJECTIVE:

1)     To find out the impact of the Agreement on Agriculture (AoA) on export performance.

2)     To identify the decomposition of India’s agriculture export growth.

 

SOURCE OF DATA AND METHODOLOGY:

The source of data is secondary, the data of India’s agricultural export and import has been taken from various volumes of Food and Agriculture Organization (FAO) of the UN trade year book and Economic Survey of India. The study, based on secondary data and the time span from 1986-95 to 2002-2011, in this pre and post WTO era of ten years. The study mainly focuses on India’s agricultural trade structure and its export performance ratio.

 

Export Growth Rate:

G=(R-1), R=F1*F2*F3=X1/X0 (1)                                                                        

 

Where F1 is a passive expansion for countries agricultural export it has a ratio of agricultural import of the world in the current year and initial year; (W1/W0).  F2 is an active expansion it has a ratio of country’s agriculture export current and initial year upon F1. The share of agricultural export in market share expands ;( T1/T0) / (W1/W0). F3 is show diversification of non agricultural commodity; it has a ratio of country agricultural export of initial year and total export of initial year upon the ratio of country agricultural export of current and total export of current year; (T0/X0) / (T1/X1), G= Export growth rate, 0 and 1 express initial and current year of the period under analysis.[ World Bank, 1997, p.259, GATT 1966, p.23 and Ramphul, 2010, p.58]

 

Composition of India’s agricultural trade

In Table 1 the pre and post AoA phase of different agricultural commodity export is presented. In the WTO regime percentage share of commercial crops is more than the traditional crops, but from  both tables it’s clear that pre phase has more percentage share of major agricultural commodities then post phase because now India export more agricultural commodities then pre share number of commodities India export increases that’s clearly visible in Table 6.  In absolute term, the export value of half of the commodities has increased, except sugar, cashew nut, tea, coffee, sesame seed and most important rice share in export declined from 17.18 % to 13.5%. A comparison of the unit value of India’s major export during 1992-95 and 2008-11 indicates that unit values of all items have jumped up. The post WTO regime increased in the unit value may be due to AoA or due to increased in demand of commodities. The unit value of cashew nuts remains constant and the high jump of the unit value has been of spices since 0.68 to 1.4. The three major markets for four Indian agricultural commodities they are, for Rice: UAE 20.0%, Saudi Arabia 18% and Kuwait 6.5%, coffee: Italy 21.2%, Germany 11.4% and Russia 10%, for Tea: Russia 13.7%, UK 11.6% and USA 7.7%, for Cashew nuts, shelled: USA 34.9%, UAE 14.07% and Netherland 08.4%. Tobacco, Oil meals spices main trading partners are USA, UK and UAE. It’s clear that most of the agriculture market is captured by USA in India.

 

Decomposition of India’s total Merchandise export growth

The export growth rate (Eq.1) of India’s merchandise export during pre and post-AoA period along with their decomposition. Table 2 which displays that India; total export during the pre WTO period (1986-95) have grown by 254.7 percentage and during post 462 percentages. The decomposition of growth in India’s over all export suggests that during the post WTO phase the bulk of total export growth is mainly supported by diversification, expansion of world agricultural markets and increase in share of active expansion of the market.

CONCLUSION:

With focus on trade, an attempt was made in this paper to study the trade performance of India in before and after WTO. In absolute term, the export value of half of the commodities has increased, except sugar, cashew nut, tea, coffee, sesame seed and most important rice share in export declined from 17.18 % to 13.5%. A comparison of the unit value of India’s major export during 1992-95 and 2008-11 indicates that unit values of all items have jumped up, it can be said that the post AoA Regime increased in unit value may be due to AOA or increased in demand of commodities. On the basis of the overall study trade performance in AOA regime the composition of some important crop the agricultural commodity of trade share reduced, as a whole deterioration in agricultural trade in WTO regime and in post AoA regime.

 

 

ANNEXURE 1:

Table 1. India list of major export of agriculture commodity in before and after WTO regime

Commoditires

Total export 1992-95

Quantity export

Unit value

% Share in agri export

Total export 2008-11

Quantity export

Unit value

% Share in agri export

Rice – total

(Rice milled equivalent)

646107.7

1787952.

0.36

17.18

2821326

2965469

0.95

13.50

Wheat

32797.75

189058.8

0.17

0.87

36482.5

125349.3

0.29

0.18

Sugar Raw Centrifugal

18767.25

53944.5

0.35

0.50

324750.8

685107.5

0.47

1.56

Sugar refined

62578.75

195110

0.32

1.66

631336

1162767

0.54

3.04

Cashew nuts, shelled

349724.3

68799

5.08

9.30

676213.3

117211.5

5.77

3.25

Cake, soybeans

483002.8

2285062

0.21

12.85

1807523

4503973

0.40

8.70

Oil, castor beans

115762

162603

0.71

3.08

567655.5

382664.5

1.48

2.73

Sesame seed

41322.25

51744

0.80

1.10

418722.8

285139

1.47

2.01

Coffee, green

225596.8

120766.5

1.87

6.00

422890.3

171241.8

2.47

2.03

Maize

2310

16186.5

0.14

0.06

732092

3095905.5

0.23

3.50

Tea

340057.8

157181.3

2.16

9.05

683958.3

241044.5

2.84

3.29

Cotton lint

91080.75

77919.25

1.17

2.42

2237654

1301123

1.72

10.76

Tobacco, unmanufactured

107318.8

70427.25

1.52

2.85

668397.3

211563.8

3.16

3.22

Chillies and peppers, dry

31168.5

31168.5

1.03

0.83

337456.3

230671.5

1.46

1.62

Spices, nes

31079.25

31079.25

0.68

0.83

243564

173943

1.40

1.17

Share of these in total value of agricultural export (%)

 

 

 

68.59

 

 

 

60.57

Source: computed on the basis of data available in the official website of FAO and FAO yearbook(1986-2011)

 

Table 2 Export Growth Rate

Factor

Overall periods(1985-2011)

Pre- AoA phase(1986-1995)

Post AoA phase (2002-2011)

F1 = W1 /W0

8.325

2.365

2.76

F2= (T1/T0)/(W1/W0)

1.5312

0.9775

1.98

F3=(T0/X0)/(T1/X1)

2.557

1.5347

1.03

R=f1f2f3=X1/X0

30.594

3.547

5.62

G=(R-1)100

 

254.7

462

Source: computed on the basis of data available in the official website of FAO and FAO yearbook (1986-2011)

 

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Received on 06.05.2016

Modified on 15.05.2016

Accepted on 20.05.2016

© A&V Publications all right reserved

Research J. Humanities and Social Sciences. 7(2): April - June, 2016, 145-148

DOI: 10.5958/2321-5828.2016.00023.1