WTO and Bali round--at India's own economic peril.

Tejinder Narang

The essence of WTO accord of 6th December 2013 is that it matters a little if eternity is taken for finding a solution on subsidies on Food Security Bill. Any decision/ agreement that is not time bound becomes defunct anyway. Yes, the agreement is successful in being another decorated piece of paper.

Further, WTO has realized and recognized that Indian Food Security Bill –is merely a right to food entitlement. Its implementation has already been deferred for a year and a sensible Government can postpone it further. State governments now feel encouraged to subsidize more and more over which Government of India has lost control. The string of subsidies is thus endless as politician continue to perpetuate povertarianism as the rule of populist Governance.   Governments generally forget that once the virus of subsidy gets injected into the system, it becomes very difficult to dilute or eradicate the subvention without adverse social and political consequences like Arab springs etc.

Surprisingly and imprudently , the world trade body is also in an agreement to Indian's side unfair position on stock -piling grains without limitations, year after year, in shoddy warehousing conditions. These developments are indeed "historic" because they represent irrational thought process within WTO. 

As per India's own statistics, hunger is less than 1% of total population. Subsidies are traded in the market and lead to distortion in market prices. The problem is of mal-nutrition of poor sanitary conditions, clean drinking water, toilets, lack of electricity, medical help etc. 

Food bill of UPA/Congress which was percieved as vote catching cliche has not fetched them any electoral support in elections of four states of December 2013. It is a thumbs down reception to Food Security Bill. Good politics driven to extreme of eccentricity, may not work. That should be conclusion for the politicians. Ultimately, it is good economics that is good politics. WTO too remains ignorant and isolated from the ground realities of Indian polity.

It is equally bizarre to see reports which mention that India’s should be negotiating at WTO from position of strength for economically bad ideas, which are irrelevant nationally and globally. 

If Food Security Bill is implemented, it will be at India’s own economic peril that  will lead to cheaper exports, caused by pilferage in the market—that are around 40%- 50% or very expensive imports when the buffer levels are lower than the mandated quantities.Cheaper exports benefit all nations specially the poor countries. Expensive imports support the cause of developed world and emerging economies.

Media and pro-subsidy elements are writing about massive dose of food subsidies provided by EU, US, China and justify the case of Indian subvention.

The chart below gives a rather more realistic picture--

COUNTRY	GDP($ TR)	SUBSIDY ($ BILL)	SUBSIDY AS % GDP
EU	17	107	0.63
USA	17	105**	0.17
CHINA	8	166	2.1
INDIA	2	45*	2.25

·        *Includes food, fertilizer, electricity; ** includes hunger bill subsidy of $75 billion.

Projections of subsidies in absolute forms are thus grossly misleading as reported for public consumption. If about 2.25% of GDP is frittered away, Indian growth rate (4.5%) will be nearly down to about 2.25%. From 8-9% GDP growth and decline to 2.25% GDP cannot be deemed as an achievement of any sorts.

Any jubilation on account of India’s recognition in international forum is pathetic to the intelligence of vast majority of Indians.

Of course international policymakers can see through the “Tricks of the Trade.”

(also refer the http://shar.es/DMcsc)

UPDATED 12.06.2014