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MAINS Q/A 18-05-2018

Q1. The World Trade Organisation’s Dispute Settlement Body (DSB) has agreed to establish a panel to rule on a US complaint on certain programmes in India which Washington claims are prohibited export subsidies. Comment.

The World Trade Organisation’s Dispute Settlement Body (DSB) has agreed to establish a panel to rule on a US complaint on certain programmes in India which Washington claims are prohibited export subsidies.

India was not given an opportunity to object to the first request for a dispute panel by the US, as is the usual practice, because the dispute involves prohibited subsidies.

“The panel was established under special provisions of the WTO’s Agreement on Subsidies and Countervailing Measures allowing panels to be established on first request for disputes involving alleged prohibited export subsidies,” according to a note from the WTO.

The programmes targeted by the US include most popular incentive schemes such as the Merchandise Exports from India Scheme, Export-Oriented Units Scheme and sector-specific schemes, including Electronics Hardware Technology Parks Scheme, Special Economic Zones, Export Promotion Capital Goods Scheme and Duty-Free Imports for Exporters Programme.

The US, in its representation, argued that the programmes provided financial benefits to Indian exporters, which allowed them to sell their goods more cheaply to the detriment of American workers and manufacturers.

It alleged that while the exemption given to India from the ban on export subsidies had expired (as the country had surpassed the $1000 threshold for per capital gross national product), it was yet to withdraw its schemes.

New Delhi, however, is not convinced that the time it is entitled to for a phase-out of the schemes has lapsed and wants more discussion on the issue.


Q2. US earlier this month submitted a petition to the WTO, once again arguing that India’s agriculture subsidies exceeded WTO-specified limits. Comment

. The move smacks of bad faith and flawed reasoning. In November 2014, the Modi government got the WTO General Council to agree that public stock-holding for food security would not be challenged until a ‘permanent solution’ was arrived at.

The pact reversed the decision taken at the December 2013 Bali Ministerial that only promised a temporary reprieve to price support programmes. However, the US has not kept its side of the deal. It has been stonewalling efforts to arrive at a permanent solution to public stock-holding. At the December 2017 Buenos Aires Ministerial, the developed world distorted the agenda by introducing a range of new issues.

An open discussion on public stock-holding would have worked to the advantage of large farm producers such as India, China and Thailand and, in fact, highlighted the market-distorting farm subsidies of the developed world. It is clear that the Trump administration is going all-out to prise open world markets and protect its own producers. Its disregard for multilateral rules has increased.

India’s procurement programme can be defended on a number of grounds.

First, India’s small and marginal farmers, who account for the bulk of all agriculturists, are exempt from subsidy reduction commitments under Article 6.2 of the WTO’s Agreement on Agriculture.

Second, as India and China have argued in a joint paper released last year, the developed world benefits from an overall farm subsidy ceiling of 5 per cent on farm output, as against a product-specific cap of 10 per cent on the produce of developing world. Under the guise of an overall cap, the former is able to extensively support some crops more than others. A product-specific cap may lead to an overestimation of input subsidies that are not crop-specific.

Third, product-specific price support is based on the difference between the prevailing price and an ‘external reference price’ (ERF) based on 1986-88 prices. Apart from the ERP being outdated, the subsidy is calculated in the domestic currency rather than the dollar.

Depreciation of the former exaggerates the subsidy. The developed world subsidises its farmers generously, and indeed distorts world markets, by masking its subsidies under the ‘blue box’ and ‘green box’ categories. The former is considered ‘minimally distorting’ as it deals with curtailing production, whereas the latter is deemed ‘non-distorting’ as it covers various income support.

A debate on a ‘permanent solution’ to public stock-holding should lead to a more transparent system.

That said, India should consider prioritising income support over price support. The demand for a ‘pay commission’ of sorts for agriculturists, raised by farmers’ organisations, is not without merit. We could redesign the food subsidy bill, but on our terms alone.


Q3.What are the challenges being faced by the newly introduced National Health Protection Scheme?

  • Supply Side – There is a massive shortage of health services (human resources, hospitals and diagnostic centres in both private and public sector).
  • This is made worse by gross inequalities between and within States.
  • But significantly, even a well-placed State like Tamil Nadu has an over 30% shortage of medical and non-medical professionals in government facilities.
  • Notably, the health budget has neither increased nor is there any policy to strengthen the public/private sector in deficit areas.
  • While the NHPS provides portability, it will take time for private entities to register hospitals and expand their area of operations to deficit areas.
  • Demand Side – The stark regional variations in health care infrastructure across states could cause patients to gravitate toward the southern States.
  • Growth of medical tourism (foreign patients) as a government policy is another area that is already creating significant demand.
  • The capacity of this infrastructure to take on the additional load of such insured patients from other States is very doubtful.
  • Pricing – Pricing strategy for health services under the scheme needs to be spelt out clearly as this area had proved controversial in other health too.
  • Notably, erratic profiteering by hospitals has been discovered under various state government sponsored insurance schemes thus far.
  • Mechanisms are needed to put in place to gather market intelligence and arrive at accurate pricing for medicines and medical procedures.
  • Primary Care – There is a proposal for upgrading primary care, but the claim seems hollow as no funding has been allocated for the same.
  • In the northern States there are hardly any sub-centres and primary health centres are practically non-existent.
  • It is estimated that Rs. 30,000 crore will have to be spent if this three-tier primary health-care system is to be brought to minimal health standards.


Q4. What is the situation of water crises in Gujarat? Suggest how the situation can be improved?

  • Drought in India is growing in severity, and it is being aggravated by heat waves and significant rain deficits in different regions.
  • On the cusp of the southwest monsoon, several arid States are hoping to revive their rivers and reservoirs with bountiful rain.
  • Gujarat government has embarked on a labour-intensive programme to desilt rivers and water-bodies ahead of the rains.
  • Notably, fall in reservoir storage levels in the Sardar Sarovar Dam, and 27 other reservoirs, had severely affected the farmers of the state last year.
  • Considering the dire situation, drinking water needs are being prioritized, and supply for irrigation from dams has already been suspended for now.
  • This underscores the need for comprehensive reforms at the level of States, with the Centre helping to conserve hydrological resources.


  • Gujarat needs to improve rural water storage structures to ensure long-term prosperity for its drier regions – Saurashtra, Kutch and North Gujarat.
  • This will ensure relief for farmers from the monsoon vagaries that affect the Narmada, whose waters are apportioned among four States.
  • As studies have estimated that public irrigation efficiency to be as low 35%, work needs to be commenced to better this by usage of field technologies.
  • Decentralised water storage too will help cities like Ahmedabad, Rajkot, Surat and Vadodara when supply from large dams and other sources dwindles.



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