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Posted online: Friday , Jan 19, 2007 at 0025 hrs
The spotlight is back on agricultural trade policies with a senior economist of Indian origin saying that
Indian agriculture is competitive, the WTO chief visiting India and the Government declaring its faith in
Special Product policies for protection. Superficially, it seems somebody must be wrong. But in the
Kafkaesque world of agricultural trade, this is not so. Professor Bhagwati is too good to be wrong. He is
right in saying that Indian agriculture is competitive on a global plane. With the power of the Indian sun
and a hard working peasantry, this was inevitable. The counterfactual - namely Ashok Gulati¶s earlier
argument that Indian agriculture is discriminated against as policy has been moderated.

Indian agriculture is neither discriminated against nor inefficient or uncompetitive. In fact, Indian dairying
is also globally competitive in domestic resource costs terms. Then why are Indian agricultural exports so
low and why is their growth so sluggish in the liberalisation phase? Indian agriculture may be competitive,
but the global agricultural market is highly distorted. You can¶t export dairy products even if you are
competitive. The SPS phytosanitary standards will trip you. If you survive that or change it in the next
round of trade negotiations, export subsidies will get you. It is not easy to face a competitor who gets
more than 80 per cent of her costs paid by the government or from the accumulated reserves of a
commodity board. I argued at the Dairy Congress in Kolkata that the industry should cross-subsidise
exports, but given the magnitudes, it was with a heavy heart.

India¶s Commerce Ministry has waged a brave battle on the agricultural front. I do believe, however, that
the SDS, or Special and Differential Support system, gives it a flexible tool to hang on and we must give
them more negotiating space. Reciprocity for us would be a win-win game. If Professor Bhagwati is right
and our sense is that he is, then we can negotiate with our head held high. We can bring our strengths to
the table and get our pound of flesh in return. If Professor Bhagwati means, as some Indian economists
never tire in telling us, that we must give unilateral concessions, we must dig our heels in. The world
knows by now that the Kamal Naths don¶t budge. But around that, it is in our interest to craft a new global
agricultural mandi.

A strange thing happened on the way to the bazaar. The MSP system collapsed in many crops and in
fact, in many, it wasn¶t effectively there anyway. Some parastatals were building up the futures to support
the farmer. It was a hesitant game for the farmer, but he had started it. Durham wheats, spices and other
crops were traded in the commodity exchanges. I went to a village and the coop hedged against price
volatility in red chillies in the future. And then, the future was hit. It is nobody¶s case that destabilising
speculation does not need regulation. There are standard tests of the market to determine this. But the
thinness of the commodity market is, in fact, an argument for futures. They can only make it less thin.
Volatility will be by definition less, unless someone is cheating or doing insider trading, then hit her or him.
But don¶t take away a protecting tool from our kisan which his competitors abroad have.

There are many areas in the country where markets still do not exist in any meaningful sense of the term.
A centre called Jeypur in the east always has the lowest rice price in the country. Here always, the power
of the state will work. We should limit this to the minimum of requirements for the state has a lot else to
do.