Minimum Support Prices

The main reason why the government fixes minimum support prices or MSPs is to ensure remunerative prices to farmers to encourage higher investment and production of agricultural commodities. 

Every year MSPs for major agricultural products are announced which are fixed after taking into account the recommendations of the Commission for Agricultural Costs and Prices (CACP). 

The CACP while recommending MSPs takes into account factors such as 

• cost of production,
• change in prices of inputs, 
• demand and supply,
• market price trends
• cost of living among other factors. 

Government organises Price Support Schemes as PSS of commodities through various public and cooperative agencies such as Food Corporation of India (FCI) , Cotton Corporation of India Ltd. (CCI) - , Jute Corporation of India Ltd. (JCI) -, National Agricultural Cooperative Marketing Federation of India Ltd. (NAFED) - and Tobacco Board for which the MSPs are fixed. For commodities not covered under PSS, the government arranges for market intervention on specific request from the States for a specific quantity at a mutually agreed price. The losses, if any, are borne by the Centre and State on a 50:50 basis.

Import and Export of Agricultural Products in INDIA

Since Independence, India has made a lot of progress in agriculture in terms of growth in output, yields and area under crops. It has gone through a Green Revolution (food grains), a White Revolution (milk), a Yellow Revolution (oilseeds) and a Blue Revolution (aquaculture). Today, India is one of the largest producers of milk, fruits, cashew nuts, coconuts and tea in the world. It is also well known for the production of wheat, vegetables, sugar, fish, tobacco and rice.

Certain types of agriculture such as horticulture, organic farming, floriculture, genetic engineering, packaging and food processing have the potential to see a surge in revenues through exports. Over the past few years, the government has stressed on the development of horticulture and floriculture by creating vital infrastructure for cold storage, refrigerated transportation, packaging, processing and quality control. If India wishes to optimize the production and export potential of these commodities, then it is essential to improve these facilities, marketing and export networks much further.

In recent years, the Central Government has offered different fiscal incentives for bettering storage facilities in rural areas. It also provides financial assistance to the State Governments for acquiring and distributing food grains at subsidized rates, especially to families with annual income below the poverty line. Today, the improved availability of bank credit through priority lending, favourable terms of trade and liberalized domestic and external trade for agricultural commodities have also encouraged private players to invest in agriculture.

The major thrust of the policies and programmes of the Government of India relating to livestock and fisheries is in the areas of rapid genetic upgradation of milch animals, improvement in the delivery mechanism of breeding inputs, control of animal diseases, creation of disease free zones, increased availability of nutritious feed, development of dairy activities and backyard poultry, development of processing and marketing facilities and enhancement of production and profitability of livestock.

Agricultural Exports

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Agricultural exports have shown an increase

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 from around Rs. 60 billion in 1990 - 91 to Rs. 398 billion in 2005-06. The Government's special efforts to encourage export of food grains in recent years through grant of World Trade Organization

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 or WTO compatible subsidies has lead to India becoming one of the leading exporters of food grains in the international market

Agricultural Imports

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The imports of agricultural products

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 improved from Rs. 12 billion in 1990 - 91 to Rs. 220 billion in 2005- 06. The share of agri-imports to total merchandise imports in 2005-06 was 4.59 percent. 

Edible oil is the single largest agricultural product imported into the country and accounts for around two-thirds of the total agricultural imports.

Issues & Priorities of Developing Countries

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Issues & Priorities of Developing Countries

Posted: 04 Sep 2009 11:23 PM PDT

1. The agenda of Developing countries includes agriculture, services (financial, telecommunications, information technology, etc.), intellectual property rights, electronic commerce, investment, government procurement, and competition policy.
2. The developing countries assert that the agenda of the WTO, the implementation of its agreements, and the much-praised dispute settlement system all serve to advance the interests of developed countries and sidelining those of the developing countries.
3. The least developed countries (LDCs) are marginalized in the world trade system, and their products continue to face tariff escalations.
4. Rules uniformly applied to WTO members have brought about inequalities because each member has different economic circumstances.
5. Until the Uruguay Round, which ended in 1994, the trade negotiations focused on nonagricultural goods, mainly because the U.S. always wanted to protect its farm sector.
6. Most developing country economies are in one way or another dependent on the U.S., the EU, or Japan in terms of imports, exports, aid, security, etc. Any obstruction of a consensus at the WTO might threaten the overall well-being and security of dissenting developing nations.
7. Trade negotiations are based on the principle of reciprocity or "trade-offs." This means that if one country gives a concession in an area, such as the lowering of tariffs for a certain product, in return for another country acceding to a certain agreement. However this bartering benefits the large and diversified economies, because they can get more by giving more. (The focus of Develped countries has always been Yeh Dil Maange More !!!)
8. Developing countries have fewer human and technical resources. Hence they often enter negotiations less prepared than their developed country counterparts.
9. Developing countries have discovered that seeking recourse in the dispute settlement system is costly and requires a level of legal expertise that they may not have. Besides, the basis on which the system is run—whether a country is violating free trade rules—is not the most appropriate for their development needs.
10. America has promoted free trade principles only in sectors that benefit the U.S. economy; in other sectors, like textiles, protectionism reigns.
11. Further liberalization in some areas will give Developed countries more access to the resources of the Developing countries thereby further debilitating the domestic economies of developing countries.
12. U.S. influence in the WTO has more often meant U.S. domination than responsible leadership.
13. Instead of promoting beneficial goals for all, America is too often concerned with aggressively expanding its own markets.
14. America's agenda is always it own benefits. It goes with Liberalization if it benefits or goes with protectionism if it. So it is ultimately US interest for US that counts.
15. Exports from developing countries face significant market access impediments in Developed countries.
16. The developed nations have imposed new agreements in telecommunications, information technology, and financial services for the benefits of MNC's and TNC's , so that they get new market access in Developing countries.
17. America has always interpreted WTO agreements to protect its key industries. In textiles and clothing, the U.S. has selectively opened its markets, but this liberalization has proved of little benefit to developing nations.
18. Using creative calculations and interpretations of the Agreement on Agriculture (intended to reduce domestic support and open up markets), the U.S. made a few relatively insignificant changes in its policies to comply with its commitments under the agreement. This makes difficult for the developing countries to enter the US market.
19. The 1996 Farm Bill reduced direct payments to U.S. farmers, but it increased expenditure for export subsidies, thereby providing a net benefit to U.S. agroexporters.
20. Implications of TRIPS: Trade Related Intellectual Property Rights Agreement (TRIPS) fiercely protects the rights of corporations but easily allows the shared knowledge of indigenous communities to be patented by others. When fully implemented, developing countries will lose billions in rent transfers to rich countries, as TNCs will continue to control virtually all the patents of developing countries.
21. Genetically modified seeds and plants (GMOs) raise costs for farmers and promote monocropping, which increases the incidence of diseases and pests, encourages the use of chemicals, and threatens the biodiversity and genetic purity of plant species.The Developing countries will be unable to halt their imports unless those countries can present scientific proof of harmful effects. In sum, TRIPS will be catastrophic for both health and sustainable agricultural systems in developing countries.
22. Investment Issues: Agreement on investment seeks to gain national treatment and rights for corporations operating in all countries. Small- and medium-sized enterprises in developing countries are unlikely to be able to withstand such competition, leading to the destruction of domestic economies in the LDCs.
23. Issues with Transparency in Government Procurement: Such an agreement will eventually bring about the full-scale opening of government procurement--a trillion dollar business--to foreign companies. Like the investment agreement, this will be detrimental for developing countries, whose enterprises will not be ready for such intense competition.
24. The WTO should consider its top priority to be the development needs of its members.
25. Sections of agreements that work to the disadvantage of developing countries must be changed, including agriculture, TRIPS, textiles, and the dispute settlement system.
26. U.S. domination should end, decisionmaking should be democratic, and each government should consult regularly with its broader society on trade deliberations.
27. A change from a "trade creates wealth" perspective to one that stresses broad-based development is necessary if trade is to improve the living standards of the world's poor and ensure the long-term sustainability of resources.
28. The WTO should emphasize greater self-sufficiency of economies nationally and regionally.
29. Domestic markets, rather than foreign markets, should be the main stimulus of growth.
30. Resources should be used sustainably to support local and national communities.
31. People and the preservation of the environment, rather than capital, should be the primary objectives of any expansion of global trade.
32. Countries must be free to choose if they want overseas investments and, if so, what kind of investments.
33. They must also be able to decide on their tariff rates and other trade barriers in order to protect their industries, as the developed countries have been doing.
34. The U.S. and other developed economies should use its influence to encourage the WTO to become a democratic institution that provides space for a diversity of economic interests.
35. Certain practices and rules in the WTO must be changed to incorporate the realities and broader development agenda of the Developed Countries.
36. All members should be equipped with the technical expertise and human resources to participate fully in the multilateral negotiations.
37. Decisionmaking in the WTO must involve all members. This has not been the case to date; instead the "quad" (U.S., EU, Japan, and Canada) has made many decisions on behalf of all.
38. The dispute settlement system must consider the development needs of countries (especially the most vulnerable & LDCs), not just whether free trade rules have been violated.
39. If developed and developing country farmers are to compete in the same markets, then annual subsidies that developed countries provide to their farmers should be reduced to the negligible amounts near to those developing countries provide. Or developing countries should be allowed to increase both their subsidies and their tariffs to protect their markets from the highly subsidized exports of the developed countries.
40. Small farms in both developed and developing countries should be encouraged, not squeezed out--especially in developing countries, where farming is the source of livelihood for millions.
41. Developed countries should eliminate the tariff escalation on product chains of interest to developing countries. And if the WTO continues to force all countries down the liberalization path, the protected sectors in the U.S. must also be liberalized to open up new export markets for developing nations.