Economics Project Work

CHAPTER 2: DATA ANALYSIS

2.1 NATURE OF INDIA’S RELATIONSHIP WITH INTERNATIONAL
ECONOMIC INSTITUTIONS

2.1.1 World Bank and India

The World Bank consists of the International Bank for Reconstruction and
Development (IBRD) and the International Development Association
(IDA). India’s relations with the World Bank can be traced back to the
latter’s origin. India was one of the 17 countries that prepared the agenda
for the Bretton Woods Conference in June 1944. At that time India was
under the British rule and considered as its dominion state. It was also one
of the 44 countries which signed the final agreement for the establishment
of the Bank. The name “International Bank for Reconstruction and
Development” was first suggested by India to the drafting committee.
Since then the two have established a close relationship with each other
from framing the policies of economic development in India to financing
the implementation of these policies. It was also one of the founding
members of the International Development Association (IDA) in 1960.

India was the largest borrower from the World Bank for six of the last 10
years. Between 2010 and 2019, the bank provides assistance to India
across sectors like road and power infrastructure, agriculture, health,
education and disaster management. India has also become the country
with WB’s largest country program.

At the level of organisational structure, of the 21 Executive Directors in
the Bank, one is from India (It also represents Bhutan, Bangladesh and
SriLanka, together forming a constituency). India, by its continuous
presence in the board right from the beginning, played her legitimate role
in the formulation in the implementation of policies and monitoring of the
Bank’s programmes, particularly from the standpoint of developing

World Bank Group consists of 5 organizations of which the IBRD and
IDA together constitute World Bank.

member countries. The finance ministers of India as members of the
Governing Body have been participating in the annual meetings which
frame the basic policy guidelines for the Bank’s Executive Board. Many
Indians have occupied senior positions in the Bank.

IBRD lending to India commenced in 1949 with a loan to the Indian
railways; the first investment by the IDA in India took place in 1961 for a
highway construction project. The World Bank has been India's largest
source of external capital and, in turn, India has been the largest borrower
from the WB. During the 1950s, the IBRD was India's sole source of WB
borrowings. By the end of the decade, India's mounting debt problems
became an important factor in the launch of the IDA. In the 1960s, the
WB criticized the direction of Indian economic policy. In 1965, a large
economic mission by WB and its allies, known as “Bell Mission”, to
persuade India to undertake policy reforms, proved to be largely
unsuccessful. These reservations notwithstanding, the backdrop of the
cold war and India's pivotal position as a democratic role model for newly
independent countries, as well as the high quality of India's conversational
partnership ensured continuous support by the WB.

WB has treated India more favorably than most other borrowers. The
relative importance of WB’s financial support has been greater in certain
sectors and time periods, especially when the country suffered balance of
payments problems, such as in the 1960s and in 1990–1991. At the same
time, India offered a convenient sponge to absorb WB resources and meet
its annual lending targets. The lending portfolio changed sharply after the
1991 macroeconomic crisis.

Both the World Bank and India have been working together in meeting
the developmental goals of growth, stability and social development. The
close cooperation between India and the IBRD goes far beyond the normal
creditor-debtor relations. As the Bank operates in India through many



kinds of projects, the country obviously offers an experimental ground for
learning lessons and getting insights. According to the WB, India because
of her limited credit worthiness, offered the clearest justification for the
creation of the IDA. Even though on occasions, there have been minor
differences on prioritization of goals, the Bank has attached considerable
importance to its relations with India.

2.1.2 IMF and India

The International Monetary Fund (IMF) was established along with the
IBRD at the conference of 44 Nations held at Bretton Woods, New
Hampshire, USA in July 1944. At present, 190 nations are members of
the IMF. India is a founder member of the IMF.

India’s special concern at the time was about the “Embarrassing
plentitude" of sterling balances and their multilateral settlement and the
inclusion, among the purposes of the IMF, of a clause to assist in the fuller
utilization of resources of underdeveloped countries. This concern was
not appreciated by the Americans and the British on the ground that the
problem of wartime balances was too large for the IMF to tackle, and the
development of underdeveloped countries was the responsibility of the
World Bank. However, as the deliberations of the conference proceeded,
it was conceded that the Sterling balances would be freely convertible
after the transition period, and also that the Articles of Association
governing the IMF would include the development of productive
resources of all members as a primary objective of economic policy.

India, which became a formal member of the IMF in December 1945,
played a significant role in its formation. The objectives of IMF are
macro-economic growth, alleviation of poverty and economic stability,
policy advice and financing for developing countries. It acts as a forum
for cooperation in the monetary system, promotion of exchange rate
stability and international payment system.

The Annual Meeting of the Boards of Governors of the World Bank
Group (WBG) and the International Monetary Fund (IMF)

Each member's contribution to IMF resources called its “Quota” was
made partly in its own currency, determining its voting rights and the
amount it could borrow in the event of need. The Quotas are decided
generally on the basis of the member's national income, Foreign Exchange
Reserves, and its importance in world trade, though political
considerations also weigh heavily. India has not taken any financial
assistance from the IMF since 1993. Repayments of all the loans taken
from the International Monetary Fund were completed on 31st May, 2000.

India’s current Quota in the IMF is SDR (Special Drawing Rights) 5,821.5
million, making it the 13th largest Quota holding country at IMF and
giving it shareholdings of 2.44 %. However, based on voting share, India
(together with the constituency countries: Bangladesh Bhutan and Sri
Lanka) is ranked 17th in the list of 24 constituencies at the executive
board.

Despite India’s junior status as a member of the IMF, it exercised
considerable influence in shaping IMF policies, being one of the largest
developing countries. This was evident by the role it played in the
emergence of the SDR (Special Drawing Right), an artificial device for
the creation of international liquidity, the shortage of which was felt since
the first half of 1960s. India also, as a prominent member of the group of
24 (a subgroup of the leading developing country members of the IMF)
worked assiduously for safeguarding the interest of developing countries
in the management of the International Monetary system.

2.1.3 WTO and India

India was a member of General Agreement on Tariffs and Trade (GATT),
the predecessor of WTO, since 1948. After the Marrakesh Agreement
signed by 123 nations on 15 April 1994, India joined the WTO since its
inception on 1 January 1995. The WTO is an intergovernmental
organization that is concerned with the regulation of international trade



between nations. The WTO has opened up new vistas in international
economic relations for all the countries of the world. In the opened up
world, the stakes of all the countries have multiplied, and so has the degree
of rivalry and competitiveness.

India's participation in an increasingly rule based system in the
governance of international trade is to ensure more stability and
predictability, which ultimately would lead to more trade and prosperity
for itself and the other member countries of WTO. India also
automatically avails MFN (most-favored-nation) and national treatment
for its exports to all WTO members. India, as a developing economy, has
benefited being a founding member of the WTO. The country at large has
seen many significant changes which have taken place after the formation
of WTO. On the other hand, there are some issues which are yet to be
sorted out with the WTO.

India is one of the prominent members of WTO and is largely seen as a
leader of the developing and underdeveloped world. At WTO, decisions
are taken by consensus. So there is a bleak possibility that anything
severely unfavorable to India’s interest can be unilaterally imposed. India
stands to gain from different issues being negotiated in a forum provided
it engages with different interest groups constructively, while
safeguarding its own developmental concerns. In absence of such a body
we stand to lose a platform through which we can mobilize opinion of
likeminded countries against selfish designs of the developed countries.
WTO provides a forum for such developing countries to unite and
pressurize developed countries to make trade sweeter for poor countries.

India has contributed significantly to the evolution of the concept of the
WTO. In turn, India is already reaping in a big way various benefits that
can be directly or indirectly associated with the WTO. India is
experiencing an unprecedented boom in exports, as are the world exports.



India remains committed to various developmental issues concerning the
world as a whole.

While developing countries like India are availed of greater trade
opportunities, they are also challenged by certain policies of developed
countries. India, along with a few other developing countries, has and
continues to have objections on issues like agriculture especially subsidies
in the context of food security etc. and trade facilitation.

In spite of special provisions for developing countries, they contain
imbalance. A number of developed countries did not fulfill the same
obligations for trade liberalization while developing countries asked to
reduce import duties and provide greater market access. The signing of
WTO agreements have far reaching effects not only on India's foreign
trade but also on its internal economy. India has reduced tariffs to bring
them to bound levels. However India is not in a position to reduce tariffs
substantially to the extent suggested by developed countries. Further
agreements on agriculture and intellectual property rights are a matter of
concern for India.

India has been pitching for a reformed WTO. India has maintained that it
is committed to work along with other countries to reform the WTO in
order to ensure that it continues to be an engine for global trade. India also
believes that while an institution like the WTO is required and should
remain intact, it needs to change. Though the west has relentlessly tried to
project India as a rigid and uncompromising negotiator, the majority of
countries stand with India after the failure of every meet.

To make use of the opportunities, for itself and for the provision of certain
global public goods, India’s cooperation with like-minded actors will be
key. Working together with a group of countries from the developed and
developing countries could further amplify India’s voice.

Jawaharlal Nehru, PM of India; Ayub Khan, President of
Pakistan; and William Illiff, World Bank vice president. Signing
Indus Water Treaty (1960) between India and Pakistan which

was mediated by World Bank.

2.2 POSITIVE AND NEGATIVE IMPACTS OF INTERNATIONAL
ECONOMIC INSTITUTIONS ON INDIAN ECONOMY

2.2.1 Impact of World Bank

The World Bank’s seven decade-long partnership with India is strong and
enduring. It has helped India in attaining economic development in
multiple fronts. At the same time, it is not free of shortcomings. Some
major benefits from WB could be listed as follows:

1. Financial Support: It helps developing countries like India achieve their
development goals by providing them with the financial and technical
support they need. It gives out loans to fight their poverty as well as
other issues.

2. Low Interest Rates: WB offers loans to countries at low interest rates
compared to interest rates from normal banks. It can also offer grants
and interest free credits.

3. Equality: WB’s main objective is to bridge the gap between the rich
and the poor and ensure that there is fair distribution of resources to
enable the poor countries to sustain their economy.

4. Training and Direction: It offers expert advice and imparts training to
Indian personnel. Indian government has sought WB’s guidance in
formulation and implementation of sound economic policies.

On the other side of the coin the following flaws of WB needs to be
mentioned:

1. The WB has been criticized for its part in promoting the hegemony of
the west through its close participation with the IMF in lending only to
programs that were heavily conditioned.

2. Conditionalities put forward by the WB and IMF during India’s
economic crisis of 1991 to avail loans were accepted by India at a huge
cost to its economy. Such strict conditions are part of its nature.

World Bank President Jim Yong Kim meets Prime
Minister Narendra Modi

3. WB only works through the government and thus, it is one of the chief
funders of corruption, the single biggest impediment to global
development.

4. The World Bank is often accused of ignoring the environmental and
social impact of projects it supports. A noteworthy episode of this sort
in the Indian context would be WB's support of the massive Narmada
irrigation project, which involved the construction of dams and
irrigation canals and subsequent large-scale displacement of people
that led to active protests of NGOs. As a result, WB was forced to have
its first ever external review of an ongoing project which was strongly
critical of the project's implications for displaced populations and the
environment. The WB stopped disbursements in 1993, and eventually
the Indian government simply canceled the loan in 1995.

5. Another major complaint about the World Bank is its role in causing
high debt among developing countries like India. Although the World
Bank’s loans are intended to help countries, they also cause those
countries to take on debt that they must pay interest on and remain
under the conditions of the institution.

Some economists blame it as a system which does not allow nations to
develop on their own terms, democratically, without domination and
exploitation by foreign interests, and dictates from the developed
countries but is not always the case. WB’s focus on fighting poverty in
developing countries led to a huge decline in poverty in many parts of the
world. But poverty remains substantial in India, though is on track to
decline. Inequality in income, gender, etc., unemployment and rising
social tensions and lack of adequate infrastructure and institutions still
hold back development. New global challenges of climate change,
migration, transmission of diseases require new more innovative
approaches. In this changed world, WB should not shrink and focus on
only the low-income states.



India has been the largest recipient of WB financing and has, no doubt,
helped India. But the WB is now a small contributor to India’s
development needs. What low middle-income countries like India need
are huge amounts of capital to propel their development in an inclusive
and sustainable manner and ensure they are not stuck in a 'middle-income
trap’.

2.2.2 Impact of IMF

The IMF has played an important role in Indian economy. The IMF has
provided economic assistance from time to time to India and has also
provided appropriate consultancy in determination of various policies in
the country. In addition to this India also got the following benefits of
becoming the IMF members:

1. Independence of the Indian Rupee: Before the establishment of the
IMF, the Indian rupee was linked with the British Pound Sterling. But
Indian rupee has become independent after the establishment of the IMF.
Its value is expressed in terms of gold. It is not determined by the Pound
Sterling. It means that Indian rupee is easily convertible into the currency
of any other country.

2. Membership of the World Bank: India has become a member of the
World Bank also by virtue of its membership of the Fund. As a result,
India got several loan facilities from the World Bank for the development
purposes.

3. Availability of Foreign Currencies: The Government of India has been
purchasing foreign currencies from the Fund from time to time to meet
the requirements of development activities. The large amount of
availability of foreign currencies has greatly promoted the economic
development of the country.

Cartoon in the context of Economic Reforms of 1991

4. Reputation in International Circle: India is one of those six countries
which have occupied a special place in the Board of Directors of the Fund.
Thus, India had played a creditable role in determining the policies of the
Fund. This has increased India’s prestige in the international circles. India
takes keen interest in the formulation of Fund’s policies.

5. Guidance and Advice: Being a member of the Fund, India got the expert
opinion from the Fund for solving its economic problems. The attitude of
the Fund towards India has always remained sympathetic. The Fund has
given valuable advice to the Government of India with regard to the
financing of the Five-Year Plans.

6. Timely Help: India has received timely help from the Fund to eliminate
the deficit on its balance of payments. The Fund granted loans to meet the
financial difficulty arising out of the Indo-Pak conflict of 1965 and 1971.
Thus, the fund has given timely help to solve the economic crisis.

Despite these applause, the IMF has been criticized for not doing much
and for overreaching. It has been criticized for being too slow or too eager
to assist failing national policies. Since the United States, Japan, and Great
Britain feature prominently in IMF policies, it has been accused of being
a tool for developed countries only. High interest rates charged on its
advances are considered one of the major disadvantages of the IMF. So,
debt servicing for the developing countries is difficult.

The conditionality clause of the IMF loan in recent years is subject to
serious debate. Measures suggested to India by the Fund in the early years
of the 1990s involved serious stress and strains. In spite of the use of IMF
medicine since 2007, India has been facing recession in industries.
Unemployment problem is on the rise. Public sector enterprises are facing
extinction. Number of people living below the poverty line is on the rise.
It is true that the BOP problem is not as serious today as it was 10 or 20
years ago, but debt burden is not showing any sign of abatement.



Anyway, the IMF prescriptions on India as well as on other countries
present a mixed picture of failures and successes. The IMF has to be
credited for the creation of an open and competitive economy. Still more
has to be done. But, in the process, it has generated enough problems. We
must not brush aside these as transitional problems. These problems are
to be tackled promptly.

2.2.3 Impact of WTO

There have been several benefits for India along with few concerns by
virtue of its participation in the multilateral trading system within WTO.

a. WTO has helped India to improve its export competitiveness.
b.Lower tariff barriers and market access has helped India to integrate

and participate in the global economy in a more efficient manner.
c. Transfer & exchange of technology, ideas etc. has been of tremendous

help for India in pursuit of its growth and development.
d.Having market access has helped in reduction of cost and time which

would have otherwise required for bilateral trade negotiations.
e. A well-defined and structured dispute settlement mechanism also

makes it easier to settle the trade disputes.

Specifically the major benefits have been in the following ways:

1.Increase in export earning: The establishment of WTO has increased the
exports of developing countries because of reduction in tariff and non-
tariff trade barriers. India's merchandise exports as well as service exports
have substantially increased. Overall exports stand at US$ 528.45 billion
in 2019.

2.Agriculture export: Reduction of trade barriers and domestic subsidies
raise the price of agricultural products in the international market, India
benefits from this in the form of higher export earnings from agriculture.

WTO Ministerial Conference

3.Foreign direct investment: As per the TRIMs agreement, restrictions on
foreign investment have been withdrawn by the member nations of the
WTO. This has benefited developing countries by way of foreign direct
investment, euro equities and portfolio investment.

However, at the same time WTO also poses some serious challenges to
the Indian Economy.

a. The WTO’s extensive rules on trade or trade-related aspects like
Agriculture (Agreement on Agriculture-AoA), Intellectual Property
(TRIPs), services (GATS) and manufactured items (Non-Agricultural
Market Access-NAMA) favours developed countries.

b.Developing countries have experienced loss of autonomy in policy-
making. These countries are not able to use their legitimate policy
instruments to pursue their own development goals.

c. Since India can't deny market access to the other countries. It might
prove detrimental to the domestic industries and farmers to a certain
extent because it would be a herculean task for them to compete with
them owing to their lack of competence in terms of production, quality,
technology, manufacturing cost etc.

d.Reduction of trade and non-tariff barriers has adversely affected the
exports of various developing nations. Various Indian products have
been hit by non-tariff barriers.

Some of the major unfavorable implications of WTO agreements on
Indian economy are as follows:

1.TRIPs (Trade Related aspects of Intellectual Property): As a member
of the WTO, India has to comply with the TRIPS standards. However,
the agreement on TRIPs goes against the Indian patent act 1970 and
would lead to rise in price of medicines, thus keeping them out of reach
of the poor people as well as allows MNCs to take over seed production



and eventually control food production, affecting the livelihood of a
large majority of Indian population that depends on agriculture.
2.TRIMs(Trade Related Investment Measures): The agreement on
TRIMs also favors developed nations as there are no rules in the
agreement to formulate international rules for controlling business
practices of foreign investors. Also, complying with the TRIMs
agreement will contradict our objective of self-reliant growth based
technology and resources.
3.GATS (General Agreement on Trade in Services): The agreement on
GATS will also favor the developed nations more. Thus, the rapidly
growing services sector in India will now have to compete with giant
foreign firms. Moreover, since foreign firms are allowed to remit their
profits, dividends and royalties to their parent company, it will cause
foreign exchange burden for India.

India has experienced blended outcomes from its association with WTO.
The WTO has influenced the trade marginally positively, however not of
course. The trade volume of India was expanding after the WTO
execution, however not at such a great rate when contrasted with world
trade. This is because of the new difficulties faced by Indian economy
forced by the WTO. However, India has picked up a favorable position of
the WTO in the points of view of international trade.

2.3 CONTRIBUTIONS OF INTERNATIONAL ECONOMIC
INSTITUTIONS TO ECONOMIC DEVELOPMENT OF INDIA

2.3.1 Contributions to development: World Bank

The World Bank’s financing, analytical work, and advisory services have
contributed to the country’s development. IDA – the WB’s soft-lending
arm created for developing countries like India - has supported activities
that have had a considerable impact on universalizing primary education;
empowering rural communities through a series of rural livelihoods

Celebrating 70 years of World Bank’s
partnership with India

Cover of India Country Partnership
Framework FY 18-FY 22

projects; revolutionizing agriculture through support of the Green and
White Revolutions; and helping to combat polio, tuberculosis, and
HIV/AIDS. In FY18, the relationship reached a major milestone when
India became a low middle-income country and graduated from IDA
financing. The World Bank group also supports lighthouse India, a
program of knowledge exchange on development experience among
India’s states and between India and other countries. For example, the WB
has helped foster a high-level partnership around skills development
between India and several nations in Africa.

The WB assistance programs are guided by a “country partnership
strategy” (CPS), which sets out how the World Bank group proposes to
build a growing partnership with the Government of India. In September
2018 it began a new partnership with India. A key feature of the new
strategy is the significant shift in support toward low-income and a special
category states, where many of India’s poor and disadvantaged live. The
new strategy proposes a lending program of $3 billion to $ 5 billion each
year over five years. 60% of the financing will go to state government-
backed projects. Half of this will go to the low income or special category
states. The partnership emphasizes an efficient and sustainable growth
path and fosters competitiveness to create new job opportunities and
investments in human capital. The Country Partnership Framework
between the WB and India is the largest one in the WB and it supports
India’s transition to a middle income country.

Two nationwide projects implemented by the government of India with
the partnership of WB would help us better understand the contribution of
WB to India’s economic development. Sarva Shiksha Abhiyan (SSA) is a
government program aimed at universalisation of primary education to
children across the country. Huge financial support by WB as well as its
evaluations and research was a major attribute to the success of the project
which today caters to some 200 million children living in over a million

Logo of Sarva Shiksha Abhiyan Programme
Road constructed under PMGSY

habitations across the country, making it one of the largest elementary
education programs in the world. The Pradhan Mantri Gram Sadak
Yojana (PMGSY) is an infrastructure development programme that aims
to connect unconnected habitations in the country with all-weather roads.
It is a very large undertaking, with the WB also being involved in its
financing and execution all along. The programme has converted around
35000 kilometers of rural roads to all-weather pots to the benefit of 8
million people with the investment of funds received from WB. Many
such wide ranging programmes were and continues to be undertaken with
WB support by central and state governments like Maharashtra Project on
Climate Resilient Agriculture, Bihar Kosi Basin Development Project,
National AIDS Control Support Project, Tamil Nadu health system
Reform program, Rajasthan’s state highway network project, etc.

Seventy years of the World Bank’s partnership with India has contributed
to the country’s development on many fronts, from providing access to all
weather roads for thousands of rural communities, to ensuring almost
every child including girls go to Elementary School. At the same time, the
country is still home to the greatest number of the world’s poor and
sustained effort is required to continue on a path to higher income status
that is inclusive of all its citizens. India is both critical to the success of
global development efforts including eliminating extreme poverty and as
an influential leader for global good such as addressing climate change.

2.3.2 Contribution to development: IMF

The role played by IMF in Indian economy is indeed significant. The
frequent and timely economic assistance as well as appropriate
consultancy in determination of various policies in the country by the
Fund were decisive. There is no doubt that this membership has been
greatly beneficial to India. International regulation by the IMF in the field
of money has certainly contributed towards expansion of international

Gita Gopinath, the Chief Economist of
the IMF since 2019, is an Indian

American. Born and brought up in India,
her parents hail from Kannur, Kerala.

trade and thus prosperity. India has, to that extent, benefitted from these
fruitful results.

The IMF's primary purpose is to ensure the stability of the international
monetary system—the system of exchange rates and international
payments that enables countries (and their citizens) to transact with each
other. The Fund's mandate was updated in 2012 to include all
macroeconomic and financial sector issues that bear on global stability. It
works in three ways: (i) keeping track of the global economy and the
economies of member countries; (ii) lending to countries with balance of
payments difficulties; and (iii) giving practical help to members.

The IMF oversees the international monetary system and monitors the
economic and financial policies of its member countries. As part of this
process, the IMF highlights possible risks to stability and advises on
needed policy adjustments. This is the most active way in which the IMF
currently engages with India and contributes to its economic
development. For instance, IMF presented its projection of contraction in
India’s GDP for 2020-21 as 10.3 percent due to Covid-19. It added that
the country’s economy might rebound with an 8.8 per cent growth rate in
2021-22. Thus it helps the government to make appropriate policy
decisions.

The IMF provides loans to member countries experiencing actual or
potential balance of payments problems to help them rebuild their
international reserves, stabilize their currencies, continue paying for
imports, and restore conditions for strong economic growth. The IMF
renders a short term financial assistance to the members so as to enable
them to tide over the BOP short run situation.

India borrowed both financial and other assistance from the IMF quite a
number of times under several lending provisions of the Fund. India has
made huge borrowings from the Fund to cover its deficits in BOP. In the



period after Independence, India could not possibly reduce imports, since
these consisted of essential foodstuffs, capital equipment and industrial
raw materials. Exports, on the other hand, could not be immediately
expanded due to conditions of limited production in the country. Under
such difficult circumstances, it was the IMF that came to her rescue. The
total figures of borrowings by India from the IMF do not convey the extent
of the support that it extended to her. What are of greater significance are
the crucial timings of and special circumstances under which such
assistance was availed of. The IMF works with the government to
modernize their economic policies and institutions, and train their people.
This helps it strengthen its economy, improve growth and create jobs.

The economic reforms of the 1990s in India are said to have been
introduced at the instance of the IMF- World Bank. As the IMF and the
World Bank are inseparable twins, membership in the former is a
prerequisite for membership in the latter. Thus all the benefits from WB
were received only because of India’s membership in the IMF.

But the suggestions of the IMF have not always turned up to be fruitful.
Its policy of laying emphasis on elimination of subsidies, liberalisation of
trade and capital market privatisation as conditions for providing financial
assistance to the developing countries has not led to the solution of the
twin problems of poverty and unemployment in the developing countries.
IMF has to renew its efforts to remain as an effective support to countries
like India.

2.3.3 Contribution to development: WTO

As mentioned in the earlier chapters, the World Trade Organization
(WTO) is an organization that intends to supervise and liberalize
international trade. The WTO is the only global international
organization dealing with the rules of trade between nations. In that

Doha WTO conference

sense, commerce and development are good for each other. The main
goal of WTO is to help the trading industry to become smooth, fair,
free and predictable. It creates an environment such as international
trade among member countries in an open, uniform and non-
discriminatory manner. In the Doha WTO conference that took place
in 2001, India emerged as the most outspoken of advocates for the
developing bloc. The meeting was declared a success since the
delegates of 142 countries agreed to a new round of trade talks,
including topics such as environment, competition and investment.

There are many implications for the Indian economy as a result of the
many agreements signed as part of the WTO. It has influenced the
liberalisation and globalisation of the country and in providing
technology at a reduced cost. This has clearly contributed to India’s
economic development.

At its heart are the agreements, negotiated and signed by the bulk of
the world's trading nations and ratified in their parliaments. The goal
of these is to help producers of goods and services, exporters and
importers conduct their business. Let's inspect one among those
closely to better understand whether WTO agreements effectively
supports the economy of developing countries like India.

Agreement on Agriculture (AoA) deals with giving market access,
reducing export subsidies and government subsidies on agricultural
products. Actually AoA was about reducing the domestic
support/subsidies by the developed countries while reducing the tariff
and non-tariff barriers by the developing countries to enhance market
access and more open trade across the countries in agriculture. It was



expected that implementation of AoA would raise international prices
of agricultural commodities and would improve the exports prospects
of the country like India. Consequently along many developing
countries, India reduced tariffs and import duties as well as removed
the quantitative restrictions on agricultural import. However due to
the widespread presence of domestic and export subsidies in the
developed countries, prices of agricultural commodities went to its
lowest limit in post WTO period and the Indian market started getting
flooded with cheap imports. A poor Indian farmer, with minimal
domestic support can’t compete with the heavily subsidized products
from the developed countries leading to higher indebtedness,
migration and consequently a steady decline in the agriculture
workforce and its share in GDP. Also, there are some other
agreements like that of AoA which are based on the reduction of tariff
and non-tariff barriers that proposes an overall reduction of tariffs on
manufactured products and the phasing out of the quantitative
restrictions over a period of time.

India, along with a few other developing countries, has and continues
to have objections on such issue. At the same time India has shown
some flexibility in adopting WTO agreements. India has been
pitching for a reformed WTO. It insist for a reduction in production-
related support measures and a special and differential treatment for
developing countries, the principle which is there but needs to be put
into operation. These actions will help establish a more equitable
system of international trade that is not rigged against developing
economies like India.

Economists say that a trading system with an institution like the WTO
is surely better than one without it! A referee is a must and an



institution like WTO should strive to become an even better and more
effective referee although not necessarily only that. The WTO is
dominated by leading developed countries and by the corporations of
these countries. The world is witnessing a dirty trade war with
countries, including the US and India, adopting nonsensical
protectionist tariffs. This will dirty the already muddy waters at the
WTO whose integrity is under siege. The comity of nations has to
come forward to ensure that the WTO continues to function
effectively. This is time for India to show its leadership and once-and-
for-all dispel a popular notion, particularly in the west, that we are not
a good sport in trade negotiations.