Vibrant Gujarat 2011
© NITI Central FileVibrant Gujarat 2011. Prime Minister Narendra Modi has always been keen to ensure development reaches everyone and global industry leaders want to be part of India’s growth story.
India's assertion at World Trade Organisation (WTO) meet in Australia has sent shivers down the spine of some Western nations, including the United States. India, in the last global meet, had asserted that it has the right to retain higher stock-holding of food grains. This is the bone of contention in the Bali Agreement, the final Trade Facilitation Agreement (TFA) for which is to be signed by July 31, this year. For the first time, the Government of India has asserted itself in no uncertain terms.

Defending the Indian stance noted Economic Policy Analyst Dr. Anantha Nageswaran in an Op-Ed in The Mint had this to say:
Let us continue to strive for an original and smarter food security programme from this government but let us not allow that to blind us to the hypocrisy of the arguments made against India for its stance at the WTO negotiations.
Dr.Nageswaran's argument primarily is that:
India is insisting upon change in the method of calculating the legally permissible subsidy. It cannot be based on prices that prevailed in 1986-88. That India has a badly designed and ultimately counterproductive grain procurement and distribution programme today is no reason to agree to the use of an outdated benchmark price to calculate the nation's food subsidy. At a future date, even a well-designed food security programme might still fail to comply with the treaty obligation if the reference prices are not updated. The reluctance to do the same raises many unanswered questions on the intent behind keeping the reference price from nearly two decades ago. Further, the numerical ceiling of the total food subsidy not exceeding 10% of the value of production (calculated at 1986-88 prices) needs to be reviewed
India's stance has been the cause of much consternation with the developed countries.

According to a Reuters report the US Ambassador Michael Punke warned in a speech to the Geneva-based body on Friday, "Today, we are extremely discouraged that a small handful of members in this organisation are ready to walk away from their commitments at Bali, to kill the Bali agreement, to kill the power of that good faith and goodwill we all shared, to flip the lights in this building back to dark."

There are two important factors that need to be looked into when considering this statement. The economy of India is the tenth-largest in the world by nominal GDP and the third-largest by purchasing power parity (PPP). The country is one of the G-20′s major economies and a member of BRICS. By 2030, India is expected to become the third largest economy in the world. In such a scenario, none of the world's economies that intend to benefit from this country can rule it out. Moreover, there are studies suggesting that China's economy had invited global attention primarily because of its plug-and-play infrastructure - which means that any multinational group could simply fly down and start operations there overnight because of the availability of resources and policy support. This is why China has been a better destination and could become a major manufacturing hub.

India has been lagging behind in terms of policy reforms, thus making it operationally difficult for international groups to come here. In the last decade, it has also created hurdles for such groups. It is therefore difficult to give up the interests of the large segment of people who have survived through subsidies.

Policy reforms are needed but there are also enough reasons why the world cannot overrule India today. While China, Japan, Russia, South Korea are keen to engage with India and be partners of growth - it could help them get reliable investment destinations to park their funds, get better returns and help India benefit in terms of growth and employment - US and its allies cannot afford to miss the bus now.

Moreover, BRICS nations will mutually benefit in bilateral and multilateral trade. Narendra Modi's Look East Policy has given such strength to the Government that it may not be pushed around anymore. Subsidies have been boring a hole in our national treasury and infrastructure development and other sectors. Public-Private-Partnerships (PPP) may be an initial step and Foreign Direct Investment is also going to follow suit due to the resurgence of a business-friendly environment.

Let us not forget that US still gives financial support to its farmers and agriculture is one of the integral part of the Bali agreement. With India's economy, agriculture forms 18 per cent of the GDP whereas it is 1 per cent for the US. Still US gives $23 billion as direct subsidies to farmers.

Prime Minister Narendra Modi had repeatedly clarified his long-term intentions in his election campaign when he reiterated that he wants skill and technology enhancement in the agricultural and agro-based sectors. However, without delivering the fundamentals to the people, he cannot pull away their bread and butter.

It is quite clear that reforms are on the cards. Knowledge and technology-sharing is a part of the roadmap. But for now, there are two statements from the G-20 meet in Sydney that needs to be kept in view. "When we stopped them (developed members) from running away with a trade facilitation pact without delivering on food security, they are trying to blame the failure of the Doha Round on us. This is infuriating and unacceptable," says a Commerce Ministry official as per Hindu's Business Line report.

The assertion of Indian officials comes forth from this report. As per a Times of India report, Australian Trade and Investment Minister Andrew Robb said that, "All the countries, including India, re-committed themselves to the Bali package and there was no dissent on the significance of TFA and the timelines. India's concern on food security will be addressed as decided earlier. (We) don't know if they will be satisfied but they will not be left behind." He further added that India had pointed out its concern about food security but added that the deadline for food subsidy issue is 2017.

This statement shows that all is not over yet and G20 cannot overrule India's interests. Narendra Modi may have played a masterstroke here !

For now, US and its allies dare not flip the lights at WTO and miss the Indian growth bus. Prime Minister Modi knows that well and is going to bargain hard for the nation.