Sunday, Oct 26, 2014

In the name of India, why?

India is making itself a laughing stock in the eyes of the world by violating agreements it made just six months earlier when it made the WTO accept its unreasonable demands. India is making itself a laughing stock in the eyes of the world by violating agreements it made just six months earlier when it made the WTO accept its unreasonable demands.
Written by Surjit S Bhalla | Posted: July 31, 2014 12:25 am | Updated: July 31, 2014 10:24 am

Modi-led BJP is pursuing an illogical and regressive anti-trade-facilitation stance at the WTO.

In my previous article (‘A “principled” Congress stand at the WTO?’, IE, July 29), I reached three conclusions. First, that there was an urgent need for the representative WTO reference price for agricultural products to be made a dynamic price rather than the present outdated average 1986-88 price. Second, with this dynamic price adjustment, the minimum support price paid by the Indian government to its farmers is well in excess of that allowed by WTO rules. Third, that India’s present WTO stance is without logic or empirical support.

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Unfortunately, the computations in my July 29 article contained errors with respect to international reference prices for rice and wheat. In the transformation between statistical programmes, the price for 2013 was mistakenly taken as the price for 2004, the price for 1990 was the price for 1981, that is, the price levels were shifted backwards by a uniform nine years for each data point. My error, my apologies.

I have written close to 1,000 articles in newspapers over the last 30 years, and this is the first time I am making an empirical error — and for this I must apologise. I have made other important errors, for example that I believed that the government had no option but to present a “good” budget in 2011, 2012 and 2013, and I had egg on my face, and worse, when the government of the day did not oblige. These were errors of judgement and not errors of calculation.

This error of calculation has allowed me to correct other assumptions detailed in the footnotes to the table. When all these corrections are incorporated, there is no material change in any of the conclusions mentioned above (phew!). Indeed, the 32-year average excess price provided to Indian producers of rice increases from minus 17 per cent of the world fob price to plus 17 per cent. In the case of wheat, there is no change between the earlier calculation and the present one — in both cases, our prices have been, on average, 14 per cent above the world price.

One advantage in redoing the numbers is that it allows one to answer some questions. First, how is it that India has been able to export wheat and rice in the last few years when our domestic fob price has been above the world price? For the last three years, India exported each year an average 9 million metric tonnes (MMT) of rice, and 4 MMT of wheat. continued…

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