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

Production
The central government has created agricultural support policies intended to promote its
food security <strong>and</strong> economic goals. These programs intensified during the Green
Revolution, laying the foundation for the large increases in agricultural production that
followed. Today, <strong>India</strong>’s support for the farm sector can largely be subdivided into three
groups: input support programs, output price support programs, <strong>and</strong> farmer welfare funds.
Input support programs focus primarily on fertilizers, rates for irrigation water, electricity
rates, diesel prices, <strong>and</strong> seeds. Output price support programs consist <strong>of</strong> minimum
support prices (MSPs) for certain staple crops produced in <strong>India</strong>. Farmer welfare funds
refer to a suite <strong>of</strong> government payments that lower the cost <strong>of</strong> borrowing to farmers (via
below-market loan rates or debt write-<strong>of</strong>fs) or boost wages for farm laborers. Each <strong>of</strong> the
three groups <strong>of</strong> <strong>India</strong>n government support programs affects U.S. agricultural exports
differently. In the aggregate, however, <strong>India</strong>’s intervention policies in the farm sector, in
combination with trade measures, restrict U.S. agricultural exports. 11
General Production Patterns
<strong>India</strong> is a significant global producer <strong>of</strong> many agricultural products, mainly to feed its
own population. It is the largest or second-largest global producer <strong>of</strong> milk, pulses, sugar
cane, tea, wheat, rice, certain fruits (bananas <strong>and</strong> mangoes), certain vegetables (potatoes,
onions, garlic, <strong>and</strong> ginger), <strong>and</strong> peanuts. <strong>India</strong> is also a major producer <strong>of</strong> cotton <strong>and</strong>
castor (used for oil). Fresh fruits, vegetables, <strong>and</strong> livestock, including dairy, account for
the largest agricultural contributions to <strong>India</strong>n GDP. 12
<strong>India</strong>n commodity production patterns reflect the Green Revolution’s focus on intensive
farming <strong>and</strong> high-yield seeds, almost exclusively for food grains, specifically rice, wheat,
corn (maize), <strong>and</strong> millet (a coarse grain). 13 During the 1970s <strong>and</strong> 1980s, <strong>India</strong>n
agricultural yields for food grains increased through a combination <strong>of</strong> the use <strong>of</strong> highyielding
varieties, increases in irrigated areas, <strong>and</strong> the introduction <strong>of</strong> intensive doublecropping.
14 Government irrigation projects included a system <strong>of</strong> dams to capture
monsoon rains <strong>and</strong> provide water for a second yearly crop <strong>of</strong> certain commodities.
Current irrigation patterns reflect those initiatives; nationally, percentage <strong>of</strong> area under
irrigation for sugar cane, wheat, <strong>and</strong> rapeseed/mustard are relatively high (72–
93 percent), in contrast to other commodities, such as soybeans, coarse grains, <strong>and</strong> pulses
(2–15 percent). 15
11 <strong>India</strong>n government policies related to incentives for the food processing sector <strong>and</strong> food safety are also
described in this chapter. Both sets <strong>of</strong> policies set up frameworks under which companies are permitted to
operate in <strong>India</strong> for investment <strong>and</strong> trade. In principle, they are policies that impact <strong>India</strong>n <strong>and</strong> foreign
companies uniformly.
12 Horticulture <strong>and</strong> livestock each account for approximately one-quarter <strong>of</strong> agriculture’s contribution to
GDP. Mittal, “Can Horticulture Be a Success Story for <strong>India</strong>” August 2007, 2; <strong>India</strong>n National Dairy
Development Board, National Statistics, 2008.
13 Coarse grains include corn, barley, oats, sorghum, rye, millet, <strong>and</strong> mixed grains.
14 Double-cropping is the growing <strong>of</strong> two consecutive crops on the same l<strong>and</strong> in the same season or
calendar year. Jha et al., “<strong>India</strong>n Wheat <strong>and</strong> Rice Sector Policies <strong>and</strong> the Implications <strong>of</strong> Reform,” May 2007,
2.
15 Irrigation rates are for MY 2005/06. Government <strong>of</strong> <strong>India</strong>, Ministry <strong>of</strong> Agriculture, Agricultural
Statistics at a Glance, 2008.
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