Delhi’s Doha Doldrums

Original Publication Date: 
21 March, 2007

NEW DELHI -- Agriculture here is a life and death issue. Scores of farmers have committed suicide in recent years because of crop failures and falling prices. Recently, police killed 14 peasants who were protesting proposed seizure of their land to build a giant business park in West Bengal.

For the Indian government, this is the political backdrop to the agricultural negotiations in the Doha Round of multilateral trade talks. In those deliberations, the United States and others are demanding that New Delhi open the Indian market to more foreign commodities. So far, India has resisted, a major reason why the Doha negotiations are stalled.

"We are committed to securing the food security, livelihood security and rural development interests of the 650 million Indian farmers," Indian Minister of Commerce and Industry Kamal Nath told CongressDaily in a recent interview. Surely, he reasoned, the United States would not ask India to trade off the livelihood of so many Indians to add to the prosperity of far fewer American farmers.

Before the Doha negotiations can be successfully completed, U.S. trade officials, and ultimately the U.S. Congress, will have to decide to what extent they believe that India's employment challenge is a legitimate reason why New Delhi cannot grant greater agricultural market access or to what extent India's farmers are simply being used by Nath as a bargaining ploy.

Agriculture does play a bigger role in the Indian economy than it does in any of the other major emerging markets, accounting for nearly one-sixth of India's gross domestic product and over half of total employment.

But 650 million Indian farmers are not about to be displaced by imports. The Indian agricultural workforce numbers only about 200 million, according to Abhijit Sen, one of India's best agricultural economists. Nath's figure of 650 million includes farmers' wives and children.

Nevertheless, the need for alternative job creation is still daunting. Sen estimates that about 10 million Indians will move from the land to other jobs in India over the next five years, as part of an ongoing process of consolidation of rural landholdings. Farm trade liberalization would obviously add to that number. However, these numbers are dwarfed by the 50 million who will be added to the labor force thanks to population growth over that period.

So, in the short run, the Indian challenge is to create jobs for about 60 million people, whatever is decided in the Doha Round. If there is farm trade liberalization, some additional millions will be added to that task, but they will be a fraction of the total.

By more narrowly defining the Indian challenge, and by recognizing that it will exist irrespective of market opening, Washington and others can pressure New Delhi to stop engaging in hyperbole and open a dialogue about what India needs to do to create alternative employment opportunities for people from rural areas.

First, New Delhi could use the money it already spends more wisely. "The level of agricultural support for India would appear to be considerably higher than that for other emerging economies," according to a new study, "Agricultural Policies in Non-OECD Countries," by the Organization for Economic Cooperation and Development in Paris. "Moreover, most of the support is provided in the form of market price support and input subsidies which are the least efficient and the most trade distortive forms of support."

Moreover, there is no evidence that current rural employment schemes and large infrastructure development projects have successfully raised the income of poor rural households.

As New Delhi prepares to pour even more money into such efforts, it needs to ensure they work. Moreover, agribusiness is needed in rural areas -- warehousing, food processing -- to create rural jobs for those who are leaving their land so they do not have to migrate to the cities.

At the same time, investment in irrigation has been doubled and there is new money to encourage production diversification and improved commodity marketing. New Delhi should be encouraged to expand these efforts that seem to be working.

Finally, in the 1960s, the Green Revolution resulted in large gains in Indian agricultural production. But in recent years, production of food crops has plateaued, due to deteriorating land quality and water shortages. And the lack of pest protection and cold storage results in an estimated 40 percent of the Indian fruit and vegetable harvest being lost before it reaches the market.

India needs help in spurring new gains in productivity and in reducing such waste. To that end, the U.S. Agriculture Department has recently initiated an agricultural technology initiative with the Indian government that deserves congressional support.

There is no gainsaying the fact that opening India's agricultural market to more imports will further complicate the country's already daunting job creation challenge.

But trade will never be the primary cause of India's job problems. And the implication by Indian trade negotiators that imports will be the culprit is disingenuous at best.

There are discrete policies that India can pursue to help mitigate its employment troubles. That is what Washington and New Delhi should be discussing. Not why India can't possibly open up its agricultural market.