Liberalising Domestic Agricultural Markets in India International Workshop and Second Advisory Committee Meeting Introductory Remarks 10 February 2006

Research Sponsor Programme Management Department British High Commission, Delhi Government of UK

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

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 This provides us with opportunity to build on what we accomplish under the present research funded by the Government of UK.

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 Project Team

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

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

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

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?

Share of Agriculture

Public Sector Investment and Subsidies in Agriculture: Recent Experience (Rs. Billion) Source: Agriculture at a Glance (2004)

Food Subsidy: Average of Triennium (Rs. Billion) * Two Years Source: Expenditure Budget: Various Issues

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?

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 US$13 billion by the year

Disconnect between Domestic and International Markets: 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

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

Thank You for Your Attention