India: Effects of Tariffs and Nontariff Measures on U.S. ... - USITC

TABLE 7.1 <strong>India</strong>: Characteristics <strong>of</strong> the agricultural marketing <strong>and</strong> distribution system <strong>and</strong> its effects on imports
Characteristic
Effect on imports
Most small farmers restricted to on-farm consumption or Lower prices for domestic products with which imports
to sales within a state-regulated m<strong>and</strong>i (market) with few compete.
buyers.
Government regulations <strong>and</strong> market structures vary by
state.
Limited crop- <strong>and</strong> market-specific price information.
Limited grades <strong>and</strong> st<strong>and</strong>ards.
Limited risk management tools.
High storage costs <strong>and</strong> product losses.
Poor transportation infrastructure.
Unreliable <strong>and</strong> expensive electrical power. Limited
availability <strong>of</strong> electrical power to rural population.
Uneven application <strong>of</strong> some regulations in the organized
retail sector. a
Source: Compiled by Commission staff.
Added uncertainty <strong>and</strong> complexity.
Lower prices for domestic products with which imports
compete. Increased risks for processors buying domestic
products.
Lack <strong>of</strong> an attribute on which imports can compete.
Lower prices for domestic products with which imports
compete. Increased risks for processors.
Increased costs, reduced quality.
Increased costs; limits on market opportunities,
particularly in rural areas. May present opportunities for
imports in areas near major ports.
Increased cost <strong>and</strong> risk, particularly for processing.
Limited market for chilled or frozen products.
Increased costs for imports relative to domestic products.
a The organized retail sector can be generally characterized as modern retail businesses, owned by companies
who hire employees to work in the store. The unorganized retail sector consists <strong>of</strong> small traditional outlets, which are
primarily if not exclusively family owned <strong>and</strong> operated.
surplus.” Approximately half <strong>of</strong> the cereals <strong>and</strong> pulses that account for the bulk <strong>of</strong> the
<strong>India</strong>n diet are marketed, as shown in the following tabulation. 4
<strong>India</strong>: Share <strong>of</strong> marketed surplus for certain cereals <strong>and</strong> pulses (%)
Commodity
Marketed surplus
Paddy (rice) 52
Wheat 54
Corn (maize) 46
Barley 57
Red gram (pigeon peas) 54
Green gram (mung beans) 60
Bengal gram (chick peas) 52
Lentils 49
Source: Ministry <strong>of</strong> Agriculture, “Abstract <strong>of</strong> Reports on Marketable Surplus
<strong>and</strong> Post-Harvest Losses <strong>of</strong> Foodgrains in <strong>India</strong>,” March 2005.
Note: Data are for the three-year period ending marketing year 1998/99,
the latest data published.
4 The concept <strong>of</strong> marketed surplus is important in underst<strong>and</strong>ing the reactions <strong>of</strong> subsistence farmers to
commodity prices. If prices for major food crops decline, subsistence farmers in <strong>India</strong> may market a larger
share <strong>of</strong> their production, because the lower prices reduce farm income. Reddy, “Factor Productivity <strong>and</strong>
Marketed Surplus <strong>of</strong> Major Crops in <strong>India</strong>,” May 2009, 44. Therefore, a policy that results in lower prices for
major food crops at the farm level could lead subsistence farmers to market a larger share <strong>of</strong> the crop,
reinforcing the price decline. Similarly, an improvement in marketing, distribution, or infrastructure might be
expected to result in higher returns to farmers, letting subsistence farmers <strong>of</strong>fer a smaller share to the market
<strong>and</strong> keep more for home consumption.
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