Liberalising Domestic Agricultural Markets in India International Workshop and Second Advisory Commi

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Liberalising Domestic Agricultural Markets in
IndiaInternational Workshop and Second Advisory
Committee Meeting

• Introductory Remarks
• 10 February 2006

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Research Sponsor
Programme Management Department British High
Commission, Delhi Government of UK
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Research Sponsor
Our special thanks are due to the following staff
of the British High Commission, New Delhi Mr.
Daniel Shepherd Ms. Nicola Murray Ms. Cordelia
Fernandez Ms. Sanchita Chatterjee Ms. Stuti Jha
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Long-Term Aspect of this Study

• The NCAER is currently engaged in a longer-term
  study with similar aims and objectives funded by
  the Australian Government (ACIAR) with a period
  2004-2007.
• This provides us with opportunity to build on
  what we accomplish under the present research
  funded by the Government of UK.

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Project Team
NCAER Research Team Shashanka Bhide, Rajesh
Chadha,
Devender Pratap, Anjali Tandon and
Abhishek
Akhouri Collaborating Researchers Sisira
Jayasuriya, Donald MacLaren
and Steve
McCorriston Participating Researchers
Arvind Panagariya, Scott Davenport
and Razeen
Sally Computer Graphics Praveen
Sachdeva Secretarial Support
Sudesh Bala Workshop Support Services Balwant
Singh
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Advisory Committee
Academia and Research Mr. Suman Bery DG NCAER,
New Delhi Professor S.S. Acharya Former
Chairman, CACP Professor Mruthyunjaya National
Director, NATP, New Delhi Professor Ramesh Chand
Director NCAP, New Delhi Professor Arvind
Panagariya, Columbia University
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Advisory Committee
Government, Policy and Industry Mr. P.K.
Agarwal, Joint Secretary, Ministry of
Agriculture Mr. R. Gopalan Joint Secretary,
Commerce Ministry Professor T. Haque Chairman,
CACP Mr. Vyas ji Secretary, Competition
Commission of India Ms. Jyoti Gujral, IDFC Mr.
Bharat Desai, Senior VP, Reliance India Limited
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Broad Contours of the Study

• To analyse economy-wide and sectoral effects of
  trade, efficiency and distributional outcomes of
  reforms in domestic agricultural markets
• Important Research Areas
• Structure and effectiveness of domestic
  agricultural market institutions Case Studies
  through Primary Survey
• State Trading Enterprises Interventions and
  Impact
• WTO implications for Indian agriculture
  production and marketing

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Context

• Wave of globalisation of markets is Indian
  agriculture ready?
• Slow growth of agriculture what can be done to
  raise growth?
• Is growth equitable across regions, crops, farm
  communities, and to consumers?
• Is growth sustainable?
• Is there a new future for Indian agriculture?
• Are new policies needed?

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Share of Agriculture
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Public Sector Investment and Subsidies in
Agriculture Recent Experience (Rs. Billion)
Source Agriculture at a Glance (2004)
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Food Subsidy Average of Triennium (Rs. Billion)
Two Years Source Expenditure Budget Various
Issues
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Policy Initiatives

• Encourage investment in infrastructure cold
  chains, electricity, transportation etc.
• Encourage research
• Improve extension systems
• Encourage diversification
• Improve agricultural credit system
• Improve market infrastructure
• Water and land growing scarcer what new
  policies?

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Post-Reform Domestic Agricultural Scenario

• Input subsidies increased, investment decelerated
• High MSPs favoured certain crops and regions
  inefficient resource allocation
• Regional disparities accentuated
• Ecological strain on natural resource base
• Fiscal drag due to input and food subsidies
  amounting to US13 billion by the year 2000-01

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Disconnect between Domestic and International
Markets 1997-2002

• MSPs of rice and wheat increased rapidly on the
  basis of full cost
• International prices declined after 1997 but not
  domestic prices, which were kept supported at the
  already achieved high level
• The MSP became the price of first choice. This
  has been termed as de facto nationalization of
  rice and wheat trade
• The Worst Scenario (GOSE) Granaries Overflowing
  (65 million tonnes) Stomachs Empty (250 million
  plus) May 2002

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What we expect to achieve

• Understand the consequences of globalisation
• Understand the potential for growth under market
  reforms in agriculture
• Present analysis of alternative policies relating
  to STEs

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Thank Youfor Your Attention