EPW, Vol.59, Issue No.46, 16 Nov, 2024

LETTERS
Issn 0012-9976
Ever since the first issue in 1966,
EPW has been India’s premier journal for The Fall of the Naveen Patnaik handing over the reins of everyday govern-
comment on current affairs
and research in the social sciences.
Regime and BJD in Odisha ance to a handful of pliant babus and
It succeeded Economic Weekly (1949–1965), power brokers who would then manage
which was launched and shepherded
by Sachin Chaudhuri,
who was also the founder-editor of EPW.
As editor for 35 years (1969–2004)
Krishna Raj
T his is in response to Gyanaranjan
Swain and Vibha Attri’s article, “What
Explains the BJD’s Defeat in Odisha?”
party–society relations, would secure him
a sixth term to govern the state. This has
proven disastrous for him. In many ways,
gave EPW the reputation it now enjoys. (EPW, 21 September 2024). The authors the last assembly election results explain
Editor have pointed out various factors for the the limits of this depoliticised politics. The
S Mahendra Dev electoral success of the Bharatiya Janata article fails to explain how despite launch-
Deputy Editor Party (BJP) in Odisha, such as the cam- ing expansive programmes for the poor,
Pyaralal Raghavan
paign on Odia asmita, the dominance the BJD failed to gauge the undercurrent
SENIOR Assistant editors of bureaucrats in the Naveen Patnaik and alienation of the beneficiaries of
INDU K
Nachiket kulkarni regime, the leadership vacuum in the Patnaik’s so-called transformative govern-
Assistant editors
Biju Janata Dal (BJD), BJP’s decision to ance. The BJD was only left with two im-
Sahba Fatima contest alone in the assembly and Lok portant populist offers in these elections—
Shweta Shetty
Sabha elections, and the effective cam- free electricity to the poor and health cards
Editorial Coordinator paigning by BJP among others. for the lower-middle class—but interest-
Shilpa Sawant
The article suffers from many limita- ingly, these did not appeal to the voters.
copy editor
jyoti shetty tions, both in terms of a causal explana- The authors argue that the BJP’s elec-
tion of factors behind the BJD’s electoral toral victory marks a “shift in the power
production
suneethi nair defeat as well as in its understanding dynamics of the state” without explain-
Chief Administrative and Finance Officer
of the peculiarity of politics of Odisha. BJP ing the nature of power dynamics from a
J DENNIS RAJAKUMAR successfully centred its campaign on historical perspective. There is a limit to
Advertisement Manager corruption, migrant labour, and the dom- the analysis of electoral politics through
Kamal G Fanibanda inance of bureaucracy over elected rep- a purely political lens that overlooks the
General Manager & Publisher resentatives at all levels of administration. backwardness of the state and the relations
Gauraang Pradhan
However, the BJD under the leadership between the social classes. Factors like
editorial: edit@epw.in of Patnaik and V K Pandian harped on the emerging market economy of Odisha,
Circulation: circulation@epw.in the apolitical and techno-managerial mining- and transport-led growth of small
Advertising: advertisement@epw.in narrative of transformative governance towns fuelled by land use changes, ex-
Economic & Political Weekly and this did not appeal to the voters. pansion of the proportion of the upper
320–322, A to Z Industrial Estate The ruling regional party was not in a castes in the middle class, the spread of
Ganpatrao Kadam Marg, Lower Parel
Mumbai 400 013 position to counter the long-term strategy Hindutva, decline in agricultural incomes,
Phone: (022) 4063 8282 of mobilisation of the BJP as the BJD and the rise of migration and immigration
Economic & Political Weekly is registered has long ceased to operate as an organic in the countryside, among others, have
as a trademark with the Govt. of India.
structure that maintains a symbiotic shaped politics and social relations in
EPW Research Foundation relationship with society. Through years of Odisha. The article exclusively focuses
EPW Research Foundation, established in 1993, conducts
research on fi nancial and macro-economic issues in India. power and the populist politics of co-op- on the last assembly elections as an au-
Director
tion by the Patnaik regime, the party has tonomous event. The role of state–society
J DENNIS RAJAKUMAR been turned into a vehicle for power relations and social groups in BJP’s victory
C 212, Akurli Industrial Estate
brokers and political opportunists, who has not been explored in adequate depth.
Kandivali (East), Mumbai 400 101
Phones: (022) 2887 3038/41 have controlled the party and, in the Extraordinary voting behaviour in Odisha
epwrf@epwrf.in process, have ruptured the party’s relation- can be seen in the Centre for the Study
Sameeksha TrusT ship with society. Therefore, the preva- of Developing Societies (CSDS) study,
(Publishers of Economic & Political Weekly) lence of an undercurrent of anti-estab- where upper-caste middle classes and
Board of Trustees
Deepak Nayyar, Chairman lishment voting was beyond the knowl- the Labharthis (beneficiaries of welfare
Shyam Menon, Managing Trustee edge of BJD’s entrenched politicians. This schemes) were aligned in voting out the
André Béteille, Deepak Parekh, collapse of the BJD’s party organisation, BJD. The study also noted strong support
Romila Thapar, Dipankar Gupta,
N Jayaram, SUDIPTO MUNDLE, which was a medium of the relationship for BJP among the upper castes, upper and
Bharat Bhushan between the state and society, has not lower Other Backward Classes (OBCs),
Printed and published by Gauraang Pradhan, for and been focused on by the authors. Dalits, and Adivasis, despite the welfare
on behalf of Sameeksha Trust and printed at
Modern Arts and Industries, 151, A–Z Industrial Estate, Patnaik hoped that by withdrawing from policies launched by the Patnaik regime.
Ganpatrao Kadam Marg, Lower Parel, Mumbai–400 013
and published at 320–322, A–Z Industrial Estate, everyday politics of appearance and con- On the eve of elections, the BJD govern-
Ganpatrao Kadam Marg, Lower Parel, Mumbai–400 013
testation and instead relying on his image, ment made generous land grants to locally
Editor: S Mahendra Dev (Editor responsible for
selection of news under the PRB Act) implementing welfare schemes, and dominant castes like the Kultas, Mehers,
4 november 16, 2024 vol lix no 46 EPW Economic & Political Weekly
LETTERS
Agharias, and Yadavs/Gaudas for the and scientists predict that next year emissions under this approach. Many
construction of community buildings in could be much hotter. of these countries continued to support
Bhubaneswar and Puri. This signalled The simple objective of limiting global poorer countries for sustainable develop-
the BJD’s approach to co-opt influential in- warming to 2°C—and ideally 1.5°C—over ment, and by 1997, they had agreed to
termediate castes on the eve of elections. pre-industrial levels was defined by the meet the first legally binding emissions-re-
The politics of Odisha is a deviant Paris agreement of 2015, and climate duction targets under the Kyoto Protocol.
case, as the dominant or numerically su- scientists have outlined the path towards The Paris Agreement was intended to
perior peasant castes are yet to reap the that goal. According to a 2022 estimate be an experiment in fostering confidence
benefits of political power. Also, politics by the Intergovernmental Panel on Climate in this regard. The agreement was reached
in Odisha is marked by the persistent Change, global carbon emissions would by low- and middle-income nations to cut
dominance of the Karan, Brahmin, and need to drop by almost half by 2030 and emissions and use greener development
Khandayat castes. A historically situated reach net zero by the early 2050s in order tactics. This year is supposed to see the
analysis would have helped us to under- to maintain a 50% chance of limiting conclusion of the first worldwide stock-
stand continuities and changes in Odisha’s warming to 1.5°C. Any remaining emissions take of the Paris Agreement’s progress. A
politics of caste, class, and dominance, as would then be dealt with by removing specific promise made during the 2009
well as the power relationships that have greenhouse gases from the atmosphere. Copenhagen summit is also reiterated in
persisted since the formation of the state. Over 100 nations have reinforced their SDG 13, namely that wealthier nations will
The article fails to unravel the trends of climate promises in the last two years, and increase climate financing to $100 billion
social cleavages and political factions, all 193 signatory countries have submitted annually by 2020. Even after 14 years, that
political divergences between western and national climate commitments. According goal has not been reached. On the contrary,
coastal Odisha (as explored by F G Bailey’s to the International Energy Agency (IEA), the G20 group of economic powers saw
pioneering works) or any shift in the 107 gigawatts of capacity—more than the a more than twofold increase in public
hegemonic discourse in Odisha politics, combined total energy capacity of Ger- aid for fossil fuels between 2019 and 2022,
such as the neglect of Odisha and the many and Spain—are expected to come reaching a total of $1.4 trillion, as a result
marginalisation of Odias, the extractive online this year, demonstrating the increas- of a surge in energy costs following
economy of mines and forests, and the ing availability of renewable energy. The Russia’s invasion of Ukraine. Around
perpetual suffering by natural disasters. Breakthrough Institute has claimed that $440 billion of this $1.4 trillion has been
Pradeep Nayak more than 30 countries—mostly wealthy allocated to new fossil fuel development.
Bhubaneswar ones—have demonstrated that it is feasible The global warming trend is already
to lower greenhouse gas emissions while approaching 1.5°C. It will become more
Climate Change and continuing to grow their economies. difficult to accomplish other SDGs in areas
Sustainable Development The IEA reports that, in 2022, energy- like poverty, inequality, and hunger as well
related carbon emissions reached a record as sanitation and health services as the
I t was unclear what would happen in

the ensuing United Nations (UN) climate
summits when the Sustainable Develop-
high of around 37 billion tonnes, following
a temporary decline during the pandemic.
Many wealthy countries have seen dec-
effects of climate change spread through-
out society. Reducing warming will help
achieve other objectives, but the opposite
ment Goals (SDG) were approved in ades-long declines in emissions. But these is also true. Research indicates that
September 2015. The lack of a specific goal declines have not been enough to counter- achieving the energy (SDG 7) and climate
for reducing the rate of the global tem- act increases in low- and middle-income targets becomes easier the more countries
perature rise is one of the reasons that countries. According to the UN’s most re- advance in creating comprehensive solu-
SDG 13 calls for “urgent action to combat cent evaluation of the Paris Agreement’s tions that meet several SDGs at once.
climate change and its consequences.” implementation, global emissions are pre- The shift from a fossil fuel-based world
There has never been any question dicted to decrease by a pitiful 0.3% from economy to one powered by green energy
about the enormity or urgency of the 2019 levels by 2030. According to Climate is referred to by some as the “just transi-
task. SDG 13 offers a fundamental blue- Action Tracker, global warming might be tion.” Not only is it the moral thing to do
print for success: enact national climate kept to about 2°C if nations fulfil all of their but it is also our best chance for the future.
policies, switch to renewable energy, boost promises and commitments. Pavittarbir Saggu
resilience to climate-related risks and However, the group claims that the Chandigarh
disasters, and direct international funding planet is headed towards 2.7°C based on
and assistance to the nations that need it present policy. What the Paris Agreement
Corrigendum
the most. As the 2030 deadline draws does not specify is who bends the curve
near, each SDG is being assessed for pro- and by when. Individual countries and In the book review, “Reflections on Gaza” (EPW,
2 and 9 November 2024), the sentence “… the
gress. We are at the halfway point, and regions are in charge of carrying out
eighth and ninth centuries in the Upper Volta re-
current talks emphasise that we need to the actual implementation. Rich nations gion” on p 35 should have read as “…the eighth
move quickly to finish the job. It is possible that had long benefited from fossil fuels and ninth centuries in the Upper Volga region.”
that this year is the warmest on record, agreed to take the lead in reducing The error has been corrected on the EPW website.
Economic & Political Weekly EPW november 16, 2024 vol lix no 46 5
LETTERS
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EDITORIALS
Endorsement of Republicans or Rejection of Democrats?

Empty platitudes instead of a concrete transformative agenda wrecked the Democrat’s electoral prospects.
A
s the dust settles on the United States (US) presidential It is not an exaggeration to state that the Democrats have
elections, the writing on the wall could not have been been abandoned by the constituency that they claim to repre-
clearer. With the victory of Donald Trump in the presi- sent. One only needs to look back to the ghosts of Democratic
dential election, the Republicans not only occupy the White House administrations’ past to understand why. Both the Barack Obama
but have won a majority in the Senate and the House of Represent- and Biden administrations enjoyed a government trifecta—for
atives—a government trifecta. The Trump administration now has at least two years or half a presidential tenure. Both faced the
free rein to bring into effect a range of policies that were promised possibility of a Republican president-appointed Supreme Court
on the campaign trail. However, the Trump victory cannot be under- judges overturning the Roe v Wade judgment—something that
stood without also analysing the defeat of Kamala Harris and the Trump publicly stated in 2016 that he would undertake. How-
Democratic party. Unlike 2016, when Trump—unmarred yet by his ever, neither administration codified abortion rights. While the
role in the 6 January 2020 riots and allegations of sexual miscon- Democrats could not fulfil their promise of codifying abortion
duct and abuse as well as convictions for sexual abuse among other rights, despite having the means to, the Republicans kept theirs.
charges—won only the electoral college, in the 2024 elections, he The Democrats’ support of the ongoing genocide in Gaza—both
has won both the electoral college and the popular vote. tacit and explicit, with empty promises of a ceasefire and an
Political pandits swooping in to conduct an autopsy of the arms embargo on Israel—too had consequences. Former US
defeat have presented numerous hypotheses—the mass-scale President Bill Clinton’s address in Michigan—a swing state—
exodus of the working class to the Republican party, the fore- advocating for Greater Israel and justifying the genocide, exem-
grounding of “identity politics” in the campaign to the detriment plifies the tone-deaf rhetoric of the Democrats on the genocide
of class-based issues, and the prejudices of the American voter, in Gaza and the crisis in West Asia. The Democratic party leader-
to name a few. The mass exodus of voters from the Democratic ship which nominated Harris months before the election—with-
party is abundantly evident, with Harris losing more than 10% out presidential primaries and thereby subverting the demo-
of the absolute vote that was garnered by Joe Biden in 2020. cratic process of their own party—either did not consider Trump
However, this vote has not shifted to Trump, who has only man- to be a real contender, or it simply did not care.
aged to increase his tally of votes by a little more than 2%. These In a bid to gain Republican voters, the Democrats ran an elec-
“missing votes” are then a representation of mass-scale abstention tion campaign that was not only confusing to voters but also
from the electoral process—hinting that the Democratic party reeked of ideologically vacuous opportunism. Harris campaign-
and its candidate failed to appeal to a large section of its voters, ing with Liz Cheney, while revelling in the endorsement of oth-
who have rather than shifting their vote, chosen to abstain. er Republicans, did not help her sway Republican voters to her
Claims that it was the spectre of progressive politics that led side. On the contrary, it has given more reasons to voters to
to Harris’s defeat are similarly unfounded. Rather, it is progres- abandon the Democratic party. Post-poll surveys have high-
sive policy positions that have electorally defeated Harris and the lighted that inflation and immigration have emerged as the two
Democrats—as in the case of abortion rights, which were on the most important issues to voters. The leadership of the Demo-
ballot in 10 states, and outperformed Harris even in states cratic party has continuously harped upon the strengthening of
where Trump won. Similarly, the re-election of Rashida Tlaib— the US economy under the Biden administration after the sub-
being a Muslim woman of colour who has vocally spoken out siding of the COVID-19 pandemic. However, what has not been
against the genocide in Gaza—from a state that voted for acknowledged is that while the economy has recovered, the
Trump, is just one example which shows that consistent and well-being of US citizens has not, with the number of people fac-
principled politics does not go unrewarded by voters. If at all ing financial hardship—including those facing food insecurity
claims by marginalised gender identities to fair treatment and and living below the poverty line—having increased substan-
equal rights are to be deemed as a hindrance to electoral suc- tially. This defeat thus warrants a moment to reflect upon the
cess—which is not true—then whatever politics remains to pur- nature of post-pandemic economic recovery and rising inequal-
sue electoral victories at the cost of minority rights should not ity. Further, the Democrats did not lose because they accorded
advertise itself as progressive. primacy to identity politics to the detriment of class-based
8 NOVEMBER 16, 2024 vol lIX no 46 EPW Economic & Political Weekly
EDITORIALS
issues but because of the consistent failure of the Biden admin- So far, the appointments of unabashed war hawks, such as Marco
istration to keep economic inequality in check. While rising eco- Rubio, to the Trump cabinet hint towards a reversal of Trump’s
nomic inequality is a very real issue, immigration is an issue stated agenda of ending US participation in ongoing conflicts.
that has been made real by relentless campaigns by Trump and With the announcement of mass deportations of undocumented
his coterie—often by race-baiting and painting immigrants as immigrants—including US-born children of undocumented im-
criminals. The fallout of this campaign is most prominently that migrants—Trump is set to overturn the record of mass deporta-
it has exposed the US working class to be actually a loose collec- tions, currently held by Obama. Trump’s proposed tax cuts and
tion of disparate groups divided on race, with Trump attracting tariff hikes have a high possibility of leading to a runaway in-
the majority of White voters to him through his divisive and crease in inflation, adding to the woes of the economic precariat
racist rhetoric. The deep-rooted patriarchy among US voters is of the US. Further, it is no secret that the labour of undocument-
evident not from the defeat of Harris but the victory of Trump, ed immigrants—forming a socio-economic underclass beyond
despite and also because of allegations and convictions of sex- the ambit of numerous legal rights—holds up the US economy
ual misconduct and a consistent rhetoric that is replete with and that the forcible eviction of 11 million immigrants would
misogynistic comments. have catastrophic effects on the US economy. The inclusion of
The US election race is also a window into the inner contesta- Musk and Vivek Ramaswamy in the Trump cabinet indicates a
tions and contradictions within big capital. While the Harris more direct embedding of capital within the decision-making of
campaign raised over $1 billion and still ended up in debt for the US government, which, along with rampant inflation and
$20 million for campaign funds—a large amount of which was tax cuts to the economic elite, signals towards a “trickle up” of
spent on celebrity endorsements and appearances—the Trump wealth in the US. The bogey of undocumented immigrants
campaign raised a comparatively smaller amount. However, flooding across the border has become a common trope in the
Elon Musk’s $44 billion acquisition of X (formerly Twitter)— arsenal of far-right groups to whip up racist and xenophobic
which had a crucial role in the dissemination of misinformation frenzy. Unfortunately, as long as such tactics are met with elec-
and misleading claims in the election campaign—cannot be toral success, the chances of the same abating are slim.
disassociated with the Trump victory. A second tenure of Trump in the White House shall undoubted-
There are signs that the incoming Trump administration ly bring great chaos to everything under heaven—thanks, in no
shall be a far different beast than the first Trump presidency. small measure, to the Democratic party leadership—however,
While multiple appointments to the Trump cabinet may seem at whether it shall lead to a renewal of progressive politics or make
first glance to be akin to Caligula’s induction of his horse to the these morbid symptoms a permanent fixture of politics across
Senate, a closer inspection reveals a far more insidious agenda. the world, is something that remains to be seen.
Economic & Political Weekly EPW NOVEMBER 16, 2024 vol lIX no 46 9
EDITORIALS
From 50 Years Ago It is indeed a pleasant experience to problem is no longer looming on the hori-
feel that the most knotty and formidable zon to vitiate the political atmosphere for
problem which has dominated the scene re-establishing a normal, good-neigh-
for a quarter century and which perhaps bourly relationship with Pakistan. Today
Vol XXXIV, No 46 NOVEMBER 9, 1974 was the price we paid for our Independ- there exists much less tension between
ence, is well on the way to resolution. The the two countries and perhaps much less
Pakistan-India Relations: talks now going on between the Prime anti-Indian propaganda in Pakistan than
First Step towards Regional Minister and Sheikh Abdullah hold out in the past. It is heartening that the first
Co-operation some promise, however slow they may be successful step has been taken by the
moving. Among the many political Governments of Pakistan and India in re-
H T Parekh
achievements of the Prime Minister, her storing postal, telecommunication and
Among all the prevailing gloom, there has skilful negotiations with Kashmir leaders travel links. This should mark the begin-
appeared one sign of hope on the horizon for the ultimate integration of Kashmir ning of a new era of friendliness between
that may bring much sunshine to what was into India is very significant because of its the two peoples.
once the Indian sub-continent but which is great potential value. Though no settle- The recent visit of the Shah of Iran and
now made up of Pakistan, Bangladesh and ment has yet been reached, sustained ne- the wide publicity given to his views that
India. Never before in the last 25 years since gotiations have at least helped to clear the the countries of South Asia should get to-
Independence, have Indo-Pakistan relations ground and considerable understanding gether for their own regional develop-
become as normal and peaceful as they are seems to have taken place. In any event, ment has helped focus public opinion on
promising to become today and this may leaders of Kashmir seem reconciled to this important issue.
well be only the beginning of an era of Kashmir being part of India with some On humanistic considerations also, to
peace and amity between the two countries recognition of its special status. alleviate needless suffering and separa-
and even three countries, including Bangla- Since the establishment of Bangladesh, tion, the peoples of Pakistan and India
desh. Much more of good neighbourliness slowly and steadily not only is the Kash- must get rid of the wall that separates
and fruitful co-operation lies before us, but mir problem as seen by Sheikh Abdullah them. In a recent article in the Illustrated
we all need to seize the present opportunity and the Kashmiri people on the way to Weekly, Dewan Berindranath has drawn
and pursue actively a positive policy which some settlement but, after several diver- attention to the problem of the ‘Prisoners
can benefit all the people of this region. sions and interruptions, the Kashmir of Peace’, as he has called them.
NOVEMBER 16, 2024
KYC and Access to Bank Accounts

Regulations that freeze the bank accounts of the poor and vulnerable must be urgently reviewed.
K
YC (know your customer) is a set of guidelines and regu- there is no consistency in the demographic details in Aadhaar
lations that financial institutions use to verify the iden- cards and bank accounts. For example, the bank account of
tity of their customers. It is a key part of anti-money Bhola Oraon of Kandra village, Lohardaga district, was frozen
laundering and counterterrorism measures of the government. two years back. His name is correctly spelt in his bank passbook
The Reserve Bank of India (RBI) guidelines require banks to but misspelt as “Bhoula Oraon” in his Aadhaar card. In the voter
conduct periodic KYC updates for their customers, which in card, his name is spelt as “Maula Oraon.” The same is the case
common parlance is known as Re-KYC. The KYC regulations, de- with Basant Oraon, whose bank account is frozen because his
signed to prevent money laundering and identify suspicious ac- Aadhaar shows his name as Basnt Oraon. In the case of Sarita
tivity, can sometimes lead to poor people being denied access to Oraon, the name in the bank pass book is Sarita while the
bank accounts. This is due to the difficulty in providing neces- Aadhaar card has her name as Archana. Bank employees have
sary documentation, including formal identification for linking told Bhola Oraon that KYC is not possible until he makes the
Aadhaar cards to bank accounts which can be challenging for necessary corrections in his Aadhaar card. He cannot do that
poor and vulnerable communities, effectively leading to finan- because he does not have the documents. The local Customer
cial exclusion. Recent surveys in some states have shown that Services Centre (CSC) is supposed to help the poor people. But
many people are unable to withdraw money from their bank the CSC operators sometimes keep asking for money to do this
accounts because those accounts have been frozen until they correction. The banks are generally overcrowded and under-
complete the KYC formalities. For example, recent surveys con- staffed and it takes several weeks to complete successful e-KYC
ducted in Latehar and Lohardaga district of Jharkhand by the processes. So bank accounts remain frozen till then.
local Mahatma Gandhi National Rural Employment Guarantee The last-mile data entry in several states is not efficient and it
Act (MGNREGA) Sahayta Kendras show that the victims of such leads to a lot of errors in the spellings of names across different
frozen bank accounts include elderly pensioners who depend certificates, including Aadhaar as mentioned above. Many ac-
on their meagre pensions, children who receive scholarships, counts were opened under PMJDY with the spirit of digital fi-
and women entitled to ₹1,000 per month under Jharkhand’s nancial inclusion. Now, financial exclusion is happening by
new Mukhyamantri Maiya Samman Yojana. In the seven vil- freezing the accounts due to the KYC process and this spirit of
lages surveyed, 60% of the 244 households had at least one fro- inclusion is violated. This denial of banking services can further
zen bank account. A similar survey of 72 households in three marginalise poor people, preventing them from receiving gov-
small villages of Latehar district showed that nearly 40% had at ernment benefits like pensions, Pradhan Mantri Kisan Samman
least one frozen bank account. This was due to KYC issues in Nidhi transfers, children’s scholarships, accessing their own
most cases. savings and wages from employment, including MGNREGA. Some
Most of these bank accounts were opened in 2014 under the of the potential solutions to address this issue are: (i) enabling
Pradhan Mantri Jan Dhan Yojana (PMJDY). Millions of accounts local non-governmental organisations (NGOs) and other commu-
were opened in a hurry to meet centrally assigned targets under nity members to assist people in gathering necessary papers to
the PMJDY. Aadhaar numbers were given without biometric make corrections in Aadhaar and other documents; (ii) sensiti-
verification, and demographic details were not properly entered sation or training of bank officials on the spirit of financial in-
from Aadhaar cards. For many individuals, a significant chal- clusion and not freezing bank accounts of ordinary citizens;
lenge with KYC compliance is the requirement for complete con- (iii) banks partnering with NGOs in helping the poor and vul-
sistency of demographic details between their Aadhaar card nerable sections in the KYC process; (iv) in the case of scholar-
and bank account. As per RBI norms, for low-risk customers, ships of children, school teachers can certify the correct name
updating KYC needs to be done once every 10 years from the of the child to the bank officials; (v) implementing streamlined
date of opening the account or the date of the last KYC update. KYC processes for low-risk accounts with minimal documentation
This could be one reason why the banks want to do Re-KYC for requirements; and (vi) utilising digital ID systems that can be
these accounts after 10 years. Fulfilling KYC problems can be easily accessible to marginalised populations. There can be many
problematic for an ordinary citizen. The main problem is that other solutions to solve this problem of frozen bank accounts.
EDITORIALS
The problem of freezing bank accounts of poor and vulnera- freezing bank accounts of poor people is not the solution. This
ble groups found in the districts of Jharkhand is just one exam- leads to further impoverishment of the disadvantaged and vul-
ple of financial exclusion. This may be happening in many nerable groups. It is true that RBI officials are sensitive and look
parts of India. The RBI rightly insists on periodic reviews of into this issue when it is brought to their notice. But this entire
KYC in view of the recurring frauds in the banking system and process of KYC needs urgent review in order to enable the ordi-
as a anti-money laundering and counterterrorism measure. But nary citizen to access their own bank accounts.
COMMENTARY
was only 30.8%. More than one-fifth of

Persistent Backwardness of the the rural households used water from
wells or tube wells. The drinking water
Rural Economy sources of about 4% of rural households
were springs, rivers, canals, ponds, and
The New Government’s Biggest Challenge lakes. While the share of households using
electricity for lighting in urban areas
was 92.7%, it stood at only 53.2% in rural
B A Prakash areas. Kerosene was the main source of
lighting in 43.2% of rural households.
T
The backwardness of the he most serious development chal- While 65% of urban households used
rural economy is one of the lenge facing the Indian economy liquefied petroleum gas or piped natural
has been the persistent backward- gas as fuel for cooking, the correspond-
most critical challenges facing
ness of the rural economy, including poor ing share of rural households was just
the government. The article living conditions, low-income earnings 11.4%. Nearly 86% of rural households
examines the conditions of the of workers, high incidence of poverty, and used firewood, crop residue, and cow dung
rural economy, including poverty, economic distress of marginal farmers, cake as cooking fuel.
agricultural workers and the landless.
unemployment, and agrarian
According to the 2011 Census, 68.85% of Rural poverty: Poverty estimates give a
distress, and presents policy India’s population lived in rural areas. It dismal picture of the situation in rural
suggestions for charting a better is projected that even in 2045, the rural India. Table 2 presents the estimated ru-
course going forward. population will be more than half of the ral and urban poverty ratios based on
country’s total population (UN 2012). the Tendulkar methodology. Here, the
Though the union and state govern- poverty ratio is estimated based on a
ments have taken numerous steps to ad- narrow definition of per capita consum-
dress the backwardness of the rural ption expenditure, and excludes many
economy, they have not been of much items of expenditure that are needed for
success. In this context, the article ex- a minimum standard of living. Hence, it
amines the issues plaguing the rural indicates a level of acute poverty. Rural
economy and the measures required to poverty in India was at very high levels
address them. in 2004–05 (41.8%). Though there has
been a decline in the poverty ratio since
Conditions of Rural Households 2004–05, nearly one-fourth of the rural
During the three decades between 1981 population remained poor in 2011–12.
and 2011, the decline in the share of the The rural poverty ratio in six states was
rural population in India was minimal more than 35% in 2011–12. A review of
(Table 1). This indicates a low level of consumption expenditure shows that
economic change and urbanisation, and the rural monthly per capita consump-
a slow transformation of the rural econ- tion expenditure (MPCE) was much low-
omy. In states such as Assam, Bihar, er than its urban counterpart, indicating
Himachal Pradesh, and Odisha, more
Table 1: Rural and Urban Population in India,
than 80% of the population lived in ru- 1981–2011
ral areas in 2011. As the 2021 Census has Census Year Population (million)
Rural Urban Total
not been conducted yet, we do not have
1981 525.6 (76.70) 157.7 (23.30) 683.3
data on the current situation. 1991 630.6 (74.30) 215.8 (25.70) 846.4
The 2011 Census presents the state of 2001 742.6 (72.20) 286.1 (27.80) 1,028.7
living conditions of rural households, 2011 833.1 (68.85) 377.1 (31.15) 1,210.2
Figures in brackets indicate the percentage of the total.
such as conditions of houses, main source Source: Census of India (2012b).
of drinking water, source of lighting,
Table 2: Rural and Urban Poverty in India,
and fuel used for cooking, among others 2004–05 to 2011–12
(Census of India 2012a). The census Year Rural Urban
Percentage Number Percentage Number
reported that 39% of rural households (in lakh) (in lakh)
B A Prakash (baprakash1948@gmail.com) lived in one-room houses and 4.3% had 2004–05 41.8 3,266.6 25.7 807.6
formerly taught economics, at University of no exclusive rooms. While 70.8% of 2009–10 33.8 2,782.1 20.9 764.7
Kerala and was the chairperson, Fifth State 2011–12 25.7 2,166.6 13.7 531.2
urban households used tap water, the Based on Tendulkar methodology.
Finance Commission, Kerala.
corresponding share of rural households Source: Planning Commission (2014).
COMMENTARY
Table 3: Rural and Urban Monthly Per Capita Table 6: Distribution of Workers by Sector, nature of non-agricultural employment
Expenditure, 2011–12 2022–23 (%)
and the low rate of rural wages, rural
Average MPCE (`) Share of Food Sector Rural Urban
Expenditure (%) Agriculture 58.4 6.4 workers earn only a low income from
Rural 1,430 52.9 Mining and quarrying 0.3 0.5 employment.
Urban 2,630 42.6 Manufacturing 8.2 21.3
Source: Ministry of Finance (2023). Electricity, water, etc 0.4 1.1
Construction 13.9 10.3 Earnings from rural employment: The
a very low level of consumption in rural Trade, hotel and restaurant 8.3 23.8 PLFS has estimated the average gross
areas (Table 3). Transport, storage and 3.5 11.4 earnings from self-employment for 30
communications
Other services 7.0 25.3
days (Table 7). A notable aspect is that
Rural households: PLFS: The Periodic All 100.0 100.0 the earnings of females are much lower
Labour Force Survey (PLFS) has classi- Source: NSSO (2023). than that of males. The earnings are not
fied rural households into four catego- Table 7: Average Wage/Salary Earnings by sufficient to achieve a reasonable stand-
ries—self-employed, regular wage/salary Employment Type, April–June 2023 ard of living for an average rural family
Average Earnings (`)
earning, casual labour, and others. The consisting of 4.4 persons. The estimate
Category Wage/Salaried Casual Self-employment
broad changes in the characteristics of Employment Labour (Daily (30 Day Average) of average earnings per day of casual la-
the households between 2011–12 and (Monthly Average) Average) bourers also indicates a low wage rate for
Rural
2022–23 are given in Table 4. It shows Male 17,274 416 13,831 females compared to males.
that the vast majority of rural house- Female 13,825 287 5,056 Salaried workers are persons who
holds belong to the occupation category Person 16,482 388 11,612 work in farm or non-farm enterprises
Urban
of self-employed (53.5%) and casual Male 24,243 515 22,357 (both household and non-household)
labour (25.6%). Female 19,308 333 8,589 and, in return, receive salary or wages
Person 23,011 493 19,807 regularly. Except for a small number of
Source: NSSO (2023).
Rural employment: Of the total rural them who worked in central and state
workers, 63% belonged to the category salaried workers receive a regular in- governments, public sector enterprises
of self-employed, comprising own ac- come from rural employment. and organisations, and private compa-
count workers and employers, and A sector-wise distribution of rural nies, the large majority of them do not
helpers in household enterprises, earn- workers shows that 58.4% of workers are have a work contract and are not eligible
ing a very low income (Table 5). Anoth- employed in agriculture, which pro- for paid leave. It is estimated that 62% of
er 24.8% of workers are casual labour- vides only seasonal employment (Table 6). rural and 56% of urban regular wage/
ers, who only get a few days of employ- Other avenues of employment are con- salaried employees in the non-agricultural
ment in a year due to the seasonal na- struction, manufacturing, trade, hotels, sector had no written contract. Thus,
ture of their work. Only the 12% who are restaurants, and other services. Due to the the income and wage earnings of all
seasonality of agriculture, the irregular three categories of rural workers are
Table 4: Percentage Distribution of Households
in India (%)
Household Type Rural
NSS 68th Round PLFS ĉı đĭèŢļĎĭèċĭɌ ēĸ ʩĳ~ùŃĄ-16, ĝŃƥĭ-2, ÿĲĕĭé - ĮĉĝŃďē 2024
(2011–12) (2022–23) THE MICROFINANCE REVIEW, Volume – XVI, No.2,
Self-employed in: July-December 2024
1) Agriculture 34.3 36.2
2) Non-agriculture 15.5 17.3
CALL FOR PAPERS
Sub-total 49.8 53.5
Regular wage/salary earning 9.6 14.0 Bankers Institute of Rural Development (BIRD), Lucknow is a premier training
Casual labour in: establishment promoted by NABARD. Centre for Research on Financial Inclusion
1) Agriculture 21.0 8.2 and Microfinance (CRFIM), set up within BIRD has been publishing a half yearly
2) Non-agriculture 13.5 17.3
journal titled “THE MICROFINANCE REVIEW”. Papers / commentaries are invited
Sub-total 34.5 25.6
Others 6.1 6.8
on for publication of its July-December 2024, Volume – XVI, No.2 issue on the
All 100.0 100.0 following themes:
Source: NSO (2019) and NSSO (2023). i. Does the current Microfinance model in India needs a re-look?
ii. Microfinance for Women-led Sustainable Enterprises: Innovations, Opportunities
Table 5: Distribution of Workers by Category
of Employment, 2022–23 (%) & Challenges.
No Category of Employment Rural Workers Urban Workers Detailed guidelines for submission of papers/commentaries are available at
1 Self-employment https://birdlucknow.nabard.org/StaticPages/crfim.aspx#MFR-Journals
a) Own account worker 41.0 33.0
and employer Interested persons may submit papers/commentaries on any of the above themes
b) Helper in household 22.0 6.6 latest by 31 December 2024 to The Editor, THE MICROFINANCE REVIEW, Bankers
enterprise Institute of Rural Development, Sector-H, LDA Colony, Kanpur Road, Lucknow - 226 012;
Total self-employed 63.0 39.6 Email: birdjournal@nabard.org/bird@nabard.org; Tel: 0522-2421119/2421136,
2 Regular wage/salary 12.2 48.0 Website: https://birdlucknow.nabard.org/
3 Casual labour 24.8 12.4
Director
Total 100.0 100.0
Source: NSSO (2023).
COMMENTARY
Table 8: Unemployment Rates in Usual Status Table 9: Distribution of Operational Holdings in income. A comparable estimate of rural
and Current Weekly Status (%) India, 2015–16
poverty since 2011–12 is not available.
Category NSS 68th (2011–12) PLFS (2022–23) Category of Holdings Number of Area Operated Average Size
Male Female Total Male Female Total Holdings (Thousand of Holdings MPCE data is not collected periodically.
Rural (Thousands) Hectares) (Hectares) The collection of data on the above items
Usual 1.7 1.7 - 2.8 1.8 2.4 Marginal 1,00,251 37,923 0.38
(Less than (68.45) (24.03) -
is a critical need of the hour.
status
CWS 3.3 3.5 - 4.6 4.0 4.5 1 hectare)
Urban Small 25,809 36,151 1.40 Change in development policies: Per-
Usual 3.0 5.2 - 4.7 7.5 5.4 (1.0 to 2.0 (17.62) (22.91) -
status hectares)
sistent neglect of the rural economy and
CWS 3.8 6.7 - 6.3 9.1 7.0 Semi-medium 13,993 37,619 2.69 diversion of the major share of deve-
Source: NSO (2019) and NSSO (2023). (2.0 to 4.0 (9.55) (23.84) - lopment efforts and public funds to ur-
hectares)
low compared to urban workers. This Medium 5,561 31,810 5.72
ban areas is the current practice. Recti-
leads to low consumption expenditure, (4.0 to 10.0 (3.80) (20.16) - fying this requires a change in the
poor standard of living, poverty, and eco- hectares) development perspectives, strategies, and
Large 838 14,314 17.07
nomic distress. policies for rural development. Appro-
(10.0 hectares (0.57) (9.07) -
and above) priate policy changes and allocation of
Unemployment: The usual status and All holdings 1,46,454 1,57,817 1.08 funds should be made by the union,
(Total) (100.0) (100.0) -
current weekly status (CWS) definitions state, and local governments to achieve
Figures in brackets indicate the percentage of the total.
are used for arriving at the unemploy- Source: Ministry of Agriculture and Farmers’ Welfare rural development.
ment rates. The CWS indicates chronic (2023).
unemployment, that is, not even a sin- Table 10: Classification of Agricultural Maintain rural infrastructure deve-
gle hour of remunerative work on at Workers, 2011 (in thousands) lopment: A policy shift that has been
Category Male Female Total
least one day during the seven days pre- taking place in most of the states in In-
Cultivators 82,763 36,046 1,18,809
ceding the survey. The trend in PLFS in- (50.0) (36.9) (45.2) dia is a decline in the priority of public
dicates that there has been an increase Agricultural 82,742 6,1591 1,44,333 spending on physical and social infra-
in rural and urban unemployment rates labour (50.0) (63.1) (54.8) structure items on the one hand, and an
Total 1,65,505 97,637 2,63,142
between 2011–12 and 2022–23 (Table 8). (100.0) (100.0) (100.0) increase in populist cash distribution
The incidence of unemployment was Figures in brackets indicate the percentage of the total. and free service distribution schemes on
Source: Ministry of Agriculture and Farmers’ Welfare
much greater among young people in (2023).
the other. These policies have resulted in
urban areas than in rural areas, and the deterioration of infrastructure and
among younger age groups. The youth to protect the economic interests and has destabilised the fiscal stability of some
unemployment rate increased with the welfare of agricultural labourers. The states, pushing them to the acute fiscal
level of education, with the highest number of agricultural labourers in crisis. These policies need an overhaul.
unemployment rate seen among gradu- India is more than the number of culti-
ates. Unemployment is also higher among vators (Table 10). Agricultural workers Generation of jobs in the rural non-
women than men. face a shortage of employment due to farm sector: The lack of jobs in rural
the seasonal nature of their work, lack of non-farm sectors such as construction,
Farmers’ distress: A fundamental issue a decent wage, labour benefits, facilities manufacturing, and service sectors is a
in Indian agriculture is the uneconomic for medical assistance, medical insurance major problem in the rural economy.
size of holdings of marginal and small or measures for social protection. There Promotion of investment and produc-
farmers, and low levels of low farm in- is a need to implement social security tion in non-farm sector activities is the
come. Data on the distribution of agri- measures for agricultural labourers and answer. Adequate investment in physi-
cultural holdings show that marginal pensions for old-age workers. cal and social infrastructure is a precon-
and small farmers, who form 86% of all dition for this.
farmers in India, cultivate only 43% of Policies for Promotion of
the total agricultural area in India (Table Rural Development Reduction of rural poverty: Multiple
9). On the other hand, farmers having an policy actions are needed to reduce
economic size of holding (semi-medium, Address the lack of statistical data on poverty. They include (i) provision of
medium, and large), who form 13% of the the rural economy: Though 69% of the physical infrastructure like drinking
farming population, cultivate 53% of the population lives in rural areas, India water supply, electricity, roads, other
total agricultural area. This disparity in does not have a statistical system to col- modes of transport, communications;
the size of holdings is the root cause of ag- lect detailed data on the rural economy. (ii) subsidised or free supply of cooking
ricultural distress in India, exacerbated This has been compounded by the non- fuel, electricity, and food items; and
by the failure to effect land reforms by conduct of the 2021 Census, depriving (iii) provision of public-funded hous-
successive central and state governments. the public of critical data. The National ing, subsidised housing and credit sup-
Agricultural policies pursued by cen- Statistics Office is not estimating rural port for the construction of houses for
tral and state governments have failed gross domestic product or per capita the poor.
COMMENTARY
National Policy for Farmers: Changes increase the number of days of employ- ReferenceS
are warranted in the National Policy for ment to more than 100 days per year, Chand, Ramesh, S K Srivastava and Jaspal Singh
Farmers in order to (i) improve the eco- and enhance the daily wage rate. Skill (2017): “Changes in Rural Economy of India,
1971 to 2012: Lessons for Job-led Growth,”
nomic viability of farming through state training for the youth should be a policy Economic & Political Weekly, Vol 52, No 52,
policies; (ii) maintain a profitable price priority. Implement liberal bank credit pp 64–71.
Census of India 2011 (2012a): “Houses, Households
level for agricultural products through schemes for employment in rural areas.
Amenities and Assets, Figures at a Glance,” Of-
market interventions; (iii) change the Special schemes can be enacted for un- fice of the Registrar General and Census Com-
upper limit of the land ceiling and im- employed educated youth. Provide finan- missioner, New Delhi.
— (2012b): “Provisional Population Totals,”
plement land reforms for the distribu- cial assistance, subsidies, and interest-
Paper 2, Vol I of 2011, Rural–Urban Distribution,
tion of land to marginal farmers, agri- free loans to low-income households for India Series 1, Office of the Registrar General
cultural labourers, and landless people; housing. Conduct periodical job fairs to and Census Commissioner, New Delhi.
Ministry of Agriculture and Farmers’ Welfare
(iv) introduce a social security system bring jobseekers and employers together. (2023): “Agricultural Statistics at a Glance
for the marginal farmers, agricultural 2022,” New Delhi.
labourers, and landless people; (v) pro- Introduce a luxury tax for rural deve- Ministry of Finance (2023): “Economic Survey
2022–23,” Statistical Appendix, Publication Di-
tect and improve the land, water, bio- lopment: For mobilising resources, im- vision, New Delhi.
diversity, and climate resources; and pose a new luxury tax or increase the NSSO (2023): “Annual Report, Periodic Labour
(vi) promote suitable mechanisation in tax rate of luxury products, consumption Force Survey (PLFS) (July 2022–June 2023),”
National Sample Survey Office, New Delhi.
agricultural operations. items, and services in the goods and ser-
NSO (2019): “Annual Report—Periodic Labour
vices tax. The resources thus mobilised Force Survey (PLFS), July 2017–June 2018,”
State intervention in the rural labour should be exclusively utilised for financ- National Statistical Office, New Delhi.
Planning Commission (2014): “Report of the Ex-
market: Formulate public rural employ- ing rural development schemes for infra- pert Group to Review the Methodology for
ment schemes, suited to each locality structure, provision of public services, ag- Measurement of Poverty,” New Delhi.
or district. Expand the items of activi- ricultural development, farmer welfare, UN (2012): “World Urbanization Prospects: The
2011 Revision,” ST/ESA/SER.A/322, Depart-
ties of the Mahatma Gandhi National employment generation, poverty allevia- ment of Economic and Social Affairs, Popula-
Rural Employment Guarantee Scheme, tion, and welfare of poor households. tion Division, United Nations, New York.
INSTITUTE OF ECONOMIC GROWTH

University Enclave, University of Delhi (North Campus), Delhi-110 007, INDIA
Dated:- 13-Nov-2024
APPOINTMENT OF DIRECTOR
The Institute of Economic Growth (IEG), Delhi invites nominations or applications for the post of Director, IEG, The Institute is
an autonomous research and training organization established in 1952. It is one of the network institutions of the Indian Council
of Social Science Research (ICSSR), and it receives grants-in-aid from the Ministry of Finance, Ministry of Agriculture and
Farmer’s Welfare, and Ministry of Health and Family Welfare.
The candidate should have an outstanding academic record with a Ph.D and at least 15 years of research experience with
substantial publications in terms of books and papers in referred journals. Administrative experience in an academic organization
QH TGRWVG YKNN DG CP CFFGF SWCNKſECVKQP
The Director as the Chief Executive is responsible for the administration of IEG as well as to promote research, training and
other activities, as laid down by the Board of Trustees and Board of Governors (BoG). The appointment will be for a period of
three years. She / He shall be eligible for re-employment for a second term of 3 years. The age of retirement is 65 years. The
position of Director carries a monthly basic pay of Rs. 2,10,000/- plus allowances as per Government rules. At present, gross
salary, including permissible allowances as per the 7th Central Pay Commission, is Rs.4.06 Lakh approx, including HRA.
Residential Accommodation is available on the campus in lieu of HRA.
The Director is required to have an outstanding background in academia as well as the capability to be a decisive administrator
with excellent communication skills. She/He has to deal with the Government of India and State Governments at senior levels
as well as international partners and numerous institutions of research, education and industry, etc. The Director will also have
to organize the annual Kautilya Economic Conclave.
The Selection Committee will adopt its own procedure for selection and make a recommendation to the Board of Governors.
Selection is notEQPſPGFVQVJQUGYJQJCXGCRRNKGFQTDGGPPQOKPCVGF#RRNKECVKQPUUJQWNFDGCEEQORCPKGFD[CEQORTGJGPUKXG
DKQFCVC CU YGNN CU C DTKGH PQVG QWVNKPKPI C LWUVKſECVKQP CU VQ YJ[ VJG ECPFKFCVG KU UWKVCDNG HQT VJG RQUV
Nomination/Application should be sent in a closed cover to Chairman, Institute of Economic Growth, University of Delhi
Enclave, North Campus, Delhi 110007, marked on the cover “Application/Nomination for Post of Director, IEG” or
by email to rchandieg@gmail.com to reach by December 20, 2024.
COMMENTARY
According to our estimates, aggregate

Women-owned Non-agricultural employment was 458 million in 2017–18,
which rose to 564 million in 2022–23, an
Enterprises Can Translate increase of 106 million, as noted above.
The employment increase in rural areas
Recent Employment Surges into dominated, at about 74 million out of
106 million. And, within the increase in
Faster Growth employment in rural areas, the hike
in rural female workers dominated, at
about 57 million out of 74 million.
Bishwanath Goldar, Suresh Chand Aggarwal
Patterns in Employment Growth
B
Employment increased by about ased on the recently released About 54% of the increase in employment
150 million between 2017–18 Periodic Labour Force Survey of about 106 million between 2017–18
(PLFS), July 2023–June 2024, we and 2022–23 is traceable to the rise in
and 2023–24. About half of this
estimate that India’s aggregate employ- employment of rural females. Out of the
increase in employment in six ment increased by about 43.5 million1 in increase in employment of 43.5 million
years is traceable to increased 2023–24, up from 564 million in 2022–23 in 2023–24, about 50% was due to increas-
employment of rural female to 608 million in 2023–24 (July to June ed employment of rural female workers.
period in both cases), that is a growth of Most of the expansion in employment of
workers, most of whom are
about 7.7%. Such a large increase in em- rural female workers has occurred in
engaged in agriculture and allied ployment occurring in a year is unprece- agriculture and allied activities.
activities. Such workers also dented. The growth rate in employment Agriculture and allied activities ac-
work in increasing numbers in in 2023–24 exceeded the growth rate in counted for about 40% of the employ-
the aggregate economy real gross value ment increase between 2017–18 and
manufacturing and other
added in that year (7.2%). In the previ- 2022–23 (Figure 1, p 11). This proportion
non-agricultural activities. ous five years, 2017–18 to 2022–23 (July rose to 58% in the employment increase
Expanding non-agricultural to June period in both cases), our esti- in 2023–24 over 2022–23. The share of
enterprises in rural areas on a mates based on PLFS data show that em- manufacturing in the incremental em-
ployment increased by about 106 mil- ployment came down to some extent in
large scale, particularly
lion, an annual increase of about 21 mil- 2023–24. The share was about 8% of the
women-owned ones, will go a lion, a yearly growth rate of about 4.3% increase in employment between 2022–
long way in accelerating India’s per annum. Hence, the absolute increase 23 and 2023–24, down from about 11%
gross domestic product growth. and growth rate in employment in of the increase in employment between
2023–24 over the previous year was sig- 2017–18 and 2022–23.
nificantly higher than the annual in- The growth rates in employment in
crease and annual growth rate between 2023–24 over 2022–23 were 11% in agri-
2017–18 and 2022–23. culture and allied activities, 5% in man-
This article looks at the hike in em- ufacturing, 7% in trade, hotels and res-
ployment between 2022–23 and 2023– taurants, 8% in transport, storage and
24, in contrast to the growth during communications, and 8% in other ser-
2017–18 to 2022–23, to understand re- vices. The overall growth rate was about
cent trends. To estimate employment in 8%. Interestingly, there was only a small
various years from 2017–18 to 2023–24, increase in employment in construction
we use the population projections from in 2023–24 over 2022–23.
Population Projections for India and States Manufacturing employment grew by
2011–2036: Report of the Technical Group about 5% in 2020–21 and about 8% in
on Population Projections, July 2020, Na- 2021–22 (Goldar and Aggarwal 2023).
tional Commission on Population, Min- The growth rate in manufacturing em-
Bishwanath Goldar (b_goldar77@yahoo.com)
is non-resident senior fellow, Institute of istry of Health and Family Welfare, Gov- ployment came down in 2022–23 to
Economic Growth, Delhi. Suresh Chand ernment of India. We consider the male about 4% and was about 5% in 2023–24.
Aggarwal (sureshchag@yahoo.com) is visiting and female population of all ages in rural Thus, the average growth rate in manu-
professor, Institute for Human Development, and urban areas and apply correspon- facturing employment in India in the
New Delhi.
ding work participation rates (WPR s). last four years was about 5.5% per year,
COMMENTARY
Figure 1: Industry-wise Distribution
Figure 1: Industrywise of Incremental
Distribution Employment
of Incremental Employment Figure 2: Distribution of Employment
Figure 2: Distribution Increase
of Employment Increase According
According to Worker to Worker Status
Status
70
50
60
50 40
40
2017–18 to 2022–23
Percent
30
30
2022–23 to 2023–24
Percent
20 20
10
0 10
-10
Electricity and mining
Agriculture
Manufacturing
Construction
Trade
Transport
Other sevices
0
-10
Own-account
Own-account worker Employer
Employer Unpaid
Unpaidworker
worker Regular
Regular wage
Wage Casual labourin Casual
Casual labour Casual labour
labour in other
publicwork
public work in otherwork
work
2017–18
2017-18 to 2022–23
to 2022-23 2022–23
2022-23 to 2023–24
to 2023-24
Source: Authors’ computations from PLFS data. Source: Authors’ computations from PLFS data.
faster than the growth rate of aggregate need for more gainful employment for the significance of rapid growth in non-
employment in this period. such workers, including a shift from ag- agricultural jobs for rural women in en-
The distribution of employment in- riculture to non-agricultural activities, hancing the GDP growth rate. In our re-
creases according to the status of work- we do not subscribe to the view that the cent paper (Goldar and Aggarwal 2024a),
ers. Figure 2 reveals that own-account marginal productivity of such workers is we carried out a cross-district (510 dis-
and unpaid workers dominate the rise in negligible or zero. tricts) regression analysis using PLFS
employment. The share of unpaid work- unit-level data for 2022–23. We present-
ers in the employment increase was rela- Growing Female Workforce ed econometric evidence indicating that
tively lower in 2023–24 (over 2022–23) Participation technical training can significantly in-
than between 2017–18 and 2022–23. A significant upward trend in female crease the employment of female work-
There was a marked increase in the workforce participation rate (FWPR) in ers in rural areas. Fletcher et al (2019)
share of regular wage workers in incre- rural areas has been the hallmark of the have noted in their study that vocational
mental employment in 2023–24 in com- employment trends in India in recent training is correlated with a higher prob-
parison with 2022–23—total employ- years. Between 2017–18 and 2022–23, ability of working among women in
ment increased by 44 million, and regu- rural FWPR increased by about 12.5 per- India. The educational profile of rural
lar wage workers by 14 million. By con- centage points (about 2.5 percentage female workers engaged in agriculture
trast, there was a fall in the number of points per year) and urban FWPR in- shown in Figure 3 (p 12) provides a basis
casual workers other than those en- creased by about 4.5 percentage points. to believe that a substantial portion of
gaged in public work and hence their Interestingly, there was a 4.8 percentage working-age rural women could be en-
share in incremental employment turned point increase in FWPR in rural areas in gaged in manufacturing and services.
negative in 2023–24. 2023–24 over 2022–23, up from 30.0% Such trends are already visible. In 2023–
There is a view that recent achieve- to 34.8%. Combining rural and urban 24, there was an increase in employ-
ments of significant employment growth areas, the overall FWPR increased from ment in manufacturing by 3.4 million, of
in India need to be discounted or devalu- 27.0% in 2022–23 to 30.7% in 2023–24. which 2.2 million (that is about 65%)
ated to some extent because a large part According to the report of a study by was the increased employment of rural
of the increases arose from the employ- Barclays, the findings of which are female workers, substantiating the above
ment of unpaid family workers or help- summarised in an article in Livemint claim (Table 1, p 12). Between 2017–18
ers. An implicit hypothesis behind this (2023),2 India can reach 8% gross do- and 2022–23, manufacturing employment
argument is that the marginal produc- mestic product (GDP) growth by in- increased by about 12 million (2.4 million
tivity of such workers is low or negligible creasing female labour force participa- per year), of which about five million is
and could be even zero, that is some de- tion and improving labour productivity accounted for by increased employment
gree of disguised unemployment. We through upskilling. The report empha- of rural female workers in manufactur-
have contested the validity of this as- sised the need for a faster growth of non- ing. A somewhat similar pattern is seen
sumption for rural female workers in agricultural jobs and more formalisation
Goldar and Aggarwal (2024a, 2024b, of employment.
2024c). We believe that the assumption The significant increases in rural
available at
that the marginal productivity of rural FWPR that have taken place in recent
female workers in family farms or enter- years hold considerable potential for Delhi Magazine Distributors
prises is negligible or zero is incorrect. being translated into accelerated GDP Pvt Ltd
We find no reason to believe that such growth, provided non-agricultural en- 110, Bangla Sahib Marg
workers engaged in family farms or non- terprises, particularly women-owned New Delhi 110 001
agricultural enterprises do not add to enterprises, are set up in rural areas on a Ph: 41561062/63
the family’s income. While there is a large scale. The report by Barclays noted
COMMENTARY
Figure 3: Distribution of Rural Females in Agriculture by Figure 4: Growth in Total Employment in Manufacturing in States,
Figure 4: Growth in Total Employment in Manufacturing in States: 2017-18 to 2023-24
Education Category
Figure 3: Distribution of Rural Females in Agriculture by Education Category 2017–18 to 2023–24
30
100%
25
90% 20
80% 15
% per year
70% 10
5
60%
0
50%
-5
40%
-10
Uttar Pradesh
Assam
Uttarakhand
Nagaland
Manipur
Madhya Pradesh
Jharkhand
Bihar
Rajasthan
Chhattisgarh
Jammu and Kashmir
Gujarat
Meghalaya
Tripura
Odisha
Maharastra
Telangana
Punjab
West Bengal
Goa
Mizoram
Kerala
Haryana
Karnataka
Tamilnadu
Sikkim
Delhi
Arunachal Pradesh
Himachal Pradesh
Andhra Pradesh
30%
20%
10%
0%
2018-19
2018–19 2019-20
2019–20 2020-21
2020–21 2021-22
2021–22 2022-23
2022–23 2023-24
2023–24 For Bihar, the growth rate is computed between 2018–19 and 2023–24, because of a sharp
Above variation in the manufacturing employment estimates for 2017–18 and 2018–19. The
Below-
Below-Primary Primary
Primary Middle
Middle Secondary
Secondary and
and Hr Secondary above Hr secHigher
Primary Higher Secondary Secondary figure covers states that accounted for at least 0.5% of total manufacturing employment in
the country in 2023–24.
Source: Prepared by authors using PLFS data. Source: Authors’ computations based on PLFS data.
in services other than trade, hotels and rate of the manufacturing sector in dif- women-owned growth-oriented enter-
restaurants, transport, storage and com- ferent states between 2017–18 and 2023– prises, to encourage commercial banks
munications. About 20% of the increase 24 and the rate of increase in rural fe- to lend to this segment.
in employment in this sector between male work participation rate (RFWPR). Many working-age rural women have
2017–18 and 2023–24 is accounted for A significant positive correlation of 0.7 entered the labour force in the last six
by increased employment of rural fe- is found, indicating that increases in years. The female labour force participa-
male workers. RFWPR have helped manufacturing section rate in rural areas was 47.6% in
tor growth through increased availabili- 2023–24 (15+ age population), up from
Manufacturing Employment ty of workers in rural areas. 24.6% in 2017–18 and 26.4% in 2018–19.
Growth This increase in labour force participa-
An analysis of the state-wise growth The Way Forward tion provides an excellent opportunity
rates in total employment and female The recent World Bank paper (Gupta et al to step up the GDP growth of the econo-
employment in manufacturing between 2024) notes that the rural non-farm sec- my by creating ample employment op-
2017–18 and 2023–24 reveals that in tor needs to grow at a rapid pace to ad- portunities for women in manufacturing
most states, the annual growth rate was dress the problem of jobless growth in and other non-agricultural activities in
about 4% or higher. The annual growth India. They underscore the need for rural areas. Women-owned growth-ori-
rate in female employment in manufac- business development services to foster ented enterprises are likely to play a piv-
turing was about 10% or more in most women’s entrepreneurship. They point otal role in enhancing the employment
states (Figures 4 and 5, p 13). out that while microenterprise financing of working-age rural women in non-ag-
It has been noted above that there has is covered under the priority sector, the ricultural enterprises where the level of
been a significant increase in rural FWPR loans are mostly provided to enterprises productivity is often higher than that in
in recent years. An analysis of state-wise at the upper edge of the spectrum. agriculture. Adequate provision of busi-
data indicates that this has been an im- Accordingly, their recommendation is ness support services and ample access
portant factor contributing to the manu- that, in priority-sector lending, a fur- to finance to such enterprises hold the key
facturing sector growth. Figure 6 (p 13) ther sub-segment of the microenterpris- to success, which must be accompanied
presents a plot of the employment growth es category should be there, focusing on by technical training for rural women.
Attention should be drawn here to the
Table 1: Increase in Employment by Industry Group and the Share of Rural Female Workers in
Employment Hike fact that the digital infrastructure asso-
Sector Increase between 2022–23 and 2023–24 Average Annual Increase between ciated with the growing digital economy
(million persons) 2017–18 and 2022–23, (million persons)
All Workers Rural Female Share of Rural All Workers Rural Female Share of Rural
has been a robust enabling factor for
Workers Female Workers Workers Female Workers women to participate in the workforce.
in Employment in Employment
Increase (%) Increase (%)
This point is brought out by a recent pa-
Agriculture 25.5 17.8 69.8 8.6 9.2 107.0
per by Fernandez and Puri (2023). They
Manufacturing 3.4 2.2 65.1 2.4 1.0 40.1 note how digital infrastructure (internet
Trade, hotels and restaurants 5.0 0.5 10.6 3.5 0.5 14.1 and mobile phones) contributes to fe-
Transport and communication 2.9 -0.1 -2.6 1.1 0.02 1.5 male employment, and in the case of
Other services 6.0 0.9 14.3 1.9 0.5 26.8 India, there has been a huge penetration
Economy 43.5 21.8 50.1 21.3 11.4 53.8 of internet and mobile phone facilities
Source: Authors’ computations based on PLFS data. among people. Using the NSS 78th round
COMMENTARY
Figure 5: Growth of Employment of Female Workers in Manufacturing Figure 6: Change in Rural Female Work Participation Rate and Growth in
in States—2017–18 to 2023–24
Figure 5: Growth of Employment of Female Workers in Manufacturing in States: 2017-18 to 2023-24 Manufacturing Employment—State-wise Plot
70
18
60 16
14
rate, % per year

50
2023–24
to 2023–24
12
40 10
% per year
2017–18 to
growthrate,
30
2017–18
6
Growth
20
4
10 2
0
0
-2
Uttar Pradesh
Bihar
Assam
Uttarakhand
Tripura
Jharkhand
Jammu and Kashmir
Other NE states
Rajasthan
Gujarat
Punjab
Maharastra
Odisha
Delhi
All-India
Tamilnadu
Himachal Pradesh
Madhya Pradesh
Chhattisgarh
West Bengal
Haryana
Kerala
Telangana
Karnataka
Goa
Andhra Pradesh
10 0 10 20 30 40 50
Change
Change in RFWPR,
in rural femalebetween 2017–18
WPR, between and 2023–24
2017-18 and 2023-24
For Bihar, the growth rate is computed between 2018–19 to 2023–24, because of a sharp
variation in the manufacturing employment estimates for 2017–18 and 2018–19. The
figure covers states that accounted for at least 0.5% of total manufacturing employment in
the country in 2023–24.
Source: Authors’ computations based on PLFS data. Source: Authors’ computations based on PLFS data.
data for urban areas and estimating an reached in the study by Sioson and Kim Real Wages and Labour Standards in Indian
Manufacturing in Recent Years,” Indian
econometric model, they find that the (2019), who note that fintech may play a Journal of Labour Economics, Vol 66, No 2,
“overall access to mobile phones increas- role in bridging the gender gap in finan- pp 561–81.
— (2024a): “Explaining the Significant Hikes in
es the probability of a woman entering cial inclusion. Female Workforce Participation Rate in India
the labour force in urban India by 29%” The upshot of the above discussion rein Recent Years and Some Thoughts on How to
Raise It Further,” IEG Working Paper No 462,
(detailed analysis available in Fernan- lated to mobile and fintech is that for Institute of Economic Growth, Delhi.
dez and Puri 2023). Although this article promoting women-headed non-agricul- — (2024b): “Are Rural Indian Women Wasting
Their Time on Unproductive Work at the
is about female labour force participa- tural enterprises and rapidly raising fe- Farms? Available at Research Gate,” Preprint,
tion in urban areas, the conclusions male employment in them, substantial March 2024, DOI: 10.13140/RG.2.2.15354.
30401.
drawn will likely apply to rural areas as improvements are needed in rural infra-
— (2024c): “Boosting India’s Manufacturing Em-
well (some preliminary econometric structure, particularly digital infrastruc- ployment: Way Forward. Available at Research
analysis done by us shows a positive im- ture coupled with increased access of Gate,” Preprint, July 2024, DOI: 10.13140/
RG.2.2.13381.87528
pact of females’ access to mobile phones rural women to mobiles with internet Gupta, Arshia, Alreena Renita Pinto and Bal-
on FWPR in rural areas). Thus, a part of facilities which will enable them to ac- akrishnan Madhavan Kutty (2024): “Fostering
Female Growth Entrepreneurship in Rural
the increase in FWPR in rural areas may cess fintech. The advantages of fintech, India,” Report No 191886, World Bank.
reasonably be attributed to the in- we feel, can go a long way in enabling Livemint (2023): “India Will Manage 8% Growth by
2030 if More Women Join Workforce, says Re-
creased availability of mobile phone fa- female-headed enterprises to be set up port,” 26 October.
cilities and the internet (see discussion and function, leading to increased em- Loko, Boileau and Yuanchen Yang (2022): “Fintech,
Female Employment, and Gender Inequality,
in Goldar and Aggarwal 2024a). One ployment of female workers in non-agri- IMF Working Paper, African Department,”
may ask, how do mobiles and the Inter- cultural enterprises. paper No WP/22/108, International Monetary
Fund.
net help in raising female participation
Notes National Commission on Population (2019): “Popu-
in the labour force? The answer is that it lation Projections for India and States 2011–
1 This estimate is close to the estimate of a 47
provides information about jobs, facili- 2036,” Report of the Technical Group on Popu-
million increase in India’s aggregate employ-
lation Projections, National Commission for
tates digital payment of wages, and al- ment between 2022–23 and 2023–24 in the
Population, Ministry of Health and Family
India KLEMS database (Reserve Bank of India),
lows women to take care of the children Welfare, Nirman Bhavan, New Delhi.
released in July 2024, based on projections
made for 2023–24. National Sample Survey Office (2024): “Periodic
(at least to some extent) while still being Labour Force Survey July 2023–June 2024,”
2 https://www.livemint.com/economy/india-
at work through regular communication Annual Report, Ministry of Statistics and
will-manage-8-pc-gdp-growth-by-2030-if-
Programme Implementation, Government of
(see studies cited in the paper by Fer- more-women-join-workforce-says-re-
India, New Delhi.
port-11698328560823.html.
nandez and Puri 2023). Sioson, Erica Paula and Chul Ju Kim (2019):
“Closing the Gender Gap in Financial Inclu-
Another related point that needs to References sion through Fintech,” ADBI Institute Policy
be noted is the role that fintech has played Fernandez, Cledwyn and Havishaye Puri (2023): Brief, number 2019-3, Asian Development
“Does Access to Digital Infrastructure and Bank Institute.
in promoting female employment. Using
Increasing Digital Inclusion Spur Female La-
a novel fintech data set for 114 economies bour Force Participation: Evidence from Urban
worldwide, Loko and Yang (2022) find India,” paper presented at ACGED, Indian
Statistical Institute, New Delhi.
that fintech adoption significantly im- Fletcher, Erin K, Rohini Pande and Charity Troyer available at
proves female employment and reduces Moore (2019): “Women and Work in India: De-
gender inequality. Also, it mitigates the
scriptive Evidence and a Review of Potential Puri News Agency
Policies,” India Policy Forum, Shekhar Shah, SCO 1128–29, 1st Floor, Sector 22 B
financial constraints of female-headed Barry Bosworth, and Karthik Muralidharan
Chandigarh - 160 022
(eds), Vol 15, pp 149–216.
firms, a point connected with the dis- Goldar, Bishwanath and Suresh Chand Aggarwal Phone 0172-2702983; Mob 9888057364
cussion above. Similar conclusions are (2023): “Trends in Employment, Productivity,
COMMENTARY
of the industrial revolution. However,

A Rural Awakening for empirical evidence is not strong enough
to support the argument that India’s
Manufacturing economic growth trajectory, led by the
service revolution, is behind the employ-
ment crisis. In fact, the service sector
Ejaz Ghani has created more jobs, exhibited higher
labour productivity and has contributed
S
The lopsided nature of spatial patial location is often the best more to economic growth than the man-
development and structural predictor of income and job growth. ufacturing sector. Indeed, productivity
As the economy expands, spatial growth in India’s service sector matches
transformation in India has
development evolves, shaping the bal- that of China’s industrial sector.
weakened the linkages between ance between economic growth and em-
economic growth and job ployment generation, determined by the Stunted Structural Transformation
creation. Amid a de-urbanising patterns of spatial investments in physi- On the other hand, India’s manufactur-
cal and human infrastructure. ing sector has remained stagnant for
manufacturing sector, India needs
Despite robust growth, the Indian more than 20 years, contributing just
to shift policy focus to its small economy has been plagued by a crisis of 15% to the country’s economy in 2023,
towns and rural areas. A rural joblessness. Decades of efforts have still down from 16.1% in 2014–15. This is
structural transformation can not materialised into a meaningful shift despite huge policy efforts, including Make
from farm to non-farm jobs, with more in India, Smart Cities and “national
offer the biggest potential for
than 40% of total employment still in champions,” which have been designed
expanding and strengthening the the agriculture sector, compared to less to raise the manufacturing sector’s share
stagnant manufacturing sector. than 20% in China, and less than 2% in in the gross domestic product to 25%,
the United States (US). and create 100 million more jobs. India’s
What explains these weak linkages long-awaited structural transformation
between economic growth and job crea- from a rural-agrarian to an urban-indus-
tion, and the lopsided nature of spatial trial economy and society has not yet
development? Although great minds in materialised.
economic history have examined these Private investment in the manufactur-
linkages, controversies remain. There has ing sector has remained stagnant in
been little work incorporating space, and urban areas. Empirical evidence using
the economic structure implied by space data from the Annual Survey of Indus-
into modern endogenous growth theories. tries (ASI) and the National Sample Sur-
Are the weak linkages a result of the vey Office (NSSO) shows that India’s pri-
unconventional growth path that India vate investment is not attracted by the
has followed? Is the pace of economic anticipation of abnormally high returns
and job growth stunted due to the to investment, less regulation, or a better
changing spatial location of the growth business environment. The two most
drivers? How important is employment powerful predictors of private investment
relocation in balancing innovation across in the manufacturing sector (and the
sectors? Do innovation shocks spatially services sector) are local education lev-
diffuse over time? Is the future of India els and the quality of physical infrastruc-
in urban or rural awakening? Will “nature in the district.
tional champions” or start-ups create Factor market distortions also play a
more jobs? The answers to these ques- role in the stagnation of the sector. Man-
tions are still not well-defined, and we ufacturing tends to be more land inten-
need strong empirical evidence to iden- sive compared to the services, and huge
tify the solutions and define appropriate distortions in the land markets have re-
policies that can accelerate the pace of sulted in the misallocation of resources.
economic growth and job creation. The lack of reliable land records has
Ejaz Ghani (eghaniwb@gmail.com) is a former India did follow an unconventional been the main culprit, making it hard to
lead economist in Economic Policy and Debt, growth path, jumping straight from identify whom to negotiate with and
PREM Network, World Bank, and taught agriculture to services, breaking the how to compensate them for transferring
economics at the University of Delhi and the iron law of development, which has held the rights to the land. Less efficient en-
University of Oxford.
true for almost 200 years since the start terprises that are well-connected tend to
COMMENTARY
grab more land in the manufacturing sec- rural areas. Over half of the country’s for attracting more private investment.
tor. They have crowded out the entry of urban population lives in small towns The basic traits of rural infrastructure
more efficient start-ups. Capital markets with less than 5,00,000 people. It ex- projects, including the rising middle
have also become distorted since land is pects to add 416 million people to small class, market size, long-term steady rev-
often used as collateral for bank loans. towns by 2050—the largest projected enue stream, and investment returns
increase in the world. India’s industrialisa- that exceed inflation, make them attrac-
De-urbanisation of Manufacturing tion is being driven by the emergence of tive for most institutional investors. The
Despite huge physical and human infra- many smaller, more dispersed settlements, funds managed by private institutional
structure investments made in the cities, and not by metropolitan expansion. investors exceed $100 trillion, but their
India’s manufacturing, especially in the Unfortunately, small towns have been allocation for rural infrastructure pro-
organised sector, has been de-urbanising overlooked in the political discourse. jects is tiny at present.
and expanding into rural areas. The share Past policy efforts have focused on active Only by combining resources—centre
of the organised manufacturing sector “industrial and urban policy” and have and state, international and domestic,
in urban employment and output and overlooked the role of small towns and public and private, corporate and phil-
the number of enterprises in urban areas rural areas in promoting industrialisation anthropic—will it be possible to achieve
has declined, while the corresponding and job creation. This has contributed to the necessary levels of financing to un-
figures have been increasing in rural areas. rapidly rising spatial and subregional leash a rural structural transformation.
This process of spatial transformation disparities within the country. Take, for The challenge is to increase both the
from urban to rural areas has reduced example, the average income (measured scale and the impact of financial re-
the cost of manufacturing. However, poor using per capita state gross domestic pro- sources, improve urban–rural linkages,
rural physical and human infrastructure duct) in the poorest state, Bihar and com- and build on partnerships. Markets and
have constrained this expansion. pare it with the national capital, New institutional and administrative institu-
Unlike the manufacturing sector, the Delhi. The magnitude of spatial disparity tions will need to be strengthened in
spatial development of the services sec- between Bihar and Delhi is close to the rural areas. Infrastructure investments
tor is still concentrated in urban areas differences in per capita income between need to be ramped up. Improving rural
and is rapidly expanding in cities that India and the US. infrastructure has the potential for a
have better infrastructure. The growth To promote a faster pace of economic fourfold increase in job growth and per
of the service sector took off due to its growth and job creation, India thus needs capita income.
specific infrastructure needs, which are to shift its policy agenda away from 100
quite different from that of the manufac- Smart Cities towards small towns that The MSME Potential
turing sector. Roads and ports are not are going global. This will also make India has not yet lost the global manu-
as important as telecommunications for growth more inclusive by reducing the facturing race. Rural India is a latecom-
the service sector, and internet and tele- huge spatial and sub-national disparities er to industrialisation, and has several
phone costs have fallen more dramati- that currently exist. India needs to change potential advantages in terms of access
cally than transportation costs. The em- its understanding of industrialisation to technology and processes that can
phasis on tertiary education has also and urbanisation and base it on econom- support green growth. This will be fur-
provided it with the skill base needed for ic potential and classification, not just ther supported by the global diversifica-
modern service exports. statistical measures. tion of supply chains and the China Plus
Has the de-urbanisation of the manufac- A rural structural transformation is One policy.
turing sector worsened the spatial deve- needed to expand the manufacturing Will India need more “national cham-
lopment of India? The answer is no. Con- sector. Rural areas hold a huge potential pions,” like the chaebols in South Korea,
ventional wisdom argues that industriali-
sation and urbanisation go hand in hand.
However, an examination of the location
and migration of industries in India
Permission for
shows that the dispersion of the manufac- Reproduction of Articles
turing sector from urban to rural areas Published in EPW
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allocation and location of enterprises, No article published in EPW or part thereof should be reproduced in any form
which is good for both economic growth without prior permission of the author(s).
and job creation.
A soft/hard copy of the author(s)’s approval should be sent to EPW.
From Smart Cities to Small Towns
In cases where the email address of the author has not been published along
India’s future engines of economic growth
and job creation are thus not in its crowd- with the articles, EPW can be contacted for help.
ed megacities but in its small towns and
COMMENTARY
or more start-ups to expand the manu- focus from promoting “national champi- agricultural pricing reforms may be
facturing sector? Empirical evidence ons” to championing start-ups will also viewed by some as a way of dealing with
points to more start-ups as the answer. reduce the risk of crony capitalism— the distress in the countryside, it is not a
The self-employment rate of entrepre- political connections and inefficient pro- substitute for unleashing a rural struc-
neurship does not fully capture the scale ject allocations, related party transac- tural transformation. India’s rural areas
of entrepreneurship or its success in the tions and over-leveraging due to an im- remain home to the largest concentra-
manufacturing sector. Alternative meas- plicit too-big-to-fail perception. tion of poor people in the world. Most of
ures, such as the number of formal es- them live with limited or no access to
tablishments per worker in an area, are A Rural Awakening education, health, roads, electricity, or
better predictors of subsequent growth. India’s future economic growth and job the internet. Solving the rural distress now
The positive relationship between start-ups creation is where one would least expect may just unleash the next stage of India’s
and job growth in manufacturing is much it to be. It is in small towns and rural structural transformation, enabling the
stronger in India than in the US. areas that will continue to benefit from a country to become a $5 trillion economy
Unfortunately, India has too few en- young demographic dividend and greater by 2025.
trepreneurs for its stage of development land availability. The country needs a The policy message is clear: if job cre-
to accelerate the pace of job creation. It rural awakening to complete the process ation is a priority, policymakers should
needs more start-ups, and smaller and of structural transformation. focus on scaling up investments in hu-
more medium-sized entrants, as they are The stand-off between farmers and man and physical infrastructure in rural
well-positioned to expand in rural areas the government, and rising rural pro- areas that have experienced a slower
and cater to rural demand and low-income tests, is not just a reflection of conflicting pace of job growth. High-quality goods
consumers. Micro, small, and medium views on agricultural reforms, or an and services cannot be delivered with-
enterprises (MSME s) will be the key to expression of institutional discontent out roads, electricity, and telecommuni-
generating the income, capabilities, against the failure to consult farmers on cation, and cannot be produced without
capacities, and ecosystems needed for key policy changes. It is indicative of a well-educated workers. An increased fo-
sustained economic and job growth. deeper concern for rural distress. The cus on rural structural transformation
They are also a key source of job crea- rural population has raised their aspira- will accelerate the pace of job creation.
tion and entrepreneurship, especially tions, and is now demanding more jobs Rural India offers the biggest potential
for women in rural areas. Shifting the and a better quality of life. Although for the manufacturing sector.
THE MALCOLM ADISESHIAH AWARD – 2025

&
THE ELIZABETH ADISESHIAH AWARD – 2025
Award for Distinguished Contributions to Development Studies
The Malcolm and Elizabeth Adiseshiah Trust invites nominations for the Malcolm Adiseshiah Award – 2025 and for
the Elizabeth Adiseshiah Award – 2025.
Conditions
The Malcolm Adiseshiah Award is given for Distinguished Contributions to Development Studies.
The Elizabeth Adiseshiah Award will be presented to a young scholar below the age of 45 as on 1st January of the year of
Award for recognized contributions to Development Studies.
The MalColm Adiseshiah Award carries a citation and a cash prize of Rs. 2 lakhs. The Awardee is expected to deliver the
Malcolm Adiseshiah Memorial Lecture at the presentation ceremony.
Elizabeth Adiseshiah Award will carry a citation and a cash prize of Rs. 1 lakh.
The Awardees for both the awards will be chosen by a jury of eminent scholars.
Both awards are open to Indian and foreign scholars ordinarily resident in India.
Self Applications will not be entertained.
Scholars are invited to send the nominations for the Award/s to the Trust before 15 February 2025, to the following address.
The Executive Trustee,
Malcolm & Elizabeth Adiseshiah Trust,
Asian College of Journalism Campus,
Second Main Road,
Taramani, Chennai – 600 113.
Mobile 8248825846
E mail nominations are accepted at: malcolmelizebeth@gmail.com
GLOBAL VALUE CHAINS
Export Prices, Exchange Rate Pass-through,

and Global Value Chains
Some Indian Evidence
Darpajit Sengupta, Saikat Sinha Roy
T
Examining the factors influencing exchange his study explores the factors influencing exchange rate
rate pass-through to export prices using pass-through (ERPT) to export prices in India, a country
that has shifted its trade policy towards export promo-
product–destination–time panel data suggests
tion since 1991.1 As India seeks to manage external account
incomplete ERPT across all products, with pass-through deficits and achieve macroeconomic stability, understanding ERPT
to developed countries being lower than in emerging becomes increasingly crucial. With reductions in tariff and non-
markets. Lower ERPT in consolidated markets may tariff barriers aligned with its commitment to the World Trade
Organization (WTO), India has experienced improved export
be due to participation in global value chains and
performance; however, current account deficits persist, largely
pricing-to-market strategies, as GVCs stabilise prices and due to trade price sensitivity to exchange rate fluctuations.
reduce exchange rate sensitivity. Higher market In emerging market economies like India, characterised by
concentration and product differentiation also lower flexible exchange rate arrangements,2 ERPT is particularly rel-
evant. The sensitivity to exchange rate shocks, especially that
the pass-through along with findings showing an
of international trade, reflects the nature of integration of
asymmetric ERPT that favours currency appreciation trade and financial markets and the structure of the real economy.
over depreciation. While the nominal exchange rate (`/$), despite fluctuations, is
found to have depreciated over time (Figure 1), the current ac-
count balance as a percentage of gross domestic product (GDP)
has behaved erratically indicating the nature of ERPT. Further,
as the central bank targets inflation, the extent of pass-through
significantly impacts monetary policy’s effectiveness in con-
trolling inflation rates.
Further, ERPT plays a vital role in global value chain (GVC)
participation, particularly for emerging market economies,
like India, that aim to integrate more deeply into international
markets (Athukorala and Veeramani 2019; Jiang et al 2024).
Fluctuations in exchange rates can significantly affect firms’
pricing strategies and competitiveness, thereby influencing
their ability to participate in GVCs. Recent literature highlights
how ERPT shapes GVC dynamics, as firms adjust costs and pric-
ing in response to exchange rate changes. While Dash and
Chanda (2017) advocate that financial factors, like foreign ex-
change rates, pose major challenges to participation, Hageme-
jer et al (2022) find that the ERPT for countries whose suppliers
are strongly involved in the production along the GVC is sig-
nificantly (four times) smaller than that for economies with
suppliers not participating in GVC. In cases of incomplete pass-
through, firms often adjust mark-ups differently across mar-
kets in order to keep the market share intact.
Darpajit Sengupta (darpajit@rediffmail.com), the corresponding On the other hand, firms engaged in GVCs tend to be more
author, is senior research fellow, Department of Economics, Jadavpur sensitive to exchange rate fluctuations due to competitive
University. Saikat Sinha Roy (saikat.sinharoy@gmail.com) teaches pressures, which compel them to adapt pricing strategies across
at the Department of Economics, Jadavpur University.
various markets. This sensitivity underscores the importance
58 november 16, 2024 vol Lix no 46 EPW Economic & Political Weekly
GLOBAL VALUE CHAINS
Figure 1: Trends in Nominal Exchange Rate and Current Account dollar, while being more responsive to exchange rate changes
Balance in India
in other markets. Knetter (1993) further elaborated on this by
90 4 showing that exporters tend to reduce their mark-ups in mar-
80 kets where the currency has depreciated, suggesting that com-
70 2
petition and market conditions significantly influence pass-
60
0 through. These studies reveal that exporters’ pricing decisions
50
in response to exchange rate movements depend on market
40
-2 conditions they face, such as demand elasticity and the degree
30
20 of competition (Dornbusch 1987; Goldberg and Knetter 1997;
-4
10 Betts and Devereux 2000).
0 -6 The concept of “pricing to market” highlights that exporters’
01/1993
01/1995
01/1997
01/1999
01/2001
01/2003
01/2005
01/2007
01/2009
01/2011
01/2013
01/2015
01/2017
01/2019
01/2021
responses to exchange rate changes vary depending on the
characteristics of the importer, exporter, and product. Dorn-
Nominal Exchange Rate Current "ccount Balance(% of GDP) busch (1987) and other studies, such as those by Goldberg and
Source: Authors’ calculation using International Financial Database, IMF. Knetter (1997) and Betts and Devereux (2000), emphasise that
factors like demand, competition, and market power influence
of ERPT in determining a country’s effectiveness in GVC the degree of pass-through. Contrary to popular belief, Athu-
participation. Historically, it has been argued that relative korala and Menon (1994) challenge the notion that Japanese
prices adjust to country-specific shocks, creating an expend- exporters heavily relied on pricing-to-market strategies during
iture-switching effect between domestic and foreign goods. periods of yen appreciation, suggesting that other factors
Changes in nominal exchange rates impact domestic prices played a more significant role in shaping pricing decisions.
of imports, thus affecting the utility of nominal exchange Another explanation for incomplete pass-through is related
rates as short-term adjustment tools. In the event of limited to the currency of invoicing. Marston (1990) and Giovannini
ERPT with export price, as in India, an investigation into (1988) found that pass-through tends to be lower when prices
the nature of ERPT is necessary. At this juncture, in order to are pre-set in foreign currencies, particularly in the short run.
understand the issues involved in ERPT, delving into the Their research, based on Japanese data, showed that when
existing literature is warranted. prices are set in a foreign currency, the effects of exchange rate
fluctuations are not immediately passed-through to domestic
Literature Review prices. Gagnon and Knetter (1995) also explored the difference
ERPT refers to the extent to which changes in exchange rates between short- and long-run pass-throughs, noting that short-
affect domestic as well as trade prices, in particular import run pass-through tends to be lower when goods are priced in
and export prices. The ERPT process occurs in two stages: first, the local currency of the importer. Bachata and Wincoop
changes in exchange rates directly impact the prices of trade- (2002) argue that firms in highly competitive domestic sectors,
able goods, and in the second stage, these changes in the prices such as non-tradeable goods industries, are more likely to
of tradeable goods affect domestic prices, thus contributing to price their products in the home currency, while exporters
inflation. Two major strands of literature have evolved around tend to price in their own currency. This results in full pass-
this concept. The first one focuses on “complete pass-through,” through to import prices but limited pass-through to consumer
which assumes that exchange rate fluctuations are fully re- prices. Recent research has further developed this idea, show-
flected in prices, consistent with the theory of perfect competi- ing that a significant portion of global trade is conducted in US
tion. Dornbusch (1987) explains that under the law of one dollars, which influences pass-through dynamics (Gopinath
price, a good’s price in a foreign market, when adjusted for the and Itskhoki 2010; Gopinath et al 2010; Gopinath et al 2020;
exchange rate, should be the same as in the country of origin. Goldberg and Tille 2016).
This theory assumes that exchange rate changes fully influ- The structure of the market also plays a significant role in
ence domestic prices without any distortion or lag. determining the degree of pass-through. Studies by Yang
The second strand of thought is on “incomplete pass- (1997), Campa and Minguez (2006), and Garetto (2009) have
through,” which emphasises that in markets characterised by shown that incomplete pass-through is more common in mar-
imperfect competition, exporters may not fully adjust their kets characterised by oligopolistic competition. In such mar-
prices in response to exchange rate changes. Instead, they may kets, firms with significant pricing power adjust their mark-
partially pass-through these changes by adjusting their mark- ups strategically, in response to exchange rate fluctuations,
ups. This strategic behaviour is often linked to pricing deci- leading to a lower degree of pass-through.
sions, market structure, and price rigidities. According to In the context of India, relatively few studies have examined
Krugman (1987), one reason for this incomplete pass-through ERPT, and most of these have focused on aggregate estimates
is “pricing to market,” a practice where exporters set different rather than disaggregated analysis. Rajan and Ghosh (2007)
prices for different markets. For instance, Krugman demonstrated find that the ERPT for the Indian rupee’s bilateral exchange
how German exporters to the United States (US) maintained rate with the US dollar is around 40% in the long run, but
stable prices, or even increased them, during periods of a rising considerably lower in the short run (approximately 10%). Pyne
Economic & Political Weekly EPW november 16, 2024 vol Lix no 46 59
GLOBAL VALUE CHAINS
and Sinha Roy (2014) show incomplete and low ERPT to India’s pass-through and asymmetricity, explore the determinants of
aggregate export prices. However, the extent of ERPT varies the observed pass-through, and conclude with a discussion of
across product groups. Pyne and Sinha Roy (2019) find that key findings and policy implications.
the degree of pass-through is higher for food products, ma-
chinery, and transport equipment, while it is lower for chemi- Data and Methodology
cals and manufacturing related to materials. Mallick and
Marques (2008), in a disaggregated analysis of Indian import Data: The primary data set used in this paper contains cus-
prices, show sectoral differences in pass-through, attributing toms-based data, with product-level transaction information,
these variations to factors like the import penetration ratio provided by the Directorate General of Commercial Intelli-
and effective protection rates. Other studies, such as those by gence and Statistics (DGCI&S), Kolkata, under the Ministry of
Dholakia and Saradhi (2000), Dash and Narasimham (2011), and Commerce, Government of India. It includes goods with 8-digit
Yanamandra (2015), find evidence of full or even more-than- Harmonised System (HS) codes as well as variables for the origin
complete pass-through in the long run, implying that exchange and destination countries. The unit price required for the in-
rate fluctuations have a significant effect on inflation in India. vestigation is arrived for each 8-digit product, which is com-
John et al (2018) further explored this by estimating non-linear puted by dividing the export values by the quantity of export.
ERPT in India, suggesting that the degree of pass-through can Unit prices stated in dollars serve as stand-ins for India’s
vary across time and economic conditions. export prices. The Reserve Bank of India’s (RBI) Handbook of
Recent studies on ERPT in developed economies have focused Statistics on Indian Economy and the International Monetary
on non-linearities and asymmetries in the relationship between Fund’s (IMF) International Financial Database (IFS) are used for
exchange rates and domestic prices. Research by Brun-Aguerre the information on the nominal exchange rate, which is defined
et al (2012), Choudhri and Hakura (2015), Baharumshah et al as Indian rupee vis-à-vis destination country’s currency such that
(2017), and Kassi et al (2019) reveal that pass-through is not an increase in value implies a depreciation of rupee.
always symmetrical, with exporters adjusting their prices dif- Secondary data on the Trade Openness Index (TOI) and other
ferently based on the direction of exchange rate changes and control variables, such as destination country GDP, are obtained
the volume of trade. However, many of these studies neglect from World Integrated Trade Systems. For the purposes of com-
theoretical models of pricing-to-market that emphasise the puting average costs, a systematic matching of the National
role of asymmetries in determining ERPT. Industrial Classification (NIC) codes from the Annual Survey of
One aspect that has received relatively lesser attention in Industries (ASI) database with the HS codes from customs data
the literature is the relationship between GVCs and ERPT. The was done. The concordance effort required that the HS codes be
GVCs, which fragment production across borders, influence aggregated to a 4-digit industrial level in order to bring them at
how exchange rate changes affect prices at different stages of par with the NIC codes in the ASI database. The import intensity
the production process. When firms are integrated into GVCs, of exports is another factor that has been extensively cited in the
the impact of exchange rate fluctuations on final prices may be research on India’s export development (Pitre 1981; Bhattacharya
diluted, as only a portion of the production process takes place 1989; Siddharthan 1989; Dholakia et al 1992; Burange 2001;
in the country experiencing the exchange rate change. For in- Golder 2013; Joseph 2018; Das and Gupta 2019) and hence has
stance, Amiti et al (2014) and de Soyres et al (2021) highlight been included as a control variable. The net foreign exchange
that firms more deeply embedded in GVC s tend to absorb inflow rate (NFIR) is calculated utilising the input–output data
exchange rate fluctuations in their profit margins rather than given by the Central Statistical Office (CSO), Government of
passing them on to prices, leading to a lower ERPT. Ahmed et al India in order to assess the import intensity of exports.
(2015) further show that GVC participation lowers the elasticity
of manufacturing exports to the real effective exchange rate Econometric specifications for export price pass-through:
(REER) by 22% on average and by close to 30% for countries The factors that influence export pricing are estimated using a
with highest GVC participation. Arbatli and Hong (2016) as well panel data approach. There are several models for panel data
as Shousha (2019) find that high participation in global pro- analysis depending on the type of cross-sectional heterogeneity.
duction chains is an important determinant of export elasticities. When cross-sectional heterogeneity is accompanied by addi-
This paper aims to bridge this gap by systematically exam- tional explanatory factors, fixed-effect models provide accu-
ining ERPT to export prices in India, focusing on disaggregate rate estimates. If the unobserved cross-sectional heterogeneity
data and taking account of microeconomic factors. Three key is assumed to be uncorrelated with other explanatory variables
issues are addressed here: first, it seeks to determine if there is in the model, the random-effects model provides a useful esti-
an incomplete pass-through effect on Indian export prices; sec- mate of the parameter. The Hausman specification test helps
ond, it investigates microeconomic factors contributing to incom- distinguish between models with fixed effects and those with
plete pass-through using disaggregate product–destination– random effects. If the null hypothesis of the Hausman test is
time-varying export data; and third, it examines whether the rejected, the fixed-effect model is preferred over the random-
relationship between ERPT and export prices varies with ap- effect model because cross-sectional heterogeneity is tied to
preciating or depreciating currency. The remaining sections other explanatory factors. The estimation is carried out using
outline data and empirical specifications, present results of the following baseline log-linear specification:
GLOBAL VALUE CHAINS
Δln(Pidt) = ψt+ µid+ β1 Δlnedt + λlnGDPdt+ εidt … (1) within destination–product variation over time. Throughout
݁‫݁ݑ݈ܽݒ ݐݎ݋݌ݔ‬௜ௗ௧ this specification, demand-driven price adjustments are con-
with ߂݈݊(ܲ௜ௗ௧ ) = ߂݈݊ (݁‫ݕݐ݅ݐ݊ܽݑݍ ݐݎ݋݌ݔ‬௜ௗ௧ ) being the first differ- trolled for by adding the changes in log nominal GDP in desti-
ence of the free on board (fob) unit value at the product–destination d at time t (lnGDPdt). εidt is the disturbance term.
nation level, employed as a proxy for export price changes (in $). Apart from the exchange rate, there are different factors
It is calculated as the division of the exported value by export like average cost, import intensity of exports, and trade openness
quantity (units or weights in kilogram [kg]), at HS 8-digit prod- that can affect export prices. We modify equation (1) to control
uct level i; to destination d3 at time t. Unit prices are thus calcu- for these other factors.
lated for every transaction and then averaged at the HS 8-digit
Δln(Pidt) = ψt + μid + β1 Δlnedt + β2 lnACjt + β3 lnNFIRit +
level and then averaged at the HS 6-digit level to make it com-
β4 lnTOIjt+ εidt … (2)
patible as per international practices before taking the natural
log (ln) value of it. Then, the first difference of ln(Pidt) gener- In this specification, the average cost (AC) for product i at
ates the dependent variable in estimation. Δlnedt is the change time t is obtained from the ASI database by matching NIC codes
in the natural log of nominal exchange rate in year t between with HS codes. The coefficient of β2 captures the cost pass-
India and the export destination d. β1 is the desired regression through to export prices. TOI is calculated for sector j to which
coefficient as it captures the ERPT to export price. a product i belongs, according to HS classification. These speci-
Time (t) and product-destination (µid) fixed-effects are fications are used for estimation of India’s ERPT to export prices.
included in the baseline specification (1), so that the effect of
exchange rate movements on export pricing is identified from Results
Table 1: Export Price Pass-through Elasticities
HS Code Description ERPT Coefficient Export prices and ERPT: Campa and Goldberg (2002) dem-
Animal and animal product onstrated disparities in how sensitive import prices are to
2 Meat and edible meat offal -0.41 (1.23)
3 Fish and crustaceans, molluscs and other -0.21 (2.49)
changes in the exchange rate, which has to do with the micro-
Aquatic invertebrates economic assumptions underlying the models. An aggregate
Vegetable products measure can hide a potential dispersion in the ERPT rates
10 Cereals -1.56 (2.49)
Mineral products
across the various product classifications. This is known as the
27 Mineral fuels, mineral oils and products of their -0.65 (0.12) *** “Campa–Goldberg compositional-trade hypothesis.” In this
distillation; bituminous substances; mineral waxes estimation analysis, exportable goods that make up 80% of all
Chemicals and allied industries exports from India are selected. The export percentage of each
29 Organic chemicals -0.23 (0.46)***
30 Pharmaceutical products -0.009 (0.01) *** of the marketable items at 2-digit HS categorisation is shown in
32 Tanning or dyeing extracts; tannins and their -0.36 (0.12) ** Table A1 (see Appendix, p 66).
derivatives; dyes, pigments and other
First, the variations in ERPT across 2-digit HS codes by keeping
colouring matter; paint and varnishes; putty
and other mastics; inks the destination country differences constant are captured. For
38 Miscellaneous chemical products -0.56 (4.12) each 2-digit code (k), the following specification is estimated:
Plastics/rubbers
39 Plastic and articles thereof -0.93 (0.32) Δln(Pidt) = ψt + µd + β1 Δlnedt + β2 lnACj∈k,t + β3 lnNFIRj∈k,t + β4
Textiles
52 Cotton -0.83 (0.06)***
lnTOIj∈k,t + εidt … (2.1)
61 Articles of apparel and clothing accessories, -0.79 (0.05)**
knitted or crocheted
Equation (2.1) is estimated by pooling observations of HS
62 Articles of apparel and clothing accessories, -0.73 (0.11)** 8-digit codes, destination countries, and for all years within a
not knitted or crocheted 2-digit HS code. Hence, β is the same across all destination
63 Other made up textile articles; sets; -0.81 (0.23)**
worn clothing and worn textile articles; rags
countries and over time as this specification assumes that
Metals within a 2-digit HS code, there is no variation in the degree of
71 Natural or cultured pearls, precious or -0.63 (0.76) ** pass-through across destination country as well as over time.
semiprecious stones, pre-metals,
clad with pre-metal, etc The estimated results of equation (2.1) are reported in Table 1.
72 Iron and steel -0.73 (0.02)*** The data fits the regression specification well. The estimated
73 Articles of Iron or steel -0.68 (0.06)*** export price elasticity for each product included in this sample
76 Aluminium and articles thereof -0.71 (0.31)**
Machinery/electrical
is inelastic, being statistically significant at the 1% or 5% level
84 Nuclear reactors, boilers, machinery and -1.23 (3.23) of significance. For instance, a 10% depreciation of exchange
mechanical appliances rate leads to a 6.5% statistically significant decline in dollar-
85 Electrical machinery and equipment and parts -0.91 (1.96)*
thereof; sound recorders and reproducers, television denominated export price for mineral products. This suggests
image and sound recorders and reproducers that ERPT to export prices is incomplete.
Transport But when the pass-through coefficients are compared across
87 Vehicles other than railway or tramway -0.04 (0.007)**
rolling stock, and parts various 2-digit HS categories, they are not found to be equal.
89 Ships, boats and floating structures -0.11 (0.009)** The estimated results reveal that the export prices are almost
Robust standard errors in parentheses; ***, **, and * represent statistical significance at
1%, 5%, and 10%, respectively. All the controls are included.
not affected (based on level of significance) for agricultural
Source: Authors’ calculation based on equation (2.1). commodities, animal products, and plastic goods and are least
GLOBAL VALUE CHAINS
affected by exchange rate changes for relatively high technol- (UK), and France, the pass-through is incomplete, whereas de-
ogy products, like chemicals and transport. Pharmaceutical veloping market economies, such as Sri Lanka, Bangladesh,
items (HS 30) with high levels of technological intensity is Brazil, Indonesia, Thailand, and the United Arab Emirates,
estimated to have the lowest pass-through coefficient. Metals show higher pass-through elasticity. In particular, higher value
and textiles—low technology products—have large pass- ERPT coefficients (more than 1) can be observed for Turkey and
through coefficients. Hence, the results reflect that with the Vietnam. This is an indication that exports from India face
rise in technological intensity, the pass-through becomes less more competition in developing market economies than exports
as the firms have large mark-ups to absorb the exchange rate from developed nations and that they tend to pass-through at
shocks. This result is in tandem with the results of Sharma a higher percentage to get a competitive advantage in export
and Arora (2023), which show that the lower is the economic pricing. The results, thus obtained, show that Indian exporters
complexity (low-technology product) the higher is the level rely on pricing-to-market strategy for selling the Indian mer-
of participation in the GVC. Thus, low-technology products chandise in different destination countries across the globe.
have a higher pass-through elasticity largely on account of
higher GVC participation. Asymmetric exchange rate pass-through: The idea of asym-
Further, Table 2 reports the ERPT elasticities estimated for each metric ERPT is a new dimension that has evolved as a result of
destination country, keeping product variations constant. For recent advances in empirical research on ERPT. In other words,
each destination country d, the following equation is estimated: the effect on the price of tradeables relies on the direction in
which the exchange rate moves. Prices of items that are traded
Δln(Pidt) = ψt+ µi+ β1 Δlnedt +β2 lnACjt + β3lnNFIR it + β4
globally are affected differently by the appreciation and depre-
lnTOIjt + εidt … (3)
ciation of currency. The explanation for this uneven influence
Equation (3) is estimated for a given destination country by is rather obvious. Exporters will maximise their profits with
pooling observations of all HS 8-digit codes across all 2-digit high pass-through rates of source country currency apprecia-
codes and years. In this study, the 2-digit HS codes serve as a tions and low pass-through rates with source country currency
proxy for the respective industry-level aggregation for each of as- depreciations in a destination market where demand for their
sociated disaggregate product-level information. Here, it is fur- products is inelastic. Therefore, by lowering the price in desti-
ther assumed that for a given destination country, there is no nation country currency, following a fall in the source-country
variation in pass-through across products and over time. exchange rate, the exporters are unlikely to significantly in-
Table 2 demonstrates that ERPT varies between nations; 22 crease their market share. As a result, the exporters would
of the 25 nations analysed here exhibit a notable country-by- avoid passing this change in the nominal exchange rate on to
country variation in the extent of export price pass-through. the destination market buyers and absorb the exchange rate
For the majority of the industrialised nations in our sample, fluctuations leading to low pass-through estimates.
such as the US, China, Germany, Japan, the United Kingdom As an alternative, exporters to countries with elastic demand
Table 2: Export Price Pass-through across Destination Countries will see low pass-through of currency appreciations from the
Rank Country / Region Export Share ERPT Coefficient source country and high pass-through of currency deprecia-
1 The US 16.79 -0.03 (0.01)*** tions from the source country. These exporters might improve
2 People’s Republic of China 5.35 -0.09 (0.05)***
their market share by lowering export prices when a source
3 United Arab Emirates 9.14 -0.59 (0.21)**
4 Saudi Arabia 1.85 -0.36 (0.41)** country’s currency depreciates in order to maintain or even
5 Hong Kong 3.55 -0.69 (0.54)** raise the price they get in units of the source country’s currency.
6 Singapore 3.22 -0.76 (1.12)** Therefore, it is expected that source-country currency depre-
7 Bangladesh 2.55 -1.23 (5.31)
8 Germany 2.65 -0.04 (0.01)*** ciations will be heavily transmitted to destination markets with
9 Korean Republic 1.44 -0.26 (2.33)* elastic demand. Therefore, it is exceedingly improbable that
10 Indonesia 1.40 -0.68 (0.76)** the exchange rate would depreciate or appreciate symmetri-
11 Sri Lanka 0.31 -0.42 (0.11)**
12 Japan 1.49 -0.01 (0.01)*** cally, unless there are approximately equally many items with
13 Malaysia 1.94 -0.43 (0.89)** price-elastic and price-inelastic demand in the destination
14 Belgium 1.91 -0.52 (2.14) market. Studies including Mann (1986), Bussière (2013), Delatte
15 Brazil 1.27 -0.89 (3.89)
16 The UK 2.72 -0.07 (0.01)***
and López-Villavicencio (2012), Brun-Aguerre et al (2012),
17 Spain 1.31 -0.19 (0.07)*** Baharumshah et al (2017), Amoah and Aziakpono (2018) and
18 Turkey 1.42 -1.12 (3.54)* Kassi et al (2019) have also validated the asymmetric impact of
19 Vietnam Socialist Republic 1.71 -1.16 (3.68)*
exchange rate changes on prices of tradeable goods.
20 The Netherlands 2.76 -0.61 (0.69)**
21 South Africa 1.23 -0.71 (0.98)** In this study, the following empirical specification is used to
22 France 1.68 -0.21 (0.05)** examine the extent of asymmetric ERPT which serves as an
23 Thailand 1.34 -0.63 (0.19)** explanation for the incomplete ERPT obtained later, and as a
24 Italy 1.61 -0.23 (0.56)*
25 Nepal 2.2 -1.16 (2.46)* method to check for the robustness of the ERPT estimates.
Total of top 25 countries 72.84
Robust standard errors in parentheses; ***, **, and * represent statistical significance at Δln(Pidt) = ψt + µid + β1 Δlnedt +β2lnACjt + β4lnNFIR it + β6
1%, 5%, and 10%, respectively. All the controls are included. lnTOIjt + 1(AP*Δlnedt) + λlnGDPdt+ εidt … (4)
Source: Authors’ calculations based on DGCI&S database.
GLOBAL VALUE CHAINS
In this specification, an appreciation dummy (AP) is introduced ܲ௝,௧ െ ܸ‫ܥ‬௝,௧

which helps to distinguish between episodes of appreciation and ‫= ܫܮ‬
ܲ௝,௧
depreciations of nominal exchange rates. AP is defined as
where j denotes 2-digit-level and t denotes time. ASI provides
1 ݂݅ ߂݈݊݁ௗ௧ < 0
‫{ = ܲܣ‬ information on the variables costs, like wages and salaries
0 ‫݁ݏ݅ݓݎ݄݁ݐ݋‬
paid to employee (labour cost).
The coefficients of the estimates for equation (4) are reported
in Table A2.4 From the reported estimates, the pass-through is The Herfi ndahl index: Trade concentration is measured by
asymmetric. More specifically, we observe that the export Herfindahl indices. A group that has been separated into n
prices are more sensitive to appreciation than depreciation of categories is given, and the total of the squared shares of each of
nominal exchange rate fluctuations. A 1% appreciation in the n categories with respect to the group yields the Herfindahl
Indian rupee raises the export price (in dollar) of natural min- index. The indicator thus ranges from 0 (extremely varied) to
erals 42 times, more than proportionately compared to a simi- 1 (very concentrated). When calculating the Herfindahl-intra-
lar fall in export prices (in dollar) following a 1% depreciation industry-product index, the proportion of each 4-digit level
of Indian rupee. This suggests that the average Indian export- product’s export value to the total value of 2-digit-level product
er does not pass on the depreciation of the local currency, and exports for a given nation, time, and 2-digit-level exports is
hence absorbs the currency depreciation in their mark-ups taken into consideration. For instance, the shares of the 4-digit-
resulting in incomplete pass-through to export prices. level products 5001 (silkworm cocoons suited for reeling),
A comparison across product categories shows that the 5002 (raw silk), and 5003 (silkworm cocoons) result in the
asymmetry is present for most of the products in our sample Herfindahl-intra-industry product index for India in 2007 for
except for agricultural products, like animal and vegetable the 2-digit-level industry 50 (silk).
products. The asymmetry is highest for mineral products5 and ௞
lowest for metals. This result is also indicative of the fact that
‫ܫܪܪ‬௜௞௧ = ෍ (‫ܵܵܪ‬ସ௜௞௧ )ଶ
while designing the intervention strategies in the foreign
௠ୀଵ
exchange market, the central bank should treat episodes of
appreciation and depreciation differently to maintain stability where i is the exporter, k the 2-digit-level HS product, m the
in the foreign exchange market. 4-digit-level HS product, HSS4 is the share of 4-digit-level HS
product in 2-digit industry code, and t the period.
Factors Affecting ERPT
The results obtained in the previous section indicate that ERPT Product differentiation: Consumers can readily shift between
into India’s export prices is majorly incomplete and there is sig- varieties, according to Dornbusch (1987), if the exportable
nificant variation in the pass-through estimates across differ- item is a near equivalent for the domestic good in the other
ent destinations over time. Using the diverse literature on nation. In such a situation, “pricing-to-market” by the foreign
ERPT and industrial organisation, this study identifies some firm is lower, leading to a higher ERPT level. On the other
possible factors that may explain the variation or heterogeneity hand, if a sector is distinguished by highly differentiating
in the observed ERPT estimates. products, then enterprises participating in that area often pos-
sess more market power, since they are better able to regulate
Market structure: One of the factors determining ERPT is the amount of pass-through without jeopardising their market
market structure. According to Dornbusch (1987), ERPT will be shares. Product difference discourages new companies from
higher in markets with higher competition and lower mark-up entering the market and gives current exporting companies
rates. According to Krugman (1987) and Goldberg and Knetter more power over prices. In this study, we measure production
(1997), increased market power combined with imperfect using the Hufbauer index.
competition tends to reduce the pass-through of exchange The Hufbauer index is defined as the coefficient of variation
rates to export prices. Using the following indices, we validate of unit values of all exported products within an industry, the
the findings in our study. index calculated for each industry k and in each year t is given as:
ߪ௞௧
‫ ܾܪ‬௨௪ =
Lerner’s index: The gap between price and marginal costs, ‫ܯ‬௞௧
presented as a percentage of price, serves as an indicator of where σkt represents the standard deviation of India’s export
market power. When prices are equal to marginal costs in a unit values of all products within the 2-digit product-level in
perfectly competitive environment, market power is zero; year t and Mkt is the unweighted mean of the unit values. A
however, in an imperfectly competitive environment, the in- high value of this index would imply that there is a significant
dex can take on any value between 0 to the inverse of price price difference between similar items sold to various nations
elasticity of market demand. In this exercise, the trade data and between similar products within the same industry, im-
are aggregated at the 2-digit level since it is challenging to plying higher product differentiation. The weighted Hufbauer
match ASI firm-level data with HS 8-digit product-level data. index calculated for each 2-digit product code and in each
Lerner’s index at 2-digit level is calculated as year t is given as:
GLOBAL VALUE CHAINS
ߪ௞௧ Turning to the role of product differentiation, we find that
‫ ܾܪ‬௪ = ෍ ‫ݓ‬
‫ܯ‬௞௧ the simple Hufbauer index constructed using Indian export
data is negative and significant. This suggests that a sector of
where w is the ratio of export value of each product at the the economy with a high degree of product differentiation also
4-digit level to total exports at the 2-digit level. undergoes shifts in the standards of the goods produced and
engages in pricing-to-market. Such methods result in a lower
The regression analysis: In order to analyse the factors that pass-through. This outcome is in line with Dornbusch’s (1987)
explain within-product and cross-country differences in pass- hypothesis that pass-through rates will be lower in sectors
through estimates, the fitted values of the ERPT elasticities with very distinct product lines. Additionally, this outcome is
(β1’idt) estimated using equation (1) are regressed on the Lern- unaffected by the other weighted Hufbauer index alternative
er’s, Herfindahl, and Hufbauer indices. Since all the pass- specifications. Even with asymmetry, the results are still ro-
through estimates are negative, we transform the dependent bust. The market power and product features have a greater
variable using a modulus operator. impact on the pass-through coefficients during episodes of ap-
The regression specifications used here in the panel-data preciation of exchange rate fluctuations than during episodes
framework are of depreciation. Therefore, appreciation works better than de-
preciation as a method to boost export prices. The foreign de-
̂ | = ψ + µ + δ + γ lnLI + γ lnHHI +γ lnHbUW
|β 1’idt t k d 1 kt 2 kt 3 kt mand also plays a significant positive role in determining the
+γ4lnHbW kt+γ 5 Fgn DD+ε idt … (5) pass-through elasticity.
where ψt , µk , δd are time, cross-section and destination fixed-
effects. Conclusions
To check for robustness of our results, we also modify equa- This study examines the factors that cause export prices to not
tion (5) with respect to the choice of dependent variable. We fully reflect exchange rate fluctuations, finding that ERPT is
include the estimated coefficient of asymmetric pass-through incomplete across all product categories and varies significant-
from equation (4) and regress it for the same set of control ly by country. Among the 25 nations studied, industrialised
variables as used in equation (5). countries like the US, China, Germany, Japan, the UK, and
France exhibit partial pass-through, while emerging markets
̂ | = ψ + µ + δ + γ lnLI + γ lnHHI +γ lnHbUW
|1’idt t k d 1 kt 2 kt 3 kt such as Bangladesh, Sri Lanka, and Indonesia have higher lev-
+γ4lnHbW kt+γ 5 Fgn DD +ε idt … (6) els. Indian exporters, in particular, adopt a “pricing to market”
strategy, adjusting mark-ups in response to weak competition.
The estimated results of equations (5) and (6) are given in This behaviour suggests that pass-through is smaller in
Table 3. We find that variables capturing the extent of market more consolidated markets due to participation in GVCs. The
concentration—Herfindahl index and the price–cost margin GVC s play a crucial role in lowering ERPT by fragmenting
known as (Lerner’s index)—are negative and statistically sig- production across multiple countries, which disperses costs,
nificant. This result, as expected, suggests that the pass-through encourages price stability, and reduces sensitivity to exchange
will be lower in markets that are more concentrated. The higher rate movements. In GVCs, intermediate goods cross borders
the concentration, the greater the market power and the ability several times, diluting the direct impact of exchange rate
of the firms to absorb exchange rate shocks. Eventually, the changes on the final export price, especially in competitive
pass-through to the export prices becomes incomplete. This and concentrated markets. However, a more detailed study
result is in agreement with de Loecker et al (2016). on GVC participation and ERPT to India’s export prices needs
Table 3: Role of Market Structure and Product Differentiation to be undertaken.
Dep Var ෣
Est Coefficient ( หȾଵᇱనୢ୲ห) ෣
Est Coefficient ( หɅଵᇱనୢ୲ห) The study also finds that market
1 2 3 4 5 6 7 8 9 10 concentration and product differ-
LI -0.56 -0.43*** -0.51 -0.37***
(1.12) (0.83) (2.21) (0.53)
entiation, as reflected in negative
HHI -0.32*** -0.27*** -0.42*** -0.21*** Lerner and Hufbauer indices, fur-
(0.21) (0.23) (0.26) (0.27) ther reduce pass-through. Firms
HBUW -0.26*** -0.34*** -0.31*** -0.25** -0.43*** -0.13***
(0.06) (0.07) (0.05) (0.12) (0.05) (0.05)
with greater market power and
HB W -0.43** -0.47** -0.49** -0.47** more differentiated products can
(0.12) (0.17) (0.12) (0.17) better adjust to exchange rate
Fgn_DD 2.36** 2.95** 2.85** 3.01** 3.23*** 1.81** 2.95** 1.99** 3.19** 3.43***
shocks, leading to lesser price ad-
(1.01) (1.31) (1.29) (1.21) (1.11) (1.12) (1.38) (1.25) (1.25) (2.01)
Prod FE No No No No Yes No No No No Yes justments. The analysis also re-
Dest FE Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes veals an asymmetric pass-through,
Time FE Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes where prices do not adjust uni-
Constant Yes Yes Yes Yes Yes Yes Yes Yes Yes Yes
R-Sq 0.47 0.47 0.48 0.49 0.51 0.51 0.51 0.48 0.59 0.61 formly to currency appreciation
N 26,294 26,294 26,294 26,294 26,294 26,294 26,294 26,294 26,294 26,294 and depreciation. Depreciation is
Columns represent different econometric specifications; Robust standard errors in parentheses; ***, **, and * represent statistical
significance at 1%, 5%, and 10%, respectively.
less effective than appreciation as
Source: Authors’ estimation. a governmental policy tool.
GLOBAL VALUE CHAINS
The study recommends that the central bank needs to consider rate intervention strategies. This approach would help align mon-
the behaviour of economic agents, market competition, and the etary policy with macroeconomic objectives and avoid financial
characteristics of product categories when developing exchange crises, especially in economies deeply integrated into GVCs.
notes Burange, L G (2001): “Import-Intensity in the Reg- Dornbusch, R (1987): “Exchange Rates and Prices,”
istered Manufacturing Sector of India,” Indian American Economic Review, Vol 77, pp 93–106.
1 For an extensive review of India’s trade policy Economic Journal, Vol 49, No 2, pp 42–52, Octo- Gagnon, J E and M M Knetter (1995): “Mark-up
towards export promotion, refer to Sengupta ber–December 2001–02. Adjustment and Exchange Rate Fluctuations:
and Sinha Roy (2018).
Bussière, M (2013): “Exchange Rate Pass-through Evidence from Panel Data on Automobile
2 For a brief review of India’s exchange rate ar- to Trade Prices: The Role of Nonlinearities and Exports,” Journal of International Money and
rangements towards a flexible exchange rate Asymmetries,” Oxford Bulletin of Economics Finance, No 14, pp 289–310.
regime, see Sengupta and Sinha Roy (2018) and Statistics, Vol 75, No 5, pp 731–58. Gantman, R and D Dabós (2018): “Does Trade
and Das and Sinha Roy (2024).
Campa, J and J M Minguez (2006): “Differences in Openness Influence the Real Effective Exchange
3 Top 25 export destinations that account for Exchange Rate Pass-through in the Euro Area,” Rate? New Evidence from Panel Time-series,”
approximately 75% of India’s export volume. European Economic Review, Vol 50, pp 121–45. Journal of the Spanish Economic Association,
4 See Appendix. Campa, J M, L Goldberg and J M González- Springer: Spanish Economic Association, Vol 9,
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Appendix
Table A1: India’s Major Export Items
HS Code Description Export Value Export Plastics/rubbers
Share 39 Plastic and articles thereof 0.95 (1.15)
Animal and animal product Textiles
2 Meat and edible meat offal 26,03,392.48 1.13 52 Cotton 0.26 (0.07)***
3 Fish and crustaceans, molluscs and other 43,83,218.83 1.90 61 Articles of apparel and clothing accessories, 0.28 (0.06)**
aquatic invertebrates knitted or crocheted
Vegetable products 62 Articles of apparel and clothing accessories, 0.15 (0.06)**
10 Cereals 56,82,855.00 2.46 not knitted or crocheted
Mineral products 63 Other made-up textile articles; sets; worn clothing 0.31 (0.16)**
27 Mineral fuels, mineral oils and products of their 3,35,47,439.80 14.54
and worn textile articles
distillation; bituminous substances; mineral
Metals
waxes
71 Natural or cultured pearls, precious or semiprecious 0.11 (0.06) **
Chemicals and allied industries
stones, pre-metals, clad with pre-metal, etc
29 Organic chemicals 1,27,56,673.67 5.53
72 Iron and steel 0.16 (0.03)***
30 Pharmaceutical products 1,03,23,992.70 4.47
73 Articles of iron or steel 0.19 (0.05)***
32 Tanning or dyeing extracts; tannins and their 23,12,403.45 1.00
76 Aluminium and articles thereof 0.14 (0.08)**
deri dyes, pigments and other colouring
Machinery/electrical
matter; paints and ver; putty and other mastics;
84 Nuclear reactors, boilers, machinery and 0.45 (2.32)
inks
mechanical appliances; parts thereof
38 Miscellaneous chemical products 32,39,659.32 1.40
85 Electrical machinery and equipment and parts 0.46 (1.28)*
Plastics/rubbers
39 Plastic and articles thereof 56,07,897.32 2.43 thereof; sound recorders and reproducers, television
Textiles image and sound recorders and reproducers, parts
52 Cotton 55,02,070.31 2.38 Transport
61 Articles of apparel and clothing accessories, 54,69,178.09 2.37 87 Vehicles other than railway or tramway rolling stock, 0.04 (0.03)**
knitted or corcheted and parts and accessories thereof
62 Articles of apparel and clothing accessories, not 58,13,591.85 2.52 89 Ships, boats and floating structures 0.11 (0.06)**
knitted or crocheted ***, **, * represent statistical significance at 1%, 5%, and 10%, respectively.
Source: Authors’ estimation.
63 Other made up textile articles; sets; worn 36,76,823.96 1.59
clothing and worn textile articles; rags
Metals Table A2: Asymmetric Export Price Pass-through Elasticities
71 Natural or cultured pearls, precious or 2,82,79,365.85 12.25 HS Code Description ERPT Coefficient
semiprecious stones, pre-metals, clad with Animal and animal product
pre-metal and artcls thereof; imitation jewellery; 2 Meat and edible meat offal 0.45 (1.76)
coin 3 Fish and crustaceans, molluscs and other aquatic 0.48 (2.12)
72 Iron and steel 68,07,482.60 2.95 invertebrates
73 Articles of iron or steel 50,98,296.95 2.21 Vegetable products
76 Aluminium and articles thereof 39,87,562.54 1.73 10 Cereals 1.62 (2.29)
Machinery/electrical Mineral products
84 Nuclear reactors, boilers, machinery and 1,46,65,227.99 6.35 27 Mineral fuels, mineral oils and products of their 0.42 (0.13)***
mechanical appliances; parts thereof distillation; bituminous substances; mineral waxes
85 Electrical machinery and equipment and parts 89,19,233.08 3.86 Chemicals and allied industries
thereof; sound recorders and reproducers, 29 Organic chemicals 0.21 (0.06)***
television image and sound recorders and 30 Pharmaceutical products 0.12 (0.02)***
reproducers, and parts 32 Tanning or dyeing extracts; tannins and their 0.36 (0.12)**
Transport derivatives dyes, pigments and other colouring
87 Vehicles other than railway or tramway rolling 1,26,53,335.85 5.48 matter; paints and ver; putty and other mastics; inks
stock, and parts and accessories thereof 38 Miscellaneous chemical products 0.46 (2.14)
89 Ships, boats and floating structures 39,25,894.45 1.70 Robust standard errors in parentheses; ***, **, and * represent statistical significance at
Total 80.28 1%, 5%, and 10%, respectively. All controls included.
Source: Directorate General of Commercial Intelligence and Services (DGCI&S). Source: Authors’ calculation based on equation (5).
GLOBAL
GLOBALVALUE
VALUECHAINS
CHAINS
Bangladesh, Bhutan, India, Nepal

Motor Vehicle Agreement
A Supply-chain Analysis of the Benefits to the North East
Region of India
Nisha Taneja, Biswajit Nag, Sanjana Joshi, Rashmi Rastogi, Sanya Dua
T
The paper aims to examine the role of the Bangladesh, he Bangladesh, Bhutan, India, Nepal (BBIN) Motor
Bhutan, India, Nepal Motor Vehicle Agreement in Vehicle Agreement (MVA) signed in 2015 lies at the heart
of India’s Act East policy. It is a major step towards
enhancing the export competitiveness of the region
integrating the entire BBIN region and also better integrating
by analysing the efficiency of existing supply chains the north-eastern region of India (NER) with the rest of the
of selected products. Using secondary data and an country as well as the neighbouring countries.
in-depth primary survey, a detailed examination of The BBIN-MVA provides an opportunity to member countries
to facilitate seamless cross-border transportation and also the
the supply chain of two key items—pharmaceuticals
opportunity for the creation of regional supply chains across
and processed pineapple—is undertaken to the sub-region through backward and forward linkages. This is
understand the impediments in the inbound and also likely to result in an increase in trade volumes between
outbound supply chains. member nations and can help in transforming the corridor
into a developmental corridor. For India, the additional benefit
lies in terms of increasing connectivity between industrial
clusters in eastern, southern, and western India and the north-
eastern states. The synchronisation of the BBIN MVA with other
regional efforts such as the Asian Highway Network would
also expand trade linkages and opportunities with the other
east Asian economies.
Two important road routes under the BBIN MVA for trans-
portation of cargo through the NER are most likely to be:
(i) Kolkata–Dhaka–Sylhet–Tamabil–Dawki–Shillong–Guwahati
and (ii) Agartala–Akhaura–Dhaka–Kolkata. At present, the
route for the movement of domestic cargo between the North
East and the rest of India and bilateral trade between India and
neighbouring countries (Bangladesh, Nepal and Bhutan) is
[This paper is based on Working Paper 419 “Benefits of BBIN Motor only through the Siliguri route. Under BBIN MVA, on the first route,
Vehicles Agreement to the North East Region: A Supply Chain Analysis”
the distance is reduced to 775 km from the current 1,045 km, a
prepared by the authors for the Indian Council for Research on
International Economic Relations. Support for the study by the World
reduction of 28%, and on the second route, the distance is
Bank is gratefully acknowledged. Useful feedback was received from reduced from 1,600 km to 450 km with a reduction of 72%.
experts during two presentations that were made on the study. The The prior literature on BBIN MVA has highlighted the benefits
findings of the study were also presented at a workshop on “Regional of the agreement for India vis-à-vis the NER. The potential gains
Connectivity: Unlocking the Opportunities for North East States”
of the BBIN MVA to the NER states would be in terms of savings
organised by the Government of Assam in January 2023.]
in distance, transport time, and cost and reliability of transit
Nisha Taneja (ntaneja@icrier.res.in) is with the Indian Council for (Kearney and FICCI 2014; Dappe and Kunaka 2021; CUTS 2019).
Research on International Economic Relations, New Delhi.
For instance, the distance between Agartala and Kolkata port
Biswajit Nag (biswajit.nag@gmail.com) is with the Indian Institute of
Foreign Trade, New Delhi. Sanjana Joshi (joshi@icrier.res.in) is via the existing Siliguri route is 1,600 km. The same distance
at the Indian Council for Research on International Economic Relations, can be reduced to 450 km by transit through Bangladesh and
New Delhi. Rashmi Rastogi (rash.rastogi@gmail.com) is with the Indian would also lead to timesaving by 60%. Similarly, on average, the
Institute of Foreign Trade, New Delhi. Sanya Dua (sanyadua16@gmail. existing route between Guwahati and Kolkata via Siliguri takes
com) is with Invest India, New Delhi.
164 hours. Using the India–Bangladesh border crossing at
74 november 16, 2024 vol lIX no 46 EPW Economic & Political Weekly
GLOBAL VALUE CHAINS
Petrapole–Benapole, the time and cost would be reduced by supply chain for agriculture items. Tripura accounts for 11% of
18% and 21%, respectively (World Bank 2021). the production of pineapple in the NER (Ministry of Statistics
This paper adds to prior literature by (i) examining the and Programme Implementation 2018–19). Processed pineapple
pattern of exports from the North East in terms of commodi- has been identified from the districts of Gomti, Dhalai, and
ties and markets and understanding the reasons for the under- Unakoti in Tripura under the ODOP districts export hub initiative.
reporting of exports from the NER; (ii) examining the efficiency Hence, an analysis of the supply chain of both pineapple and
of existing inbound and outbound supply chains of key prod- processed pineapple has been included in the study.
ucts of the region for exports; (iii) assessing the benefits that The study uses a mixed-method approach. It uses existing
selected sectors can gain and improve in their export com- studies, secondary data, and primary data for the analysis.
petitiveness with the operationalisation of the BBIN MVA; and Secondary data has been obtained from the World Integrated
(iv) suggesting measures that the NER states and the union Trade Solution (WITS), agriculture statistics from the Ministry
government can adopt to improve the export competitiveness of Statistics and Programme Implementation (MOSPI), and the
of the region. Directorate General of Commercial Intelligence and Statistics
(DGCI&S). For the supply chain analysis of pharmaceuticals
Approach to the Study and fresh and processed pineapple, a semi-structured question-
The two most likely BBIN routes are (i) Kolkata–Dhaka– naire with open-ended questions was canvassed across different
Sylhet–Tamabil–Dawki–Shillong–Guwahati, and (ii) Agartala– representatives of stakeholder groups to elicit quantitative and
Akhaura–Dhaka–Kolkata that pass through Assam and Tripura qualitative insights based on their opinions and experiences.
respectively (ADB 2022). Hence, these two states were selected The goal was to develop an understanding of the ecosystem
for the study. and identify factors that hamper the export competitiveness of
A detailed examination of the supply chain of two key supply chains located in the NER.
items—pharmaceuticals and fresh and processed pineapple— Interviews were held with various government departments
is undertaken to understand the impediments in the inbound that dealt with regulations, trade, transport and marketing.
and outbound supply chains. The efficiency of current supply From the private sector, interviews were held with exporters,
chains is measured in terms of time and cost incurred in various manufacturers, producers and logistic service providers. A
stages of the supply chains and indicative costs on alternative total of 52 interviews and 23 follow-up interviews were con-
routes obtained to assess how the sectors could benefit and ducted during the study. The survey was conducted in Assam
improve their export competitiveness. In addition, impediments and Tripura during the December 2022–March 2023 period.
emanating from the ecosystem within which the supply chains Expert opinions provided an idea about enabling policies,
are embedded have been identified. These constraints are future directions, and current challenges. Interviews with the
related to transportation and logistics, trade policy, and other private sector representatives were initiated with an introduc-
domestic policies that impact the organisation and efficiency of tion to the BBIN MVA as most of them were not aware of it.
supply chains. Identifying and addressing these impediments Respondents provided information on the organisation of
can help improve the export competitiveness of these items. supply chains, bottlenecks faced in sourcing inputs and raw
Diverse supply chains are likely to capture different aspects materials, and in accessing domestic and export markets.
of the ecosystem within which these supply chains are struc- Open-ended questions helped in collecting information on
tured. Hence, two supply chains, namely pharmaceuticals and indicative costs at every stage of the supply chain. Alternative
agriculture/processed foods, representing manufacturing and route options under BBIN were discussed with the respondents
agriculture were selected. The emphasis on choosing manu- and their inputs on indicative costs incurred in these alterna-
factured items for our study is that there are no studies to our tive supply chains created through the BBIN routes were also
knowledge that have examined manufacturing supply chains elicited. Respondents also provided information on possible
in the North East. Pharmaceuticals is an emerging manufac- solutions to the impediments faced by them.
turing sector in the North East. The largest cluster in Assam is
located in Kamrup district which has been identified as the Exports from the North East Region
only district in Assam for manufacturing and exporting phar- Total trade of the NER increased from $281 million in 2017–18 to
maceuticals under the government’s One District One Product $520 million in 2021–22. Although total trade has been fluctu-
(ODOP) District Export Hub initiative in which identified prod- ating, the region has maintained a trade surplus through these
ucts are being nurtured as an export hub. For agriculture five years. Coal and briquettes, bulk minerals and ores, tea,
items, most studies have examined supply chains related to petroleum products and wheat were the top five commodities
agriculture products like kiwi, fresh spices, ginger, bamboo, lemon, exported by the NER, accounting for a 66% share in total NER
pineapple, mandarin/citrus, turmeric, passion fruit, and large exports in 2021–22.
cardamom (Kathuria et al 2020; CUTS 2019; NIAM 2018; SFAC nd). A large proportion of exports from the NER is destined for the
However, these studies do not examine their export competi- neighbouring countries. In 2021–22, Bangladesh and Bhutan
tiveness even though the primary sector accounts for 33% of accounted for 87% of exports from NER (up from 65% in 2017–18)
the gross domestic product (GDP) in the NER states (MOSPI while the remaining 13% was accounted for by a wide range of
2020–21). Pineapple has been selected to represent a possible countries which included the United Kingdom (UK), United
Economic & Political Weekly EPW november 16, 2024 vol lIX no 46 75
GLOBAL VALUE CHAINS
Figure 1: North East Region Trade Trends
Trade over Five Years, 2017–18 to 2021–22 Share of Top Five Export Commodities of NER, 2021–22
600 40
34
520 35
500 30
430
400 370 25
20
316 20
$ million
300 281 270 15 12

243 15 12
203 219 204
10 7
200 151 160 151 5
78 92
100 0
Coal, Coke Bulk minerals Tea Petroleum Wheat Others
-
and and ores products
2017–18 2018–19 2019–20 2020–21 2021–22 Briquettes
Export Import Total Trade 2021o22
Source: Directorate General of Commercial Intelligence and Statistics (DGCI&S) Port-wise data.
Figure 2: Top Destinations for North East Region Exports, 2021–22 and Kamrup, and pharmaceutical clusters at Kuruwa, Kamrup,
60 Balipara, and Sonitpur.
Share of export in total NER export (%)
54
50 The pharmaceutical industry has a complex supply chain.
45 42
The inbound supply chain comprises a one-time cost incurred
40
in sourcing machinery to set up the plant and a recurring cost
30 to source the raw material. The machinery is imported mostly
20 from European countries through the Kolkata port while the
16
11 basic raw material for pharmaceuticals—active pharmaceutical
7 9
10
2 11 1 2 1 1 5 ingredient (API)—is sourced largely from China through ports
0.5 0.5
0 in Gujarat or Maharashtra. There are no firms producing APIs
The Netherlands
UAE
Poland
US
Ireland
UK
Bhutan
Myanmar
Germany
Others
Bangladesh
in the North East. The pharmaceutical industry in the North

East is therefore completely reliant on the Indian hinterland
and other countries to set up manufacturing facilities. Packaging
2017–18 2021–22
material, another input required for the finished product, is
Source: DGCI&S Port-wise data.
also sourced from the hinterland.
Arab Emirates (UAE), Ireland, Poland, United States (US), the The finished pharmaceutical products manufactured in the
Netherlands and others. North East are then exported to the rest of the world, again
The export products are also segmented between the using a complex and long process. The consignments are sent
neighbouring countries and markets located in the rest of in containerised trucks to the Jawaharlal Nehru Port Trust
the world. While a range of commodities are being exported (JNPT), Mumbai from where they are shipped to the final desti-
to the neighbouring countries (mainly coal, coke and nations, mainly in the US and Europe. Due to the unavailability
briquettes, bulk minerals, spices and petroleum products), of containerised trucks in the NER, empty trucks have to be
only one item—tea—is being exported to countries in moved from Kolkata to the manufacturing units in Assam
Europe, West Asia and the US. where they are loaded and then sent to JNPT for onward move-
Since the North East states share 98% of their borders with ment. All goods are transported via the Siliguri route.
neighbouring countries, trade with neighbouring countries is
facilitated through land customs stations (LCSs) and integrated Impediments in the existing supply chain: Taking an example
check posts (ICPs) located along international borders. Being of a typical large firm located near Guwahati in Kamrup district
landlocked, export goods to the rest of the world are trans- of Assam, the current costs incurred for the inbound and
ported from the NER to Kolkata—the nearest sea port, which outbound supply chains were mapped and impediments identi-
can be accessed only through the “Chicken’s neck” Siliguri fied at every leg of the supply chain. Additional costs are incurred
route. From Kolkata, the goods are shipped out to the rest of at four levels of the inbound and outbound supply chains:
the world. However, tea is exported to the rest of the world from (i) Sourcing machinery—a one-time cost (from Kolkata to
only one inland container depot (ICD) located in Amingaon, Guwahati).
Assam while a diversified range of items are exported from (ii) Sourcing raw materials—a recurring cost (from Dahej,
24 functional LCSs and ICPs. Gujarat to Guwahati).
(iii) Procuring empty containers for preparing export consign-
Supply-chain Analysis for Pharmaceuticals (Assam) ments (from Kolkata to Guwahati).
There are 30 pharmaceutical units located in Assam.1 Most of (iv) Exporting goods through JNPT (from Guwahati to Mumbai).
these are units of large companies which have their head- Further, due to the time-sensitive nature of the raw material
quarters in the hinterland. Some of these companies include required, predictability and speed are important considerations.
Ajanta Pharmaceuticals, Sun Pharma laboratories and Eris While machinery is imported from the Kolkata port by the
Lifesciences. Assam has pharmaceutical parks at Chaygaon manufacturing unit in Guwahati, export consignments are
GLOBAL VALUE CHAINS
Figure 3: Current Supply Chain for Pharmaceutical Manufacturing Unit provision for the through bill of lading from
Machinery Raw material Amingaon for any item other than tea, hence
`15 per tonne km; `6 per tonne km;
items being exported from the North East are
Dahej,
4.5 days Kolkata
Gujarat 7.5 days shipped from Kolkata or JNPT, Mumbai. Thus,
Siliguri Siliguri any export originating from the North East and
destined for countries other than neighbouring
Manufacturing in
Guwahati bordering countries moves as domestic cargo from
Order cycle: 20 days the North East until it reaches the port of exit
Siliguri Siliguri
`3.7 per tonne located in another state, for example Kolkata
`46 per km;
4 days Kolkata Gorakhpur
km; 7.5 days port (West Bengal) or JNPT (Maharashtra). Hence
the bill of lading2 shows the origin of the export
JNPT
Empty container cargo from these states and not from the North
Export
East. Accordingly, the exports originating from the
Source: Indian Council for Research on International Economic Relations (ICRIER) Survey.
North East get recorded in the export data of the
state from where the cargo is shipped for export.
mostly shipped out from JNPT rather than from Kolkata as the Manufacturers handle logistics within their own firms.
former is more efficient. The average import release time at Sourcing of empty containers, loading, unloading and making
Kolkata port is six days, whereas at JNPT it is four days. Even for the cargo export ready are done at the manufacturing facility
imports of raw material, JNPT or Dahej is preferred to Kolkata as there are no logistics operators or customs house agents
port as these ports are more efficient even though the distance (CHAs) who can handle these activities in the NER. The few
between Guwahati and Dahej/JNPT is much more than it is be- CHAs present in Guwahati are familiar only with procedures
tween Guwahati and Kolkata. Also, to source empty containers related to tea and lack expertise in procedural and other
for export, manufacturers have to rely on the Kolkata port due requirements related to the export of other items.
to the unavailability of empty containers in Guwahati. This Unlike most ICDs in the Indian hinterland, which clear both
adds considerably to transaction costs. rail and road containerised cargo, at present, Amingaon ICD is
Even though Amingaon ICD near Guwahati is very close to functional for the clearance of rail cargo but not road cargo.
the pharmaceutical cluster in Kamrup district, it is not equipped There is only one rail track from Amingaon which is used by
to handle clearances of any item other than tea. There is no Indian Railways for moving goods trains and passenger trains.
Table1: Pharmaceutical Supply Chain in Assam
Transportation Current Supply Chain Alternative Supply Chain
Inbound for machinery Route: Road Route 1: Road
Kolkata-Siliguri-Guwahati Chittagong-Dhaka-Guwahati
Cost: `15 per tonne km Cost: `11 per tonne km
Time: 4.5 days (Cost reduction: 27%)
Distance: 1,045 km Time: 3.5 days
(Time reduction: 22%)
Distance: 700 km
(Distance reduction: 33%)
Inbound for raw materials Route: Road Route 1: Road Route 2: Road
Dahej (Gujarat)-Siliguri-Guwahati Chittagong-Dhaka-Guwahati Kolkata-Dhaka-Guwahati
Cost: `6 per tonne km Cost: `3.6 per tonne km Cost: `4.5 per tonne km
Time: 7.5 days (Cost reduction: 40%) (Cost reduction: 25%)
Distance: 2,625 km Time: 3.5 days Time: 4.5 days
(Time reduction: 53%) (Time reduction: 40%)
Distance: 700 km Distance: 750 km
(Distance reduction: 73%) (Distance reduction: 71%)
Inbound for empty trucks Route: Road Route 1: Road Route: 2 Road
Kolkata-Siliguri-Guwahati Chittagong-Dhaka-Guwahati Kolkata-Dhaka-Guwahati
Cost: `46 per km Cost: `25 per km Cost: `40 per km
Time: 4 days (Cost reduction: 45%) (Cost reduction: 13%)
Distance: 1,045 km Time: 2 days Time: 3 days
(Time reduction: 50%) (Time reduction: 25%)
Distance: 700 km Distance: 750 km
Outbound for exports Route: Road Route 1: Rail Route 2: Road Route 3: Road
Guwahati-Siliguri-Gorakhpur-JNPT Amingaon ICD, Guwahati-Kolkata Amingaon ICD, Guwahati- Amingaon ICD, Guwahati-
Cost: `3.7 per tonne km Cost: `1.65 per tonne km Dhaka-Kolkata Dhaka-Chittagong
Time: 7.5 days (Cost reduction: 55%) Cost: `3 per tonne km Cost: `2.5 per tonne km
Distance: 2,900 km Time: 2 days (Cost reduction: 19%) (Cost reduction: 35%)
(Time reduction: 73%) Time: 4.5 days Time: 3.5 days
Distance: 1,000 km (Time reduction: 40%) (Time reduction: 53%)
(Distance reduction: 65%) Distance: 750 km Distance: 710 km
Source: ICRIER Survey.
GLOBAL VALUE CHAINS
The same track is also used by the Container Corporation of Dhaka–Kolkata (ICD road route). Once the BBIN MVA route
India (CONCOR) for moving containerised cargo. Hence, the becomes operational, export cargo can be shipped from the
cargo train takes two days to reach Kolkata from Guwahati. Kolkata port or from the Chittagong port. Under the BBIN route,
Consultations with officials at CONCOR revealed that if there is for exports through Kolkata, the cost and time reduction
a dedicated freight corridor on this route, the cargo would would be 19% and 40%, respectively, compared to the existing
take only 10 hours to move from Amingaon to Kolkata. Also, road route through Siliguri. For exports through Chittagong,
there is no institutional mechanism or designated agency for the reduction in cost and time would be 35% and 53%, respec-
manufacturers to raise concerns regarding the logistics. tively. Again, the key reason for the higher costs of exporting
through Kolkata is that the cargo has to move through two
Alternative supply chain routes: Possible supply chain options transit points whereas Chittagong can be accessed through a
for both inbound and outbound supply chains were mapped single transit point at Dawki/Tamabil. Another likely reason
along with the time and costs incurred on these routes, in the for preference of Chittagong port over Kolkata for exports of
context of the BBIN MVA. The best options were then selected finished items is that at Chittagong port, the export release time
based on the information collected. The BBIN-MVA will provide is five days compared to eight days at Kolkata.4
alternative options at all four levels on the inbound and out- However, the largest reductions in cost and time can be
bound supply chains (Table 1, p 77). realised if Amingaon Rail ICD becomes operational for more
Currently, machinery is being imported through Kolkata and export items. The preference for Amingaon Rail ICD was cate-
is moved to Guwahati via the Siliguri corridor. Alternatively, gorically expressed by stakeholders. The reduction in cost and
the option is that the cargo could be moved from Chittagong to time is the largest through this route when compared to the
Guwahati by road. This would be the preferred option as the BBIN routes, provided this route is made operational for other
cost reduction would be 27% and it would take 22% less time commodities in addition to tea.
compared to the Kolkata-Guwahati Road route through Siliguri.
Raw material (API), currently being imported into Guwahati Supply Chain Analysis for Fresh and Processed Pineapple
via Gujarat and transported through Siliguri, can be sourced from (Tripura)
the Chittagong port or from the Kolkata port and transported Fruit processing is a key thrust area for all North East states
through Dhaka under the BBIN MVA. Further, the costs incurred due to the high share of fruit production such as pineapple,
in terms of money and time are lower for imports from passion fruit, and jackfruit in the NER. A total of 14 NER dis-
Chittagong than from Kolkata. The reduction in cost in sourcing tricts are targeting “multiple fruit processing” as part of the
from Chittagong is 40% while the time saved is 53% while ODOP scheme. Using Ministry of Statistics and Programme
sourcing from Kolkata would imply a cost reduction of 25% Implementation, agriculture statistics (2018–19) data on agri-
and time saving by 40%. Moreover, raw material sourcing culture production, it was observed that pineapple is produced
through Kolkata would mean passing through two transit in large quantities and accounted for 49% of total pineapple
points (one on the West Bengal–Bangladesh border and the production in India.
second on the Assam–Bangladesh border). Given the time- Tripura cultivates two varieties of pineapple—kew and
sensitive nature of the raw material, a major advantage of queen. The kew variety accounts for 90% of the pineapple
using the Chittagong port is that there would be only one cultivation in the state and therefore we focus on the kew variety
transit point through Dawki–Tamabil. However, import release in this study.
time at Chittagong port is 83% higher than at Kolkata.3 The There is no mandi in Agartala. Due to the absence of a price
decision to use either route would finally depend on the pre- discovery mechanism enabled through a mandi, farmers can-
vailing efficiency of the ports at Kolkata and Chittagong and not demand their market price. Hence, they get unfair remu-
on the time taken at the border transit points once the BBIN neration. Post-harvest losses at the farm level are 7% to 10%
route becomes operational. while losses from the farm level to the retailer range between
The empty containers currently being sourced from Kolkata 30% and 35%. The pineapples are heaped in open fields on
could be sourced from Chittagong or from Kolkata and moved the roadside from where they are loaded onto trucks and
through Dhaka under the BBIN MVA. Chittagong would be the moved to the aggregation point in Agartala. This aggregation
preferred option as the cost reduction would be 45% compared point is demarcated by locals and is basically an open space
to 13% when sourcing from Kolkata under the BBIN route com- with no infrastructure. There are no packaging, sorting and
pared to the current route from Kolkata to Guwahati through grading facilities, and the cold storage facilities are missing.
Siliguri. The key factor accounting for this difference is that During transportation, no reefer containers are used as the
sourcing from Chittagong would entail crossing only one cost of using reefer trucks outweighs the marginal increase in
transit point whereas sourcing from Kolkata would mean the shelf life of the pineapple.
crossing two transit points through Dawki/Tamabil and There are five distribution channels for pineapple from
Petrapole/Benapole. Agartala: (i) local consumption in Tripura, (ii) transported to
For exports, there are three options: (i) Amingaon (Guwahati)– Guwahati for consumption in the North East, (iii) transported by
Dhaka–Chittagong (ICD road route) (ii) Amingaon (Guwahati)– road to other states or cities, for example Kolkata, (iv) airlifted
Siliguri–Kolkata (ICD rail route) and (iii) Amingaon (Guwahtai)– to other states, and (v) informally traded to Bangladesh because
GLOBAL VALUE CHAINS
Figure 4: Current Supply Chain for Fresh Pineapple In recent months, there has been
Shelf life of kew pineapple: 5–6 days an interest in setting up processing
Kumarghat farm plants by manufacturers located in
`1–2 per piece days the Indian hinterland who are
`4.4 per tonne km; already engaged in fruit processing.
0.5 day
These manufacturers have the tech-
Agartala nical and marketing expertise in
Local aggregation
`10– `15 per piece this sector as they are already en-
gaged in this activity in the hinter-
land. Field interviews revealed that
`4 per tonne-km `70/kg `2 per tonne/km;
3.5 days 1 day 6.5 days these manufacturers have tried to
source pineapple from Tripura, but
Consumeed locally Guwahati
Aggregation point/mandi
Airlifted to other states,
for example: Delhi
Transported by road to
Informal trade to due to the distance and the short
at `30– `35 per other states
piece at `15– `20 per piece `100 per kg for example: Kolkata Bangladesh shelf life, it was uneconomical. The
Source: ICRIER Survey.
advantage of setting up manufactur-
Figure 5: Current Supply Chain for Pineapple Fruit Processing Unit ing facilities in Tripura is of locating
the plants close to the production
Machinery Raw material (pineapple)
area which enables procuring raw
Kolkata material at a lower price and also
`20 per tonne-km; `4.4 per tonne-km; Kumarghat minimises wastage. Currently, there
5.5 days 0.5 days farm
Siliguri is only one such unit which is opera-
tional. It is expected that more man-
Fruit processing unit in Agartala
ufacturers from the hinterland will
Siliguri set up processing facilities.
`4 per tonne-km;
5.5 days
Kolkata Impediments in existing supply
chain: Currently, the processing plant
Domestic market for processed pineapple set up in Agartala sources locally
(to hinterland, for example, Kolkata) manufactured machinery and other
Source: ICRIER Survey. packaging material from Kolkata
its import is not permitted by Bangladesh. Indicative estimates and other places in the hinterland. The processed item is
suggest that almost 70% of the pineapple produced in Tripura transported back to Kolkata or to other places in the hinter-
is exported informally to Bangladesh. Informal trade takes land. The only disadvantage seen in setting up the plant in
place because pineapple is not on Bangladesh’s permissible list Tripura is the distance between Agartala and Kolkata through
of imports. Thus, restrictive trade policies play a crucial role Siliguri. Hence, alternative route options under BBIN MVA are
in informal trade. Table 2: Supply Chain for Processed Pineapple in Tripura
Further, in Tripura, despite the abun- Transportation Current Supply Chain Alternative Supply Chain
dant availability of fresh pineapple, Inbound for Route: Road Route: Road
machinery Kolkata-Siliguri-Agartala Agartala - Dhaka - Kolkata
there are hardly any private process- Cost: `20 per tonne-km Cost: `12 per tonne-km
ing plants in the state. The domestic Time: 5.5 days (Cost reduction: 40%)
investment from local entrepreneurs Distance: 1,600 km Time: two days
(Time reduction: 63%)
has not been forthcoming. Lack of Distance: 450 km
knowledge of developments in modern (Distance reduction: 72%)
technology and the associated skills Inbound for raw Route: Road Route: Road
required for setting up processed food materials Kumarghat Farms (Tripura) - Kumarghat Farms (Tripura) - Food Processing
Food Processing Unit in Unit in Agartala
plants has discouraged local entrepre- Agartala Cost: `4.4 per tonne-km
neurs. Efforts have been made by the Cost: `4.4 per tonne-km Time: 0.5 day
North Eastern Regional Agricultural Time: 0.5 day Distance: 120 km
Distance: 120 km (Assuming no change since domestic transportation
Marketing Corporation (NERAMAC) to within Tripura)
set up processing plants in the past Outbound for Expected cost of the present Route: Road Route 2: Road
but they have failed as the units could domestic market route Agartala-Dhaka-Kolkata Agartala-Dhaka-Chittagong
distribution/export of Route: Road Cost: `2 per ton-km Cost: `1.5 per tonne-km
run only for nine months in a year due processed pineapple Agartala-Siliguri-Kolkata (Cost reduction: 50%) (Cost reduction: 62.5%)
to the seasonality of the fruit and Cost: `4 per tonne-km Time: two days Time: one day
workers had to be paid for the whole Time: 5.5 days (Time reduction: 71.5%) Distance: 430 km
Distance: 1,600 km Distance: 450 km (Distance reduction: 73%)
year. The units were also set up for a (Distance reduction: 72%)
single fruit—pineapple. Source: ICRIER Survey.
GLOBAL VALUE CHAINS
likely to provide a major cost advantage to processing units point to access Chittagong while there are two transit points to
being set up in Tripura. access Kolkata. Similarly, import cargo would move through only
one transit point from Chittagong and two transit points from
Alternative supply chain routes: Processing firms in Tripura Kolkata. In balance, the combined effect of transit times and
are likely to see major advantages through the BBIN MVA. port efficiency will determine which route would be preferred.
The alternative route options available with the BBIN MVA The already existing rail route from Amingaon ICD if made
would be as follows—Agartala–Dhaka–Kolkata; and Agartala– operational for all commodities would be the best option for
Dhaka–Chittagong. exporters as this route is cheaper than the road routes. An
The distance on the BBIN MVA route through Dhaka currently added advantage would be that exports of these commodities
will be shorter than the route between Kolkata and Agartala would be recorded as originating from Amingaon as the bill of
through Dhaka as it reduces the distance from 1,600 km to lading would record exports as originating from the point of
450 km—a reduction of almost 72%. Under the BBIN MVA, origin at Amingaon. This could help in correcting the under-
the cost of transporting machinery and other inputs from reported value of exports from the NER.
Kolkata is likely to reduce by 40% and the time for transpor- The CHAs in the North East lack the requisite skills to handle
tation by 63% through the Kolkata–Dhaka route. The pro- exports of commodities other than tea. All logistic operations
cessed fruit can either be sold in the domestic market in the are handled by the manufacturing firms.
hinterland or it can be exported through Kolkata port or In recent months, fruit processors in the hinterland have
Chittagong port. As to transporting the processed fruit, the shown an interest in setting up manufacturing facilities in
time from Agartala to Kolkata would be reduced by 71.5% Tripura. Machinery and other packaging material are, however,
compared to the existing route through Siliguri. Under the sourced from the hinterland and processed pineapple is sold
BBIN route, exports through Kolkata port would result in cost back to the domestic market in the hinterland. The processing
and time reductions of 50% and 71.5%, respectively compared plants set up in Tripura are likely to gain immensely from the
to the existing route through Siliguri while for exports BBIN MVA. The distance from Agartala to Kolkata through
through Chittagong port, the reduction in cost and time Siliguri is currently 1600 km and would reduce to just 450 km
would be 62.5% and 73%, respectively. through the BBIN route through Dhaka which is likely to result
in a huge reduction in cost and time by 40% and 63%, respec-
Key Findings and Recommendations tively. The processed fruit can either be sold domestically in
While it is expected that the BBIN MVA will lead to a significant the hinterland or it can be exported through Kolkata port or
reduction in transaction costs and is likely to improve Chittagong port.
export competitiveness of products from the North East, The recommendations are based on the study of only two
stakeholders have some apprehensions about the likely benefits. sectors but have overall implications for the agriculture and
Some of these concerns are related to the risk associated with manufacturing sectors.
cargo movement through international territories and conges-
tion and delay at Chittagong and Kolkata ports. Stakeholders EPWRF India Time Series
opined that the NER could benefit from the BBIN MVA if these (www.epwrfits.in)
constraints are addressed.
The pharmaceutical industry located in the North East has An online database on the Indian economy and society
a complex supply chain. The inbound supply chain comprises a developed by EPW Research Foundation, Mumbai.
one-time cost incurred in sourcing machinery to set up the
plant and a recurring cost to source the raw material. The
Environment Statistics
machinery is imported mostly from European countries This module contains 6 major sections:
through Kolkata port while the basic raw material for pharma-
  Environmental Conditions and Quality
ceuticals—API—is sourced largely from China through ports
 Environmental Resources and their use
in Gujarat or Maharashtra. The finished pharmaceutical prod-
ucts manufactured in the North East are then exported to the   Residuals and Management of Waste
rest of the world. The consignments are sent in containerised   Natural Extreme Events and Disasters
trucks to JNPT, Mumbai from where they are shipped to the   Human Settlements and Environmental Health
final destinations.   Environment Protection, Management and Engagement
All export cargo from the NER moves as domestic cargo
Data are provided at the All-India and State levels, depending
until it reaches a port in the Indian hinterland. Hence, these
on availability.
exports are recorded as originating from the state from where
the cargo is being shipped. The shipping bill and the bill of The EPWRF ITS has 38 modules covering a wide range of
lading mention the point of origin of the cargo which is used India’s macroeconomic, financial and social sector indicators.
for collecting trade data.
For subscription details, visit www.epwrfits.in or write to us
While BBIN MVA will open up shorter routes for exports from
at its@epwrf.in
Guwahati to Kolkata and Chittagong, there is only one transit
GLOBAL VALUE CHAINS
With regard to pharmaceuticals, the ICD at Amingaon should setting up an ICD in Agartala. Reefer trucks should be made
be improved with additional functions. Necessary procedures available to improve the shelf life of fresh pineapples during
should be put in place so that pharmaceuticals and other items transportation. Attracting more fi rms to avail the PLI
can be exported from here. The ICD should be made functional scheme: The processed food sector has the potential to ex-
for road cargo as well so that consignments can move through pand if domestic firms from all over India can avail of the
Bangladesh when BBIN MVA becomes operational. Enabling incentive and set up manufacturing facilities in the North
ICD at Amingaon for items other than tea will automatically East. Domestic investment from within the state also needs
ensure the collection of trade data on exports from Amingaon. to be encouraged. The state government can spread aware-
All other exports to the rest of the world originating in Assam ness of the benefits of the PLI scheme. Pineapple and other
and in other north-eastern states are being shipped from ports fruits should be removed from Bangladesh’s negative list
in the hinterland and are being recorded in the state’s trade of imports from the North East so that informal trade can
data from where the exports are being shipped. Containerised shift to formal channels. Farmers need marketing assistance,
trucks should be made available. Customs will need to provide technical assistance and training so that they can adopt
training to CHAs so that the required skill base can be developed modern methods to reduce post-harvest losses. Assistance
in the region. Unless the requisite training is given to CHAs, is required to set up more FPOs. Domestic firms located
Amingaon ICD even if made operational for other commodities in Tripura also need technical assistance to set up manufac-
will remain under-utilised. A dedicated rail track is required turing facilities.
for the movement of containerised cargo in order to improve Finally, there are also key messages for other NER states
rail connectivity through Amingaon ICD. The efficiency of the and the union government. Currently, pharmaceuticals
Kolkata port needs to be improved and release times need are being produced in Sikkim and Assam only. Connecting
to be reduced substantially to bring it on par with the best- other states to the main BBIN routes will encourage other
performing ports such as JNPT. Assam can also set up a states to set up manufacturing facilities in pharmaceuticals.
bulk drugs park as is being set up in Andhra Pradesh and Setting up one ICD in each state would create the basic infra-
Gujarat. Production of API under the production-linked structure required for exports of other manufactured items
incentive (PLI) scheme can help create backward linkages for from other north-eastern states as well. Undertaking traffic
the pharmaceutical industry. analysis projection could be helpful in understanding if
With regard to pineapple, a mandi should be set up in Agartala there is sufficient demand for one ICD in each state. Setting
so that a price discovery mechanism is established formally. up professionally managed logistic services which include
This will help farmers in getting due remuneration for their packaging and handling, forwarding and clearing, ware-
produce. A more formal aggregation and collection method housing, cold chain, and transportation in each state will
needs to be put in place in consultation with the farmer pro- encourage all north-eastern states to set up manufacturing
ducer organisations (FPOs). Basic infrastructure should be pro- facilities for several items. Providing training to CHA s will
vided at aggregation points. Customs need to build the capacity provide the necessary soft logistics infrastructure in all
of CHAs so that they can undertake the document processing north-eastern states and encourage trade in all items.
tasks related to trade. Strengthening FPOs and providing technical training in
Improving Logistics: Since Agartala is likely to gain tre- post-harvesting practices will strengthen the capacity of
mendously from the BBIN MVA, the government may consider farmers to reduce wastage in agricultural items.
Notes References 291362523/291369117/The+Innovative+

1 Information received from Drug Controller, Asian Development Bank (2022): BIMSTEC Master A.T.+Kearney.pdf/05bc37ef-648f-47cc-ce8d-
Licensing and Controlling Authority, Assam Plan for Transport Connectivity, Doi: http:// e20977a6898f?t=1591344426000.
(Appendix 2.2) and Government of Assam dx.doi.org/10.22617/TCS210388-2. MoSPI (2019): Agriculture Statistics, Ministry of
(2023). Allopathic manufacturing units. Com- Statistics and Programme Implementation.
CUTS (2019): “Role of Multi-modal Connectivity in
missionerate of Food and Drugs Administration, Fostering Value Chains in the BBIN Sub-region,” NIAM (2018): Pineapple Value Chain Analysis and
Government of Assam, India, https://fda.as- CUTS International, https://cuts-citee.org/pdf/ Market Assessment for Unakoti and Dhalai
sam.gov.in/frontimpotentdata/allopathic- dp-role-multi-modal-connectivity-in-fostering- District, Tripura, CCS National Institute of
manufacturing-units Agricultural Marketing, Ministry of Agriculture
value-chains-bbin-sub-region.pdf
and Farmers Welfare, Government of India,
2 Bill of Lading (BL) is a document that is issued Dappe, Matias Herrera and Charles Kunaka (2021): https://midh.gov.in/VCS%20Reports/Tripura%
by the shipping company, to carry the consign- Connecting to Thrive: Challenges and Oppor- 20Value%20Chain%20Analysis%20and%20
ment from port-of-receipt to port-of-discharge, tunities of Transport Integration in Eastern South Market%20Assessment%20Report%20on%20
and signed by the carrier. The bill of lading has Asia, International Development in Focus, World Pineapple.pdf.
details of the shipper, name of the port of loading, Bank Washington, DC, https://openknowledge. Small Farmers’ Agribusiness Consortium (nd):
port of discharge and place of delivery, number worldbank.org/entities/publication/52b864d2- “Value Chain Analysis of Select Crops in North
of containers and packages, and description of a65f-5bfe-9e61-6af25633d144. Eastern States,” Small Farmers’ Agribusiness
goods in terms of quantity and gross weight. Kathuria, Sanjay and Mathur Priya (2020): Strength- Consortium, http://sfacindia.com/PDFs/SFAC_
3 National Time Release Study (2022), CBIC, ening Cross-border Value Chains: Opportunities Value-Chain-Analysis.pdf.
Government of India; Time Release Study, for India and Bangladesh (ed), Development World Bank (2021): “Seamless Transport Connec-
National Board of Revenue (2022), Govern- Knowledge and Learning, World Bank Group, tivity Can Create Significant Economic Gains
ment of Bangladesh. Washington, DC, http://hdl.handle.net/10986/ for Bangladesh and India,” https://www.wor
4 National Time Release Study (2022), CBIC, 32719. ldbank.org/en/news/press-release/2021/03/
Government of India; Time Release Study, Kearney, A T and FICCI (2014): Connectivity-led 09/seamless-transport-connectivity-can-cre-
National Board of Revenue (2022), Govern- Development of North East India through BBIN ate-major-economic-gains-for-bangladesh-
ment of Bangladesh. Corridor,https://www.kearney.com/documents/ and-india.
GLOBAL VALUE CHAINS
Micro-level Export Management

in Foreign Trade Policy
Implementing Districts as Export Hubs in India
Pankhuri Gaur
I
While examining the role of districts in India’s export ndia’s importance in the global forum, be it trade, diplomacy,
sectors, it has been observed that Indian exports at the environment, etc, has seen changes in the last decade. The
global pandemic and continued geopolitical crisis have
district level are highly skewed with nearly 50% of
affected trade for many countries through supply chain disrup-
exports concentrated in the top 18 districts and the top tions. Conversely, India has resisted this external pressure with its
50 districts constituting India’s 75% of exports in resilient exports. The Foreign Trade Policy (FTP) 2023 has sys-
2023–24. The Districts as Export Hubs initiative, with tematically focused on increased participation in global supply
chains through high-technology exports, e-commerce and district-
proper implementation, would be able to reduce the
level export initiatives to reach the export target of $2 trillion by
export disparity among the districts while encouraging 2030. One of the many initiatives focused on in the FTP 2023 is
the self-reliance approach with the necessary push to the Districts as Export Hubs (DEH) initiative which is primarily a
the agriculture, toy cluster and MSME industries with decentralised approach to boost the export sector performance
with micro-level management at the district level. This initiative
Make in India, Skill India, and other initiatives under
is also a step towards ongoing government schemes, like Make in
India’s Foreign Trade Policy 2023. India, Atmanirbhar Bharat, Skill India, Local Goes Global, etc.
The DEH initiative has been merged with the One District
One Product (ODOP) programme which has seen successful
implementation at the state level since 2019 and national
prominence afterwards to boost the local economic and regional
balanced development. There is a minute difference between
the two approaches as the role of government in the DEH initi-
ative does not include the provision of financial support to the
districts through subsidies. The DEH has focused on three sec-
tors—agriculture, toy cluster, and geographical indication (GI)
products while highlighting the role of artisanal workers,
farmers, and micro, small and medium enterprises (MSMEs),
whereas at the state level, under the ODOP programme, state-
specific sectors have been identified. The implementation of
DEH at the national level would also help establish the MSME
export clusters at the disaggregated levels.
However, it has been observed that India’s exports have been
concentrated in a small number of districts, increasing the coun-
try’s regional imbalance. Nearly 90% of the exports are contrib-
uted by 12 states and union territories. The corresponding share
for the districts is 38.2% in 2023–24. This variation is also present
at the state level where fewer districts account for major state
exports. Enhancing product exports in all the districts, through
the DEH initiative, is likely to reduce this variation among the dis-
tricts and states for the necessary balanced regional growth. This
paper discusses the evolution of DEH and its sub-component
ODOP in India. It tries to analyse the export trends and the skew-
Pankhuri Gaur (pankhuri.gaur@ris.org.in) is with Research and ness extent of Indian exports in various districts and states
Information System for Developing Countries, New Delhi.
and union territories in the subsequent sections. Lastly, it
GLOBAL VALUE CHAINS
discusses the challenges under the ODOP scheme and how of the destination markets with financial assistance to partici-
they can be addressed in the DEH initiative. pate in national and international trade fairs, exhibitions, etc.
The Margin Money scheme helps the ODOP projects to be
The Evolution of DEH and ODOP financed by all nationalised banks, regional rural banks, and
other scheduled banks, where subsidy money will be released by
The Difference between the DEH initiative and ODOP: Since the Department of MSME and the Department of Export Pro-
the last decade, India has been continuously focusing on boost- motion based on the project cost. The Skill Development scheme
ing the external sector performance, primarily its exports, not only provides current and future skill requirements to the
through the grassroots levels. This has been carried out by workforce for the entire value chain of the ODOP products but
promoting districts to increase their export competitiveness also equips the trainees with a free-of-cost advanced toolkit
and enhancing trade facilitation measures. A comprehensive and an honorarium of `200 per day during the training. Uttar
policy decision was reinforced in India’s FTP 2023 where the Pradesh’s ODOP scheme focused on increasing productivity,
union government emphasised the DEH initiative, which was employment, and income in the MSME and traditional indus-
merged with the ODOP programme. The DEH initiative provided tries in indigenous craft and agricultural products which has
a platform for the districts, states and local exporters to shape increased employment in the state by 42.1% from 2018–19 to
the country’s export policy with the union as an active stake- 2019–20 (Asian News International 2020). Around 80% of the
holder (Ministry of Commerce and Industry 2023). With the goods exported by the state in 2019 were categorised as ODOP
micro-level development, the DEH initiative seeks to enhance products and nearly 1,100 products are available online within
the production and export competitiveness of local producers the country (Tripathi and Agrawal 2021).
and exporters while focusing on identified goods and services The successful implementation of ODOP in Uttar Pradesh
where the districts have export potential. created a good example for other states of India where several
One of the lynchpins embedded within the DEH initiative is of them joined the bandwagon. To this, the Ministry of Food
the promotion of inclusive development not only through bal- Processing Industries also launched the Pradhan Mantri
anced regional growth aiming at all districts of the country Formalisation of Micro Food Processing Enterprises scheme to
but also by increasing the role of MSMEs, including traditional support the food processing industry wherein it adopts the
and artisanal producers, in the foreign trade sector by endors- ODOP approach while identifying different food products in
ing export competitiveness and diversification. Under its first various districts to reap the benefits of scale. Though the ODOP
phase, the DEH initiative focuses on agriculture products, toy has been termed successful in Uttar Pradesh, there are many
clusters, and GI products. The responsibility of export promo- challenges that the scheme faces, especially on the demand-side
tion under the DEH initiative has been decentralised with the measures (Misra et al 2021). One of the major hurdles in ODOP
union, state, and districts, playing a major role through export exports has been the inefficient distribution channels for bulk
promotion councils at various levels through action plans with products in the foreign market. The MSME producers cannot
identified products, potential export markets, and quantifiable provide the bulk supply of the products ordered, which hampers
targets. This initiative is expected to increase export growth their reputation in the market and the buyers’ faith. The un-
by double digits in the next five years and thus provide impe- recognisability of the brand and lack of market awareness
tus to India’s export target of $2 trillion by 2023. To reach the have also affected the ODOP manufacturers’ businesses. How-
export target, the government under the DEH initiative has ever, many of these challenges are said to be addressed in the
been supporting the districts in terms of infrastructure, logis- DEH initiative which are yet to be implemented and evaluated.
tics, branding and outreach activities with scale economies. One can also learn from the experiences of different countries,
However, there is no financial assistance provided to the though the results have been highly individualistic.
districts and states under the DEH initiative (Press Information
Bureau 2023a). This is unlike the ODOP scheme which heavily Global experiences of ODOP: The ODOP concept was fi rst
relies on financial subsidies in the form of the Common Facility introduced in Japan in 1962 as the New Plum and Chestnut
Centre (CFC) scheme, Marketing Development Assistance (MDA) movement in Oyama village prefecture (Ndione and Suzuki
scheme, Finance Assistance scheme/Margin Money scheme, and 2019). In 1979, it became One Village One Product (OVOP) in
Skill Development scheme (Yadav et al 2022). The ODOP scheme the entire Oita prefecture (Mukai and Fujikura 2015). It has
in India was first launched by the Government of Uttar Pradesh been replicated, with different names, in various provinces in
in 2018 in all its 75 districts and pillared with four sub-schemes— China in the 1980s (Hoang Thanh et al 2018) and further in
CFC scheme, MDA scheme, Finance Assistance scheme/Margin Asian and African countries in the 1990s and 2000s, respec-
Money scheme, and Skill Development scheme. Under the CFC tively (Kurokawa et al 2010). Recently, the Food and Agricul-
scheme, the state government provides financial assistance ture Organization (FAO) launched One Country One Product
(up to 90%) for infrastructure facilities, like technical research (OCOP), where the organisation identified special agricultural
and development centres, common processing centres, testing products for countries to promote resilient production sys-
labs, packaging, labelling, barcoding facilities, etc. With market- tems for achieving its Strategic Framework and Sustainable
ing management, the MDA scheme aims to achieve fair prices Development Goals. However, the motivation behind the launch
for the MSME and artisanal products and explore the demands of ODOP programmes has been different for different countries.
GLOBAL VALUE CHAINS
The motivation behind the ODOP in various countries can be Figure 1: Share of Various District Brackets in India’s Exports, 2023–24
categorised into two: (i) economic development for increasing 45
38.2
export basket, boosting MSMEs, industry, and product develop- 40
Share in total exports (%)

ment and (ii) social inclusion and community development 35
30
(FAO 2022). Many Latin American countries have used the
25
ODOP strategy for social development, whereas countries from 20
Asia and Africa have used it to boost their economic growth 15 15
9.1 6.9 7.6
(Gaur 2024). Some countries have used it for both economic 10
4.7 5.2
5.5 5.1
and social development. In the case of Japan, for instance, the 5
0.8
0
strategy first aimed at increasing income and improving rural
1–10
76–100
11–20
21–30
31–40
41–50
51–75
101–150
151–300
301–681
development. Afterwards, at the national level, the strategy
aimed at the development of new products and export diversi-
fication. The Japanese curated the OVOP strategy primarily on District brackets (No of districts)
Around 2% of the exports are classified under unspecified, hence are not included in the figure.
three pillars—local yet global, self-reliance and creativity, and Source: Author’s estimation based on DGCI&S, MoCI, Government of India (2024).
human resources development (Hirohata 2013) providing heavy
reliance on endogeneity with local and private sector partici- Delhi, and Rajasthan. The top three states constituted 56% of
pation rather than government support and subsidies. India’s exports of that year. Such skewness is also witnessed
The ownership of locals and the private sector with self-reli- within some of these states. For example, in the case of
ance in the Japanese OVOP strategy has been the main ingredi- Gujarat, the top five districts contribute 75% of the state’s
ent of sustaining the programme in the long run. Many studies exports. Similarly, in Haryana, two-thirds of the state’s exports
(Kurokawa et al 2010; Issa and Lawal 2014; Ndione and Suzuki come from three districts, namely Gurugram, Faridabad, and
2019) have identified factors, such as private investment, Karnal. From an overall perspective, 38.2% of India’s mer-
community participation, self-reliance, technology, natural chandised exports are accounted for by the top 10 districts in
endowments, the role of MSMEs, etc, determining the success 2023–24. This share was similar in 2021–22 (Gaur 2024). Nearly
of the ODOP programme. Lack of endogeneity, with govern- half of India’s exports are exported by the top 18 districts and
ment financial subsidies and low local participation, has been the top 50 districts of the nation contributed to 75% of India’s
identified as the main cause for the ineffectiveness of One exports in 2023–24 (Figure 1).
Tambon One Product in Thailand in 2000 (Anh 2013). However, The skewness of the merchandise exports is vividly observ-
there are countries where the inclusion of financial subsidies able in Figure 1. Though the top 10 districts contributed to
by the government has also been successful just as in the case nearly 38% of the nation’s exports, the subsequent 10 districts
of some states in India. cover only 15% of the exports, which is less than half of the
above share. The share further reduces to 9%. The last 300-
Role of Districts in India’s Export Sector plus districts, that is, more than half of the number of districts,
India’s stronghold on exports has been attributable to various only constitute less than 1% of India’s exports in 2023–24. The
factors, like the diverse export basket, improved logistical government aims to reduce such variations in districts’ export
measures, government initiatives, etc. This has helped India performance through the DEH initiative with the active partici-
fulfil the increasing global demand and made it export resilient pation of relevant stakeholders to balance economic growth at
despite repeated global challenges. India’s merchandised exports the micro level. The identification of competitive products in
have increased nearly sevenfold from $63.8 billion in 2003–04 each district is important for the specific and targeted orientation
to $437.1 billion in 2023–24. The exports witnessed a sharp rise of the DEH, as not every district is competent to produce all
during the global buoyancy (2003–07), which grew at more goods. Gaur (2023) identified the number of HS chapters where
than 25% per annum. With the emergence of the global financial the exported goods from each district are covered and the
crisis, this growth rate was reduced to 5% per annum during number of exporting countries where the goods have been
the first phase of the recession (2008–16), which bounced to 6.4% exported. Many districts of Jammu and Kashmir, Ladakh,
during the second phase of the recession (2017–23) despite Northeast, and Central India are less diversified in their exports
global disturbances like COVID-19, global supply chain disrup- with limited natural endowment and their economic linkages,
tions, and several geopolitical crises. This trend has shown the especially exports, are limited with few partner countries.
export resilience of the Indian economy in comparison to many However, many districts are not top exporting ones but are
developed and developing economies of the world. However, exporting goods at 8-digit HS classification contributing more
at the state level, the exports of merchandised goods are con- than 75% of India’s exports of the commodity. For example,
centrated in a few states and union territories of the country. Ri Boi in Meghalaya is exporting more than 80% of India’s agar-
It has been observed that, in 2023–24, nearly 90% of India’s wood and can be developed as an exporting hub for that product.
exports were concentrated in the top 12 states and union territo- Many such low-hanging fruits can be focused and prioritised
ries. These are a mix of coastal and hinterland regions, including to boost exports with targeted policy interventions. The DEH
Gujarat, Maharashtra, Tamil Nadu, Karnataka, Uttar Pradesh, initiative gave the local stakeholders an edge over the ODOP
Andhra Pradesh, Haryana, Telangana, Odisha, West Bengal, programme to choose more than one product per district. There
GLOBAL VALUE CHAINS
are many districts in India where the districts are endowed with Andhra Pradesh, Gujarat, Kerala, Maharashtra, Puducherry and
raw materials that can produce more than one product and be ex- West Bengal. In this case, only three states have more than
ported competitively. Except for union territories, like Chandigarh, half of the districts categorised as port districts. And three,
Dadra and Nagar Haveli, all the states and union territories have where the port district export share is less than 50% of the
been exporting more than a single product competitively since state’s overall exports in 2023–24. This group includes states
2021 (Gaur 2023). In the latest list of identified products under like Karnataka, Odisha and Tamil Nadu. The role of ports in
the DEH initiative, more than 500 districts have identified more state exports is visible with a high share of exports in 10 out of
than one goods or services with a special focus on the exporting 13 coastal states and union territories.
sector. However, these identified goods and services are not classi- Similar to the inter-district disparity, a disparity among the
fied under the international trade or service classifications. port districts is also observable, whether it is between port and
Also, there are various examples where the list of identified non-district or major port districts and minor port districts.
goods by the District Export Promotion Committees (DEPCs) Among the port districts, a minor port district of Jamnagar
does not match the top exporting commodities. For example, contributes a larger export share than any other major port in
in the case of Amreli, cotton yarn, portland cement, and oil seed India. Minor port districts like Surat, Mumbai Suburban, Baruch
are not included as DEH potential products. Similarly, Nicobar and Thane are exporting more than major port districts like
is exporting jewellery, trunks, and aluminium bars instead of Ernakulam, Vishakhapatnam and Kolkata. However, within
identified marine products such as tuna, coconut and coconut- the minor port districts, the majority of export share (25%) is
based products and tourism. On the other hand, there are contributed by seven districts whereas 50 other minor port dis-
cases, such as in Mumbai, where identified products match tricts constitute only 6.7% of India’s total exports. Therefore, a
with top exporting commodities. However, the identification high share of exports in a district cannot be attributable only
of DEH products at the international trade classification and to the presence of a major port or minor port. Similar is the case
disaggregated levels would help the local manufacturers, with port and non-port districts. Even though Ahmedabad,
DEPCs and State Export Promotion Committee (SEPC) mem- Gautam Buddha Nagar, Kanchipuram, and Pune are not port
bers to locate and map the products with potential markets, districts under the top 10 exporting districts, incentives under
tariff barriers, and non-tariff barriers associated with it in the the special economic zones and benefits of industries clusters
international databases. have also boosted the exporting capabilities of these districts.
Moreover, when comparing port and non-port districts,
Port versus Non-port District Exports around 48% of India’s exports were exported by port districts
One of the many reasons assumed for the inter-district disparity in 2023–24. This value has also been similar in the last two
is the presence of ports in the district. It is believed that the years. The number is further reduced to 16% considering only
districts with ports are more connected with the international the major ports district. The share of exports of districts con-
market as they require less cost and time to export than hinter- stituting minor ports of India is around 32%. This falls to
land districts. While analysing the district-level data at the port around 20% excluding the petroleum oil exports from
and non-port categorisation, this paper has considered all major Jamnagar. The top exporting district of India is Jamnagar,
and minor ports of India. All 13 major ports and more than 200 which is also a port district. In 2023–24, it exported nearly 13%
minor ports fall under 70 districts and 13 states of the country. of India’s exports, out of which 12.25% of India’s total exports
These 13 states can be classified into three groups. One, where the from Jamnagar accounted for non-crude petroleum oil, that is,
entire state and union territories export at port-district, for exam- heading 2710 in HS trade classification, including motor gasoline
ple, Andaman and Nicobar, Goa, Daman and Diu and Lakshad- (27101241) and automotive diesel fuel (27101944) at 8-digit HS
weep with the share of exports equal to 100% (Table 1). Two, codes. The rest of the share (6.9%) of India’s non-crude petro-
where the port district share accounts for 50% or more like leum oil (HS 2710) was exported by 234 districts, where the
Table 1: Contribution of Port District in State Exports, 2023–24 value of exports ranges from $7.9 billion in Devbhumi Dwarka
States/Union Territories Exports in Port No of Port Port District Port District in Gujarat to $1 in Nagaur in Rajasthan. More than half of
Districts Districts (Unit) Share in Total Share in Total No
($ Million) State Exports (%) of Districts (%) India’s exports are constituted by non-port districts. Hence, a
Andaman and 1.00 3 100.0 100.0 mixture of infrastructure and connectivity facilities, tax bene-
Nicobar fits and incentives, and other trade facilitation measures are
Andhra Pradesh 16,279.77 8 82.4 61.5
Daman and Diu 84.36 2 100.0 100.0
required to boost exports at the district level.
Goa 2,392.11 2 100.0 100.0
Gujarat 1,13,087.23 16 84.1 48.5 Export Status of DEH-focused Sectors
Karnataka 7,147.69 3 26.8 10.0
Kerala 7,717.33 9 94.4 64.3
Lakshadweep 0.04 1 100.0 100.0 Micro, small and medium enterprises: One of the objectives
Maharashtra 42,018.27 7 62.5 19.4 of the DEH initiative is to expose the MSMEs to the international
Odisha 1,727.46 6 14.5 20.7 market. The concern with these manufacturers is that being
Puducherry 512.99 2 99.2 50.0 small entrepreneurial units, it gets difficult to export goods
Tamil Nadu 11,068.28 8 25.4 25.0
West Bengal 6,316.36 3 54.1 13.0 and services at a competitive rate and capture the international
Source: Author’s estimation based on DGCI&S, MoCI, Government of India (2024). market. They lack infrastructure, finance, and easy availability of
GLOBAL VALUE CHAINS
raw materials for bulk orders. Consequently, they also need goods from the agriculture sector. In value terms, the top 10
support for packaging, branding, and post-sale services to agriculture export districts contributed around 30% of India’s
establish a reputation with international buyers. The share of agriculture trade in 2023–24. This list includes districts like
MSME product exports in India experienced a fall from 49.4% Kutchh (cane or beet sugar and chemically pure sucrose and
in 2020–21 to 43.6% in 2022–23 (Press information Bureau rice), Karnal (rice), East Godavari (rice and cane or beet sugar
2023b). This share slightly increased to 45.7% in 2023–24. The and chemically pure sucrose), Guntur (pepper of genus piper
composition of MSME product exports of India in 2023–24 is and unmanufactured tobacco refuse), Mahesana (seeds of
highly skewed to the manufacturing sector accounting for anise, badian, fennel, coriander, cumin, caraway, or juniper),
98.3% of total MSME product exports. This is nearly 67.4% of Ahmedabad (rice), West Godavari (crustaceans), etc. The top
total manufacturing exports in the same year. five states, namely Gujarat, Andhra Pradesh, Maharashtra,
At the micro level, 19 states and union territories have ex- Haryana, and Uttar Pradesh, contributed 63.3% of India’s
ported MSME products accounting for more than half of their overall agriculture exports. The comprehensive management
total exports in 2023–24. The share ranges from 100% in the of natural resources through the DEH initiative would boost
case of Mizoram to 50.4% in Madhya Pradesh. At the district the agriculture exports in various districts which further can
level, around 228 districts are highly dependent on exporting be utilised in establishing value chains among the districts and
MSME products (with a share greater than 50% of their overall states for exports to the international markets.
exports). Out of these 228 districts, 28 export only MSME-classi-
fied products. The number of districts increases to 66 out of 442 Toy export clusters: Indian toy exports have seen a remarkable
when considering only the manufacturing sector. In the case growth in the international market with a six-times increase in the
of mineral sector, three states/union territories, namely Chan- last two decades from $90 million in 2003–04 to $523.3 million in
digarh, Puducherry, and Sikkim export more than 70% of their Table 2: Top Exporting Districts in Agriculture HS Chapters in 2023–24
mineral exports in the MSME product bracket. There are 47 dis- Chapter Chapter Description District State Exports
tricts where MSME mineral exports are greater than half of their ($ Million)
overall mineral exports to the world. The share of MSME 1 Live animal Nashik Maharashtra 6.78
2 Meat and edible meat offal Aligarh Uttar 644.29
products in the agriculture sector is quite low. The MSME agri- Pradesh
products are dominated in only 27 districts and states like 3 Fish and crustaceans, West Andhra 792.17
Mizoram and Nagaland entirely depend on MSME for their molluscs Godavari Pradesh
agricultural exports. Though the classification of MSME prod- 4 Diary produce: birds, eggs Gandhinagar Gujarat 92.56
5 Products of animal origin Kolkata West Bengal 74.52
ucts by the ministry, at present, is at the heading level of HS
6 Live trees and other plants Pune Maharashtra 21.66
trade classification, which overestimates the MSME contribution bulb
to the total exports, the estimates highlight the importance 7 Edible vegetables and certain Nashik Maharashtra 374.00
of MSME industries to increase the export potential of the roots
districts for regionally balanced growth. 8 Edible fruits and nuts: peel Nashik Maharashtra 420.72
or melon
9 Coffee, tea, mate and spices Guntur Andhra 708.98
Agriculture: The agriculture sector in India’s exports accounts Pradesh
for the least share among the three broad economic sectors in 10 Cereals Karnal Haryana 2,351.57
trade in goods. It accounted for 11.1% of India’s overall exports, 11 Products of the milling Ahmedabad Gujarat 82.28
industry
whereas minerals and manufacturing sectors accounted for 12 Oil seeds and oleaginous fruits Mahesana Gujarat 327.02
21.5% and 67.4%, respectively, in 2023–24. States like Assam, 13 Lac; gums, resins and other Jodhpur Rajasthan 141.93
Manipur, Tripura and union territories like Andaman and vegetables
Nicobar and Lakshadweep export more than 50% of their total 14 Vegetable plaiting materials Guntur Andhra 7.33
Pradesh
exports from the agriculture sector. However, these districts
15 Animal or vegetable fats Kutchh Gujarat 687.77
and state and union territories are not featured as the top and oils
exporters at the national level in different agriculture HS chapters 16 Preparations of meat and fish West Andhra 172.69
(Table 2). At the HS chapter level, Guntur district in Andhra Godavari Pradesh
17 Sugars and sugar confectionery Kutchh Gujarat 1,257.17
Pradesh is the largest exporter of agricultural goods in Chap-
18 Cocoa and cocoa preparations Pune Maharashtra 77.67
ters 9, 14, 21 and 24. This is followed by Nashik which is the 19 Prep of cereals, flour, starch, Ranga Reddy Telangana 75.35
largest exporter of live animals (Chapter 1), edible vegetables etc
(Chapter 7) and edible fruits and nuts (Chapter 8). Other districts, 20 Prep of vegetables, fruit, Mahesana Gujarat 107.52
nuts, etc
like West Godavari, Pune, Mahesana, and Kutchh also appeared
21 Miscellaneous edible Guntur Andhra 100.80
more than once as the top exporting districts in agriculture preparations Pradesh
chapters in 2023–24. 22 Beverages, spirit and vinegar Aurangabad Maharashtra 44.84
For all 24 agriculture chapters, only 15 districts are identi- 23 Residues and waste from Indore Madhya 395.18
food industries Pradesh
fied as top exporting districts. However, the list of districts
24 Tobacco and manufactured Guntur Andhra 650.60
increases at further disaggregation. Around 32% of exporting tobacco Pradesh
districts in 2023–24, that is, 218 districts exported 50% of the Source: Author’s estimation based on DGCI&S, MoCI, Government of India (2024).
GLOBAL VALUE CHAINS
2023–24. The sector has grown at 9.2% per annum for the last the quality of the goods/services under the ODOP scheme. With
two decades. The global financial crisis in 2008 did not have much the high-quality requirements in the foreign market, it is im-
impact on Indian toy exports. During the global buoyancy, toy perative to maintain the product standards and meet the regu-
exports grew at 10.2% per annum, whereas in the first half relations for exporting the product to the destination market.
cessionary period (2008–16) it grew at 9.6%. The second phase Further, product aggregation is quite lacking in many MSME
of the recession (2017–23) did slow down the toy exports, how- firms. There have been instances that a single MSME firm has
ever, the magnitude of growth has stayed well above 9% per an- been unable to meet the huge demand of the importer due to
num. At a disaggregated level, the top 10 states and union territo- supply constraints. The DEPCs and SEPCs, under the DEH initia-
ries constituted 96.4% of the country’s toy exports in 2023–24. tive, should highlight the need for product aggregation at the
The largest exporting states are Uttar Pradesh, where the share district and state levels not only for exporting to the destination
has increased from 13.7% in 2003–24 to 28.1% in 2023–24, market but also for local transportation. Apart from the quality
Maharashtra with an increasing share to 17.5% from 4.7% and checks and product aggregation, it is also important to focus
Punjab with a decreasing share of 37.7% in 2003–04 to 17% in on the product packaging to meet global standards. Therefore,
2023–24. At the district level, Jalandhar, Meerut, Gautam Buddha while providing adequate facilities for ensuring product quality
Nagar, Pune, Raigad, and Belagavi are the top six exporting dis- with standard testing labs, certifications, etc, the DEPCs and
tricts, contributing nearly half of India’s toy exports in 2023–24. SEPCs should also provide access to modern technologies, infra-
More than 98% of the goods in the toy sector are considered structure, and skilled manpower for modern and high-quality
as MSME products. The MSME toy clusters, based on their ex- packaging. An institutional mechanism similar to star export
ports, are located in four places in India. In the northern part houses may be explored which not only aggregates the goods
of the country, one in Punjab, with Jalandhar and Amritsar as from various MSME producers but also ensures quality and
major exporting districts, and the other in Delhi–NCR region packaging checks on the exported goods.
with districts like Meerut, Gautam Buddha Nagar, Gurugram,
Sonipat, Panipat, and several districts of Delhi. There are some Infrastructure facilities: Besides the establishment of stand-
more districts like Jaipur, Belagavi, etc, where MSME toy exports ard testing labs, research and development centres, capacity-
were more than $19 million in 2023–24. However, they are building centres, etc, there is a dire need for ease of goods
singular districts in their respective states. The other clusters transportation from the sellers to the buyers. The lack of con-
can be seen in Maharashtra, with districts like Pune, Satara, nectivity infrastructure increases the time and cost of export-
Raigad, Mumbai, Thane, etc, and in Karnataka and Tamil ing the product, which is expected to be quite high in the case
Nadu border in districts like Bengaluru rural, Ramanagara, of perishable items. Though there is no correlation between
Krishnagiri, and Vellore. These districts can be developed as high exports and port district, as discussed in the earlier sections,
toy clusters at the district- and state-levels with various incen- the transportation of goods to destination markets requires
tives to increase their outreach in the international markets, ease of connectivity whether it is with seaport, airport, or road
which can be achieved with the DEH initiative. transportation. This is very relevant for districts that are land-
locked and lack connectivity facilities with inland waterways
Sustenance of DEH in the Long Run: The Way Forward and ports. The establishment of modern dry ports and ware-
The DEH initiative by India has been layered on three pillars: house facilities with technology-enabled services would help
Atmanirbhar Bharat (self-reliance), Local Goes Global, and to boost exports from the hinterland. However, for infrastructure
human resources development, which is supported by many sustenance, it is essential to note the role of the private sector
schemes and programmes, like Make in India, Skill India, etc. in providing the necessary investment for infrastructure de-
The DEH initiative, quite similar to the Japanese OVOP strategy, velopment with the government.
aims to provide the necessary push to the local economies by
enhancing the competitiveness of the MSME, farmers, and arti- Encouragement to local content and skills: One of the factors
sanal workers with the continuous support of DEPCs and SEPCs. that made Japan’s OVOP strategy a success was the endogeneity
However, it is also important to make the initiative sustainable of the programme. There have been instances in the world
in the long run where the government has a lesser role to play where excessive government financial support through subsi-
and the local and private players continue to grow together. dies has made the locals more dependent on the government
Notably, based on the experience of ODOP, many small manu- and take less initiative by themselves. This has affected the
facturers are facing bottlenecks in exporting to the interna- long-term objective of the programme. However, in the case of
tional market and that can be addressed through the DEH ini- the DEH initiative, the government has ensured the active
tiative. Some of the challenges are as follows. participation of the locals, through local leadership, in all
different activities of the implementation of the initiative.
Product-related challenges: The districts have identified the Additionally, the DEPCs and SEPCs should also work towards
competitive product to be exported to the international market motivating the locals by encouraging local content, enhancing
and are also exposed to the needs and demands of the partner the capacity of the locals in various stages of production, like
country through various government support. However, in many modern product packaging, certifications, etc, and incentivising
cases, manufacturers have failed or are struggling to maintain the locals with rewards and on-the-job training. Production of
GLOBAL VALUE CHAINS
the goods that the locals are competitive and sometimes also Strategy Reports have been prepared which have identified
marked as GI products is very much embedded in the DEH various products for exports, their potential markets, trade
initiative. Transferring the responsibilities of the DEPCs and barriers, domestic challenges they face, etc. However, the
SEPCs to the local leaders, after the completion of training in identified products and services, available in the public do-
the long run, may benefit the DEH sustenance in India. main, are in the broader goods and services category and not
mapped with the goods and services trade classification. Map-
Institutional coordination: A major hindrance that a govern- ping of the products at the disaggregated level of trade classifi-
ment initiative with an institutional framework at various levels cation would help the exporter in identifying specific trade
faces is the ineffective coordination between them. The export and non-trade barriers and global trade trends which would
promotion committees at the district and state levels and the further support the manufacturers in linking local production
union government are formed to decentralise export promo- with international trade requirements. Carving out an ecosys-
tion and micro-level discussions on the needs, demand- and tem where producers get information about the product easily
supply-side challenges, potential, and opportunities of the would establish a monitoring mechanism where trade and
identified goods and services under DEH. However, there are production are interlinked and manufacturers endogenously
instances where they are working in silos, which affects the decide the production and export levels.
entire institutional mechanism and raises difficulties in the Such a comprehensive institutional mechanism with moti-
working system, communication gaps, and bureaucratic hurdles vated local producers and other agents at different levels
with delays in decision-making, data sharing, and resource would provide a stronghold for better implementation of the
allocation. The vertical integration between the locals/manu- DEH initiative. The micro-level management of district exports
facturers, DEPCs, SEPCs, and the union government and the through the DEH initiative provides the necessary financial,
horizontal integration among different DEPCs and SEPCs for logistical, and infrastructural support to the MSME, farmers, and
export cluster development is needed from the apex, to minimise artisanal workers, thus promoting exports at the first level of
fragmented efforts at various levels, with policy alignment for the ladder. There are instances from Canada and China, where
better institutional coordination and success of DEH. the role of provincial governments has been highlighted in their
export strategy and trade agreements. The increased stake of
Mapping of identified DEH products with trade classification: districts in FTP development, through export strategies, and
The DEPCs and SEPCs have completed an exceptional task in their engagement in Free Trade Agreement negotiations, etc,
identifying the goods and services for export promotion in with DEH implementation, would boost the product-specific
nearly 733 districts of the nation. The formation of DEPCs and exports required for rising competition in the global market.
SEPCs is expected to mitigate production and export hindrances The DEH initiative, under the FTP 2023, can meet the $2 trillion
while providing the required infrastructure and marketing export target by 2030 by connecting the local production hubs
assistance to the exporters at the district level. As per the latest for the global market (local goes global) through self-motivated
reports, all DEPCs and SEPCs are formed and 28 State Export district exports (self-reliance) for Atmanirbhar Bharat.
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GLOBAL VALUE CHAINS
Agricultural Exports and Trade Policy Responses

Leveraging New Opportunities and Addressing
Persisting Challenges
Sachin Chaturvedi
I
The global economy has been witnessing a continued n the last two decades, global trade has gone through a
rise in agricultural trade over the last two decades. There major transformation, with the rising share of the global
South across manufacturing and agriculture, in addition to
is a distinct shift towards demand for high-value
the service sector that has traditionally been a stronghold of
processed agricultural products for consumption, with the developing world. In agriculture trade, the dominance of
India’s processed food imports rising more than 20 times the developed economies has seen a remarkable decline. Their
between 2003 and 2023. The rise of intra-industry trade share in global agricultural exports fell from nearly 63% to
55% in the last two decades (2003–23). The rise of the Indian
in processed agricultural products has been a central
economy has provided resilience to the sustenance of growth
factor driving agricultural trade among countries of the in the global South.
global South, and particularly in India. Continued efforts India’s robust growth over the past three and a half decades
are required for enhancing the share of processed food has been significantly driven by its trade sector, with agricul-
ture playing a vital role. The latest foreign trade policy (Minis-
in the Indian export basket.
try of Commerce and Industry 2023) sets a target of $2 trillion
for exports by 2030, including $1 trillion for goods exports.
Moreover, projections for 2047 place the trade sector at around
$21 trillion (NITI Aayog 2023). While these targets are ambi-
tious, they are attainable with the implementation of effective
trade policies. To achieve these goals, India’s agricultural
trade must align with the trends in global demand and supply.
The agricultural trade sector in India has consistently main-
tained a positive trade balance over the years, although it re-
mains smaller than the manufacturing sector. Notably, the
sector demonstrated resilience during the global recession.
The recent impressive agricultural export growth is largely
driven by sub-sectors such as fruits, vegetables, and processed
foods. India has the potential to further enhance its presence
in the Bay of Bengal Initiative for Multi-Sectoral Technical and
Economic Cooperation (BIMSTEC) region, where it already
holds a significant trade surplus in agriculture.
Globally, the Indian share in certain agricultural products is
commendably high, though its success is concentrated in a lim-
ited basket of goods and is focused on a small number of export
destinations. To strengthen its position in global agricultural
trade, India must diversify its range of agricultural exports
and move up the value chain, especially in processed foods, to
increase its global economic footprint. The Agriculture Export
Policy (AEP) 2018 provides a road map for achieving several of
these objectives. Its sincere implementation has led to evolving
synergistic and organic linkages with the wider economic eco-
Sachin Chaturvedi (sachin@ris.org.in) is director general at the system, like start-ups, new technology clusters, and invest-
Research and Information System for Developing Countries, ment and financing frameworks. This paper captures some of
New Delhi.
these issues in detail.
GLOBAL VALUE CHAINS
Global Trade in Agriculture 85% by 2023. These countries also represented 84% of glob-
The global economy experienced a sharp rise in agricultural al agricultural imports in 2003, but their share dropped to
trade between 2003 and 2023. There are several factors that 80% by 2023.
are being ascribed to this remarkable growth. Continued As illustrated in Table 1, in 2023, global agricultural imports
trade liberalisation in the agriculture and food sector, apart amounted to $25.7 trillion (cost, insurance and freight), while
from the growing convergence and mutual recognition of exports were reported at $25.1 trillion (fee on board). It was
standards through sanitary and phytosanitary (SPS) meas- observed that agricultural trade expanded much faster than
ures and the technical barriers to trade (TBT) measures have overall global trade during this period. Between 2003 and
been contributory factors. With rising global conflicts, food 2023, global agricultural trade increased by 3.4 times, whereas
security related demands have given a boost to trade, while overall trade rose by only 2.9 times.
at the same time, rising income levels and the quest for var- The share of agriculture in global trade was reported at
ied food products have also pushed the demand upwards. 7.8% in 2003, which subsequently increased to 9% in 2023.
Self-sufficiency is no more a parameter for engagement in Agricultural exports have performed better than imports. The
food trade. More and more countries are engaging in ex- share of agricultural imports increased from 8% in 2003 to 9%
ports and imports, or both, in the agriculture sector. Global in 2023, while the corresponding figures for exports were at
trading patterns in the agriculture sector have shifted noticea- 7.6% and 9.1%, respectively. It is evident that the surge in global
bly. In 2003, the top 40 exporting countries accounted for agricultural trade has been driven by exports.
87% of global agricultural exports, a share that declined to The growth of global agricultural trade has demonstrated
Table 1: Agriculture Trade Relative to Total Global Trade ($ billion) considerable resilience during the global recession. Before the
Year Agriculture Total Global Trade recession, global buoyancy had brought optimism, following
Imports Exports Total Imports Exports Total
the Asian financial crisis. Between 2003 and 2007, global trade
2002 621.1 576.9 1,198.0 7,704.9 7,581.9 15,286.8
(8.1) (7.6) (7.8) expanded in double-digits, marking a growth rate of 15%,
2003 707.6 659.7 1,367.3 8,847.4 8,640.3 17,487.7 while agricultural trade registered a growth rate of 11.9%,
(8.0) (7.6) (7.8) trailing behind. The situation changed significantly during the
2004 795.9 737.6 1,533.5 10,569.4 10,246.1 20,815.5
(7.5) (7.2) (7.4) recession, where agricultural trade proved to be more resilient
2005 849.4 795.0 1,644.4 11,943.1 11,504.5 23,447.5 in the goods sector. In the first phase of the global recession
(7.1) (6.9) (7.0) (2008–16), overall trade entered a zone of negative growth,
2006 922.8 877.4 1,800.1 13,674.7 13,170.8 26,845.5
(6.7) (6.7) (6.7) while agricultural trade continued to show positive growth.
2007 1,100.8 1,043.2 2,144.0 15,597.5 14,960.1 30,557.5 Agricultural exports and imports grew at 2.6% and 2%, re-
(7.1) (7.0) (7.0) spectively. In the second phase of the recession (2017–23), the
2008 1,332.3 1,254.0 2,586.3 17,882.0 17,128.1 35,010.1
(7.5) (7.3) (7.4) global economy partially recovered, and global trade also grew
2009 1,174.3 1,128.0 2,302.3 13,738.4 13,400.9 27,139.3 moderately. During this period, agricultural trade expanded
(8.5) (8.4) (8.5) at a rate of 5.2%, with exports growing much faster than im-
2010 1,295.3 1,260.5 2,555.8 16,806.8 16,309.7 33,116.5
(7.7) (7.7) (7.7)
ports. COVID-19 marked a significant moment for global agri-
2011 1,578.0 1,532.9 3,110.9 20,063.3 19,597.6 39,660.9 cultural trade, as the share of agriculture in exports increased
(7.9) (7.8) (7.8) to 9.6%, and in imports to 9.4% in 2020. Although the relative
2012 1,565.9 1,565.3 3,131.2 19,964.7 19,757.6 39,722.3
(7.8) (7.9) (7.9)
contribution of agriculture to global trade is small, it has been
2013 1,633.9 1,657.4 3,291.2 20,314.2 20,466.7 40,780.9 steadily expanding.
(8.0) (8.1) (8.1) It is interesting to note that the respective shares of the
2014 1,697.6 1,699.6 3,397.2 20,464.2 20,387.9 40,852.1
(8.3) (8.3) (8.3)
developed and developing countries in trade have also evolved
2015 1,547.8 1,522.9 3,070.7 17,852.9 17,703.6 35,556.5 over the last two decades. The share of agriculture in trade—
(8.7) (8.6) (8.6) both exports and imports—has been consistently higher in
2016 1,561.7 1,545.8 3,107.5 17,402.3 17,147.9 34,550.3
developed economies (Table 2, p 44).
(9.0) (9.0) (9.0)
2017 1,724.0 1,671.5 3,395.5 19,478.5 18,762.2 38,240.7 However, the share of developed countries in global agri-
(8.9) (8.9) (8.9) culture trade has consistently declined, while that of the
2018 1,773.5 1,743.6 3,517.1 21,472.4 20,495.6 41,968.0
global South has gone up. Very often, it is presumed that this
(8.3) (8.5) (8.4)
2019 1,757.8 1,740.4 3,498.2 20,738.4 20,066.9 40,805.3 jump is largely led by China. Our analysis clearly shows that
(8.5) (8.7) (8.6) this is not the case. The share of emerging economies, least
2020 1,803.6 1,818.4 3,622.0 19,097.9 18,916.5 38,014.4 developed countries, and at the macro level, that of the global
(9.4) (9.6) (9.5)
2021 2,106.0 2,111.7 4,217.6 24,096.3 23,746.1 47,842.4 South has gone up, even if China is excluded. As data shows,
(8.7) (8.9) (8.8) the share of the global South in agriculture exports increased
2022 2,316.0 2,281.7 4,597.7 27,314.3 25,733.3 53,047.6 from 37.1% in 2003 to 44.6% in 2023, while the share in imports
(8.5) (8.9) (8.7)
2023 2,307.4 2,288.7 4,596.1 25,740.2 25,144.1 50,884.3 increased from 32.3% to 44.5% during the same period. If
(9.0) (9.1) (9.0) China is excluded, the share of the global South declines only
Figures in parenthesis are the percentage share.
Source: Agriculture Trade Database, Research and Information System for Developing
marginally. In agriculture exports, the share of the global
Countries (RIS), based on Comtrade, United Nations Statistics Division. South stands at 40.25% in 2023 whereas in the case of imports
GLOBAL VALUE CHAINS
it stands at 34.65%. Excluding India, the share in exports Notably, India maintained a trade surplus in agriculture
stands at 42.2% in 2023, while in imports stands at 43.46%. throughout this period.
However, the share of agriculture in India’s trade basket has
India’s Trade in Agriculture seen a slight decline in 2023 as compared to 2003, likely due to
Since the green revolution, India has remarkably improved its the faster growth of India’s overall trade relative to agricultural
global trade engagement, which got further impetus after the trade. A significant shift is also occurring within the agricul-
reforms of 1991. India has been an effective player in the global tural trade sector itself. The share of upstream agricultural
trade of agricultural products, demonstrating dominance in trade has been decreasing, while the shares of midstream and
certain categories and consistently maintaining a trade surplus downstream agricultural trade have been on the rise. In 2023,
with the world economy. There is a significant potential for upstream agricultural trade accounted for 45.5%, midstream
India to expand its market access across more countries for its for 37.3%, and downstream for 17.2% of the overall agricultural
agricultural exports. trade of India. Given the steady growth in midstream and
India’s participation in global agricultural trade has im- downstream segments within total agricultural trade, it is an-
proved significantly in both imports and exports. India’s share ticipated that agricultural trade will soon outpace the growth
of global agricultural imports increased from 0.56% in 2003 to rate of overall global trade.
1.37% in 2023, while its share of exports rose from 1.05% to During periods of economic buoyancy (2003–07), global
2.14%. As Table 3 shows, India’s agricultural exports grew agricultural trade doubled. India’s agricultural imports did not
almost sevenfold, from $7 billion in 2003 to $49 billion in follow this rapid expansion, growing annually at 15%, while
2023, while imports rose from $3.9 billion to $31.7 billion. exports grew at 19.5%. In the initial phase of the global reces-
Table 2: Agricultural Trade of Different Economies ($ billion) sion (2008–16), the food sector outpaced overall export
Year Developed Countries Global South Global South World growth. Although agricultural export growth picked up during
excluding China
Import Export Import Export Import Export Import Export the second phase of the recession (2016–23), import growth
2003 418.91 373.18 200.17 220.50 184.66 199.86 707.6 659.7 declined significantly during this period. India’s export share
(8.3) (8.2) (7.8) (7.6) (8.6) (8.1) (8.0) (7.6) in world agriculture grew more sharply than its import share
2004 475.04 422.26 221.97 242.86 200.18 220.38 795.9 737.6
(7.9) (7.8) (7.2) (7.0) (7.9) (7.6) (7.5) (7.2) during the global economic buoyancy, a trend that was reversed
2005 508.35 448.75 236.03 269.11 213.84 242.65 849.4 795.0 during the recession (2008–23).
(7.6) (7.6) (6.7) (6.6) (7.5) (7.3) (7.1) (6.9) At the level of specific agriculture commodities, India has
2006 551.36 491.73 257.03 299.49 233.41 269.27 922.8 877.4
(7.2) (7.3) (6.3) (6.3) (7.1) (7.1) (6.7) (6.7) achieved the highest global ranking in the export of rice (both
2007 643.53 588.72 317.22 353.14 284.02 317.68 1,100.8 1,043.2 basmati and non-basmati). The Indian share in the global
(7.5) (7.7) (6.7) (6.6) (7.5) (7.7) (7.1) (7.0) exports of basmati rice stands at 53% and that of non-basmati
2008 747.67 702.34 418.82 431.50 368.41 392.67 1,332.3 1,254.0
(7.8) (8.3) (7.2) (6.7) (7.9) (7.8) (7.5) (7.3) rice at 45%. They add to 20% and 21% of India’s agriculture
2009 661.23 620.67 370.98 401.16 324.71 362.94 1,174.3 1,128.0 exports, respectively. India also holds an 18.1% share in the
(9.3) (9.6) (7.9) (7.7) (8.8) (9.1) (8.5) (8.4) global exports of sesame seeds; however, it only accounts for
2010 700.58 673.16 446.26 465.78 385.25 418.15 1,295.3 1,260.5
(8.3) (8.9) (7.3) (7.0) (8.2) (8.2) (7.7) (7.7)
1% of the Indian export basket. For other products listed in
2011 834.78 803.64 565.00 580.01 488.00 521.39 1,578.0 1,532.9 Table 4 (p 45), India occupies a double-digit ranking, with a
(8.4) (9.0) (7.6) (7.1) (8.6) (8.3) (7.9) (7.8)
2012 814.09 804.65 580.26 606.37 488.11 545.28 1,565.9 1,565.3 Table 3: India’s Agricultural Trade
(8.4) (9.2) (7.6) (7.1) (8.2) (8.4) (7.8) (7.9) Year India’s Agricultural Share of India in Global Share of Agriculture in
2013 851.74 860.86 607.91 629.11 507.11 563.75 1,633.9 1,657.4 Trade ($ Billion) Agricultural Trade (%) India’s Tade Basket (%)
(8.7) (9.5) (7.6) (7.2) (8.2) (8.6) (8.0) (8.1) Imports Exports Imports Exports Total Imports Exports Total
2014 872.94 878.87 641.09 646.43 532.90 577.07 1,697.6 1,699.6 2003 3.9 7.0 0.56 1.05 0.80 5.50 11.90 8.37
(8.8) (9.7) (8.0) (7.4) (8.7) (9.1) (8.3) (8.3) 2004 4.4 8.3 0.55 1.13 0.83 4.45 11.12 7.34
2015 792.35 774.34 586.64 595.10 481.34 526.93 1,547.8 1,522.9 2005 4.9 9.6 0.58 1.21 0.88 3.52 9.70 6.09
(9.1) (9.7) (8.5) (8.0) (9.2) (10.1) (8.7) (8.6) 2006 5.1 11.0 0.55 1.26 0.89 2.88 9.20 5.44
2016 802.23 788.17 589.18 599.84 487.03 528.70 1,561.7 1,545.8 2007 6.9 14.2 0.63 1.36 0.98 3.20 9.82 5.85
(9.3) (10.0) (8.9) (8.5) (9.7) (10.7) (9.0) (9.0) 2008 7.4 18.9 0.55 1.50 1.01 2.42 10.54 5.42
2017 860.39 843.53 682.01 658.63 566.71 585.05 1,724.0 1,671.5 2009 10.4 14.7 0.89 1.30 1.09 4.00 8.70 5.85
(9.1) (9.9) (8.9) (8.5) (9.7) (10.6) (8.9) (8.9) 2010 12.5 19.2 0.96 1.52 1.24 3.65 8.88 5.68
2018 909.83 881.68 672.65 684.17 546.30 606.63 1,773.5 1,743.6 2011 15.4 29.8 0.98 1.95 1.45 3.41 10.37 6.12
(8.8) (9.5) (8.0) (8.1) (8.6) (10.1) (8.3) (8.5) 2012 17.9 37.7 1.14 2.41 1.78 3.75 13.14 7.28
2019 891.14 865.07 678.59 689.82 538.35 612.87 1,757.8 1,740.4 2013 17.0 41.2 1.04 2.48 1.77 3.73 12.42 7.40
(9.0) (9.6) (8.4) (8.2) (8.9) (10.3) (8.5) (8.7) 2014 19.4 39.0 1.14 2.29 1.72 4.33 12.31 7.63
2020 906.88 892.89 707.56 700.78 545.26 626.27 1,803.6 1,818.4 2015 20.9 31.6 1.35 2.07 1.71 5.51 12.05 8.18
(9.8) (10.8) (9.4) (8.7) (10.0) (11.4) (9.4) (9.6) 2016 22.1 30.5 1.41 1.97 1.69 6.38 11.75 8.68
2021 1,037.44 1,040.93 856.25 815.72 647.67 733.35 2,106.0 2,111.7 2017 25.2 35.6 1.46 2.13 1.79 5.73 12.13 8.29
(9.0) (10.2) (8.9) (7.8) (9.3) (10.3) (8.7) (8.9) 2018 24.3 35.3 1.37 2.02 1.69 3.95 10.94 6.35
2022 1,138.77 1,100.09 931.94 917.66 707.95 828.52 2,316.0 2,281.7 2019 19.4 34.8 1.10 2.00 1.55 4.06 10.78 6.78
(8.7) (9.8) (8.8) (8.1) (9.0) (10.7) (8.5) (8.9) 2020 20.6 36.3 1.14 1.99 1.57 5.62 13.17 8.86
2023 1,148.79 1,117.51 922.46 901.14 699.65 812.54 2,307.4 2,288.7 2021 28.9 46.0 1.37 2.18 1.78 5.09 11.67 7.78
(9.4) (10.2) (9.0) (8.3) (9.1) (10.7) (9.0) (9.1) 2022 34.4 51.8 1.49 2.27 1.87 4.75 11.50 7.34
Figures in parenthesis are the percentage share. 2023 31.7 49.0 1.37 2.14 1.76 4.73 11.36 7.33
Source: Agriculture Trade Database, Research and Information System for Developing Source: Agriculture Trade Database, Research and Information System for Developing
Countries, based on Comtrade, United Nations Statistics Division. Countries, based on Comtrade, United Nations Statistics Division.
GLOBAL VALUE CHAINS
presence in the top 20 exporting countries only for pulses (with a The corresponding numbers for imports stand at 5% and 15%.
global share of 5.1%) and unmanufactured tobacco (with a share The composition of the industry and its connect with technol-
of 8.5%). ogy and packaging, and its compliance with SPS measures
India competes with a diverse set of economies—developed, opened new vistas of economic growth for the sector (Table 4).
developing, and emerging—in the export of various agricul-
tural products. The country also encounters different types of Destination and Sources of Agricultural Trade
markets depending on the product category. In some seg- The exports of Indian agricultural products over the years
ments, India faces the monopoly of certain exporting nations, have diversified in contents and destinations. In 2023, India
such as Netherlands in floriculture and China in agrochemi- exported products worth $48 billion to 86 countries. Out of
cals. At the same time, India enjoys a dominant position in this, a majority of exports, amounting to $36 billion, were to
certain categories, such as basmati and non-basmati rice, as countries in the global South, while the Americas and Europe
discussed. Oligopolistic market conditions exist in segments together accounted for $12.5 billion. As Table 5 (p 46) shows,
like wheat, pulses, unmanufactured tobacco, and sesame the global South accounted for 75% of the total exports; if China
seeds. These are some of the key product segments where is taken out of this categorisation, then the share falls to 68%.
India actively participates in global trade. India has the poten- The market for China stands at $3 billion. Within the global
tial to enhance its market access by broadening its export basket South, Asia is the largest market for India (58%). The United
across several product categories. Arab Emirates (UAE) and Vietnam are other big markets for
India, with exports amounting to $3 billion and $2.6 billion,
Trends in Processed Food respectively. South Asia has an important position in Indian
The growth of global agricultural trade over the past two dec- agriculture exports with a share of 12%. This is largely led by
ades has been significantly supported by the expansion of the Bangladesh ($2 billion), followed by Nepal ($1 billion), Sri Lanka
processed food sector. The contribution of this sector has been ($700 million) and Bhutan ($200 million). Among the devel-
substantial, and has remained resilient even during the global oped economies, Europe accounts for 12.6% and the Americas
recession. Global processed food imports increased from $271 for 13.4% of Indian exports. The United States (US) imports
billion in 2003 to $860 billion in 2023, while exports rose from products worth $5 billion from India. The Group of Seven (G7)
$263 billion to $926 billion in the same period.1 accounts for around 19% ($9 billion) of Indian agricultural
The global processed food sector achieved double-digit exports. In the recent past, exports to Africa have also stabi-
growth in exports and imports during the buoyant period of lised, with a share of around 15% ($7 billion) of India’s exports.
2003–07, with growth rates of 11.3% and 12.3%, respectively. Out of India’s exports of basmati rice worth $10 billion, almost
Processed food has continued to account for a significant share $3,210 million goes to leading Asian partners like Saudi Arabia
of global agricultural trade, contributing around 40% of the ($1.2 billion), Iran ($734 million), Iraq ($733 million), and UAE
total, with the share remaining relatively stable. In 2003, pro- ($463.6 million). The share of Africa in the basmati rice basket
cessed food imports made up 38% of global agricultural trade, stands at $1.1 billion and that of the US at $332 million. India
declining slightly to 37% by 2023. Meanwhile, the sector’s also exports non-basmati rice to US worth $666 million. The
share of exports increased marginally from 39.9% in 2003 to share of Asian partners stands at around 32% for non-basmati
40.4% in 2023, indicating minimal changes in the global trade rice, with Saudi Arabia accounting for almost 12% of exports
patterns of processed food. During the buoyant years, the with a value of $2.5 billion. In the case of wheat, Nepal is the
share of processed food in both imports and exports showed a major destination with a value of $190 million. Bangladesh is
slight improvement. the major destination for pulses with a value of $491 million,
India’s quantum of processed food trade has exponentially followed by China at $249 million and UAE at $248 million.
expanded. In 2003, it stood at $2 billion, expanding to $18 billion Belgium gets 29% of India’s exports of unmanufactured to-
in 2023. The share of processed food in agriculture exports, as bacco worth $8.5 billion (that is $2.4 billion). The market for
a result, also rose from 21% to 27% between 2003 and 2023. manufactured tobacco is dominated by UAE with exports of
Table 4: India’s Ranking in Selected Agricultural Commodity Exports in 2023 $1 billion, amounting to a share of 36%. The US is the largest
Product Category Value Global Share in Global Share in Indian market for sesame seeds with exports of $93 million. The
($ billion) Rank Agricultural Agricultural
Exports (%) Exports (%) fresh fruits market is dominated by UAE with a share of 23%
Basmati rice 9.91 1 52.7 20.2 (almost $572 million), followed by the Netherlands ($206 million)
Non-basmati rice 10.45 1 45.1 21.3 and the US ($193 million). The market for fresh vegetable
Wheat 0.05 33 0.1 0.1
Pulses 0.7 6 5.1 1.4
exports worth $2.2 billion is shared by Bangladesh ($458 million),
Unmanufactured tobacco 0.97 4 8.5 2 UAE ($360 million), Malaysia ($187 million), and the United
Manufactured tobacco 0.37 20 1.1 0.8 Kingdom (UK) ($167 million).
Sesame seeds 0.49 1 18.1 1
Fruits 1.11 22 1.1 2.3
Since the 1990s, India has also provided a major push for
Vegetables 1.04 14 1.5 2.1 the export of floriculture, which stood at $170 million in 2023.
Floriculture 0.08 21 0.3 0.2 The market is led by the Netherlands with exports worth $52
Agrochemicals 4.6 14 0.1 9.4
million and the US at $31 million. India has targeted almost all the
Countries, based on Comtrade, United Nations Statistics Division. major global importers of floriculture with a sizeable market
GLOBAL VALUE CHAINS
gain, for instance, Japan ($5.2 million), Canada ($6.2 million), tuted 63% of agricultural imports, which decreased to 53%
Italy ($8.3 million), UK ($4.9 million) and Australia ($3.2 million). in 2023. With changing dietary patterns, the value of imports
The new markets are UAE ($12 million), Malaysia ($4 million), of edible fruits and nuts has gone up from $447 million to
and Kenya ($4 million). However, despite being the second- $4 billion over the last two decades. This is a huge expansion
largest producer of flowers globally, India ranks 21 among by any standard. This trend is also discernible in the case of
the major floriculture exporting nations. More start-ups may edible vegetables and certain roots, the quantum of imports
help in overcoming the technological challenges related to which has expanded from $593 million to $3 billion. Similarly,
quality standards, retaining shelf-life value, and digital imports of tea, coffee, and spices have also gone up from
tracking of airport cargo clearance system. Kumar et al (2023) $100 million to $1.1 billion. The emerging scenario for pro-
point out that Indian flower exports to the European Eco- cessed products is also not very different. Sugar and sugar con-
nomic Community face customs duties of 15% in summer and fectionery imports have expanded from $21 million in 2003 to
10.5% in winter. $1.5 billion in 2023. Imports of cocoa and cocoa products have
Agrochemicals have also emerged in the Indian agriculture increased from $16 million to $438 million. Beverages and
trade basket and have survived despite huge mergers and ac- spirit imports have also gone up from $32 million to $1.4 billion.
quisitions in the global market, with exports worth $5 million.
The major destinations are France, Indonesia, Nigeria, and Role of Technology in Agricultural Innovation and Trade
Côte d’Ivoire. Currently, India is the fourth largest producer of A major boost for agricultural exports would come from newer
agrochemicals, but ranks 14th in terms of exports (CARE Rat- ideas and innovations, both in terms of technology and busi-
ings Limited 2019). The prospects for Indian agrochemical ness models. In this context, policies to support and enrich the
exports presently seem difficult with China’s acquisition of start-ups ecosystem may prove to be extremely beneficial. This
mega corporations, which are challenging Indian exports in may be useful across all streams for value addition in the food
the Americas and Europe. However, as per industry reports, sector. The three-stream classification that AgFunder and
major agrochemical firms in India still derive 60% of their Omnivore (2024) proposed may be relevant for studying the
earnings from exports. various points of intervention at upstream, midstream, and
India’s imports of agricultural products have also expanded downstream. Since these streams pertain to the various stages
at an accelerated pace in the last two decades. In 2003, agri- of the agricultural value chain, from inputs to processing and
cultural imports stood at $708 million, which subsequently finally to market, the stream movements are not only expected
increased to $1.6 billion in 2013 and to $2.3 billion in 2023. The to lift the productivity of the sector but may also bring in greater
share, however, has remained at around 8% of the India’s efficiency and quality.
overall imports (Table 1). Among the key sources of Indian Agricultural start-ups are playing a key role by contributing
agricultural imports, the global South accounts for 48% of im- to the whole spectrum of the agricultural value chain by deliv-
ports, led by Brazil (8%), China (7%), Mexico (5%), Argentina ering quality products, technologies, and services to farmers
(4.4%), and Indonesia (4%). Among the developed countries, and consumers. For instance, these start-ups are offering qual-
the US is the most important source of imports with a value of ity farm inputs such as high-yielding seeds at affordable rates.
$191 billion, followed by the Netherlands at $110 billion and Precision agriculture and farm management players are help-
Germany at $103 billion. In the composition of imports, one ing farmers improve their yields by providing them with better
striking fact that emerges is the rising share of processed food agricultural equipment and irrigation technologies. Players
in agricultural imports. In 2003, the share was at 5%, which operating in supply chain technology and in the output-market
expanded to 15% in 2023. In the non-processed food category, linkages segment are eliminating inefficiencies such as high
animal and vegetable fat oils continue to dominate the import wastage of farm produce, which is a win-win for both farmers
basket, though their share is declining. In 2003, they consti- and consumers. Financial services players are serving farmer
Table 5: India’s Top Exporting Destinations, 2023
households through easy access to affordable credit and crop
Region Name Value ($ billion) Share in India’s Exports (%) insurance. In addition to providing solutions to improve the
World 47.9 shelf life of perishable food commodities, Indian agriculture
Global South 35.7 74.5 startups are also engaging themselves in using advanced tech-
Global South minus China 32.5 67.8
Asia 27.9 58.2 nologies like artificial intelligence, blockchain, and the inter-
Group of Twenty (G20) 18.1 37.8 net of things to enhance traceability, quality control, and sup-
High-income economies 17.3 36.2 ply chain efficiency (Patra 2024).
Arab world 11.4 23.8
Group of Seven (G7) 8.9 18.6
About 5% (6,396) of start-ups in India belong to the agriculture
Least developed countries 8.4 17.5 sector. It is seen that 10% of the start-ups surveyed are also ex-
Emerging countries minus China 7.9 16.5 porting agricultural products and services to some countries in
Southeast Asia 7.7 16.1
Africa, Europe, West Asia, and South Asia. These start-ups have
Africa 7.0 14.7
Europe 6.1 12.6 ventured into the entire agricultural value chain and across all
South Asia 5.6 11.7 streams. The exponential rise of start-ups in India, from just
Americas 6.4 13.4
about 350 in 2014 to 1.43 lakh in 2024, has been an interesting
Countries, based on Comtrade, United Nations Statistics Division. development. The distribution of agriculture start-ups within
GLOBAL VALUE CHAINS
Figure 1: Distribution of Agriculture Start-ups in India across Sub-sectors processing centres, while that with the NCUI is to partner
Others
with cooperatives for better quality products. This would
13% help in overcoming the consignment rejections that Indian
exporters have been facing for quite a long time now. Though
SPS and TBT are largely seen as non-tariff barriers, India’s
own capability with NCUI may help in overcoming several
Organic agriculture related challenges.
15% Agri-tech
43%
Minimising Fluctuations in India’s Trade Policies
in Agriculture
Horticulture
3% The World Trade Organization (WTO)-led Trade Policy Review
Food processing
(TPR) has been consistently raising the issue of excessive fluc-
17% tuations in India’s agriculture trade policies. However, the
Indian position on domestic food security, supply chain dis-
Animal husbandry
Fisheries Dairy farming 3% ruptions, and livelihood security provides important points for
2% 4%
consideration. The WTO TPR also alludes to the impact of
Source: Author’s own analysis based on Startups India database, Department for heavy monsoons and the consequences of banning the export
Promotion of Industry and Internal Trade.
of onions in order to ensure sufficient internal supplies and
and across its sub-sectors (Figure 1) is clearly inclined towards stabilise domestic prices.
the agri-tech sector which accounts for around 43% of the The points raised across various TPR s include the calcula-
start-ups (2,771). This is followed by the food processing sector tion of domestic support (like sugar cane), concerns on public
with a share of 17% (1,080). A preliminary analysis of the start- stockholding, import restrictions (on crops like oilseeds, san-
ups that are in the process of scaling up and are at early trac- dalwood, etc), and tariff rate quotas (on products like milk
tion stages, reveals that they are catering to the downstream, powders). The TPR s also covered SPS- and TBT-related issues
midstream, and upstream of the agricultural value chains. A like labelling, safety standards, export restrictions or prohibi-
significant growth of start-ups in the millet sector (with more tions, export taxes, minimum export prices (MEP), and the
than 100 start-ups within just a couple of years) has been presence of state trading enterprises that have a broad-based
observed in India. Some start-ups are also exporting millet coverage over animal and agriculture products. Export prohi-
cakes and cookies to countries such as the UAE, Indonesia, bition on beef, tiger skin, elephant ivory, animal tallow, and
and South Africa and are also observing a strong demand for ethnic varieties of animals, MEP for onions, rice, edible oils,
gluten-free and vegan-friendly snacks (Suneja 2023). and potatoes, export quotas for sugar and other products,
export duties for spices, beverages, animal feed, edible oil,
Government Policy Framework for Agricultural Trade wool, and cotton, quality control for onion, peanuts, and sesame
Among the most robust responses for deeply integrating the seeds, raw material export restriction (for example, for black
agriculture sector with the trade policy framework has been pepper) and the presence of state trading enterprises that
the AEP 2018. The objectives of AEP are focused primarily on largely control the export of sugar have been raised. India has
four dimensions—quality, diversification, institutional sup- maintained that these are temporary measures.
port, and better export earnings for farmers. The idea is to In the case of export subsidies, India has time and again
have high-value export products included in the trade basket. confirmed that these are within WTO permissible limits. In this
This may need diversification, not only with the additional context, the AEP 2018 recommended that apart from a few
commodities and value-added products, but also in terms of products that are essential for food security, export restric-
new destinations for Indian agricultural exports. tions should not be used for processed agricultural products
The AEP also emphasises on having a robust institutional and organic products. To ensure stable domestic production,
mechanism for pursuing market access, tackling barriers, input subsidies and price support are also provided. The policy
and dealing with SPS issues. The policy is also aimed at inte- has proposed to avoid a breaking of export supply chains,
gration with global value chains, thereby enabling farmers to which may affect India’s image as a reliable supplier of quality
get the benefit of opportunities in overseas markets. The re- food products.
sponsibility of operationalisation came to the Agricultural
and Processed Food Products Export Development Authority Production-linked Support and Other Schemes
(APEDA), which signed memorandums of understanding India has launched a major scheme for providing production-
(MoU) with AFC India Limited (formerly Agriculture Finance linked incentives (PLIs) for supporting the exports of processed
Corporation Limited) and the National Cooperative Union of food products. In continuation of the recommendations of the
India (NCUI) in August 2020 (Press Information Bureau Fifteenth Finance Commission, the PLI scheme is providing
2021). The MoU with AFC India Limited is to ensure coopera- medium-term support instead of earlier such efforts of provid-
tion in the areas of critical technology for chemical residue- ing annual grants. The current framework provides scope for
free production systems and for the development of common support over a six-year period from 2021–22 to 2026–27 with
GLOBAL VALUE CHAINS
an outlay of `10,900 crore for the food processing industry. modernise value chains, and create infrastructure, the Pradhan
The idea is to provide incentives for sectors like fruits and Mantri Matsya Sampada Yojana was launched in 2020. To
vegetables and dairy products. The scheme has extended facilitate investments in the establishment of infrastructure
assistance to 172 food processing companies. An amount of for dairy, breeding, meat processing, and animal feed plants
`137 crore been provided for processing units engaged in fruits by FPOs, entrepreneurs, micro, small and medium enterprises
and vegetables; `9 crore for exports of cheese, and `72 crore and companies, the Animal Husbandry Infrastructure Devel-
for exports of marine products. There is also a scope provided opment Fund was launched in 2020.
for branding and marketing, besides assistance of `800 crore
for promoting millet-based products.2 Conclusions and Policy Recommendations
With a clear commitment towards expanding the base for
Other Agri-export Schemes agriculture exports, greater efforts are required for overcom-
There are a number of agri-food export promotion schemes, ing challenges on account of technology and standards.
encompassing objectives like credit facilitation, develop- Limited marketing networks and a restricted scope for product
ment of export infrastructure, and providing incentives to innovation also have to be addressed on priority. Growing
exporters. global diversification in dietary preferences and a rise in
In order to ensure credit facilitation, the interest equalisa- income levels have offered a new demand pattern of ready-
tion scheme of the department of commerce (DoC) was to-cook food, the demand for which is yet to be matched by
launched in 2015. The scheme provides for both pre- and Indian exporters.
post-shipment rupee export credit at interest rates that can The global economy has also witnessed a continued rise in
match the lower rates prevailing in peer countries. In the agricultural trade as compared to non-agricultural trade over
realm of infrastructure, DoC launched the Trade Infrastruc- the last two decades. This offers a unique opportunity for
ture for Export Schemes in 2017 to upgrade export infrastruc- India, as many least developed countries may exhibit a greater
ture and provide funds for projects having strong export linkages. demand with the rise in income accompanying their gradua-
In order to absorb exchange rate fluctuations, the DoC in tion. The demand patterns may evolve towards distinct high-
2022 extended a rupee trade facility for international trade value processed agricultural products. The rise of intra-indus-
settlements. Further, the One District One Product scheme try trade in processed agricultural products may drive agricul-
has focused on districts as export hubs for identified prod- tural trade among countries of the global South.
ucts with potential in order to harness economies of scale. Given the size of the agriculture sector and consumer food
This initiative was operationally merged with the Districts market in India and across the world, there is ample scope for
as Export Hubs initiative, to achieve the objectives of the AEP the scalability of start-ups in the agricultural sector, enabling
faster. Steps have also been taken to make the farmer connect them to venture into newer markets with various innovative
portal a platform for farmer producer organisations (FPOs) products and services, thus optimising the trade potential.
and companies, as well as cooperatives to facilitate direct This would require timely support from the government, both
interaction with the exporters. at the centre and state, through an enabling policy environ-
An umbrella scheme was launched by the Ministry of Food ment. The issue of sustainability is also being addressed by
Processing Industries called the Pradhan Mantri Kisan Sampada start-ups through their focus on eco-friendly processing tech-
Yojana in 2017 for providing multiple support architectures niques and reduction of waste.
for exporters. This includes creation of mega food parks, pro- In the realm of trade policy, decisive measures are needed
vision of integrated cold chain and value addition infrastruc- for streamlining the agriculture trade policy framework to
ture, and infrastructure for food preservation, safety and minimise the frequency of imposing export restrictions and to
quality assurance. Operation Greens and the creation of req- credibly prove India as an assured supplier. Even if any such
uisite backward and forward linkages also fall within the restriction is temporary in nature, the cumulative effect of in-
ambit of the scheme. In an initiative to benefit micro food voking it frequently can force its importing partners to look
processing units in the unorganised segment of the food pro- towards alternative avenues. It is a fact that the ripple effects
cessing industry, the Pradhan Mantri Formalisation of Micro of such measures are far more intense on smaller agriculture
Food Processing Enterprises Scheme has been implemented import partners, as any resultant supply shrinkages are rela-
since 2020. Further, to give much-needed fi llip to farmers in tively much larger on their agri-food systems. This policy
hilly areas, north-eastern states, and tribal areas, to enable course correction would facilitate secular trends in the growth
the transportation of perishable food products fetching high- rates of agri-food exports. A stable and credible export policy
er value utilisation, the Ministry of Civil Aviation launched regime can promote value addition, imparting vibrancy to the
the Krishi Udan Scheme in 2020. In sectors like fishing, in- food processing sector, benefiting exporters, consumers, and
frastructure continues to be a major challenge. In 2019, the farmers alike.
Fisheries and Aquaculture Infrastructure Development Fund In the larger perspective, consistent efforts are required
was launched by the Department of Fisheries. The fisheries for enhancing the share of value added, processed food in
sector is now also covered under the Kisan Credit Card India’s agriculture trade basket. The value addition in food
Scheme. Besides, to enhance fish production and productivity, processing can significantly offset the falling share of the
GLOBAL VALUE CHAINS
primary sector and generate jobs to reduce the overdependence revamp and align the existing agricultural export schemes,
on the pre-processing portions of agriculture value chains. In there is a dire need to constitute a task force to analyse the
this context, the plethora of schemes initiated by multiple contemporary global agri-food export systems and suggest
agencies needs to be reviewed in their ability to become robust adequate measures for India. This approach would also aid
guard rails for exporters, particularly small and medium in developing a more focused and clear framework, enabling
enterprises and FPOs that are now entering the export market. different stakeholders to access purpose-specific incentives
This would require another ecosystem of start-ups to be while remaining aligned with the overarching goal of pro-
linked for cost-effective access to technology. In order to moting agri-food exports.
Notes Kumar, K N R, S N Mishra and V T Raju (2023): Saxena, R, Paul, R K Rana, S Chaurasia, S Pal,
1 Because of inter-sectoral transfer of products, “Competitiveness of Indian Agricultural Com- K Zeeshan and D Joshi (2015): “Agricultural
the trade balance of processed food has modities – Constant Market Share Analysis,” Trade Structure and Linkages in SAARC: An
changed over time. This is in addition to cost, Indian Journal of Agricultural Economics, Vol 78, Empirical Investigation,” Agricultural Economics
insurance and freight (CIF) and free on board No 2. Research Review, Vol 28, No 2, Agricultural Eco-
(FOB) issues leading to divergence between Kumar, Vinod (2021): “Trends and Performance of nomics Research Association (India).
the import and export of processed food India’s Agricultural Trade in the Midst of Singh, Ajit (2019): “An Assessment of India’s
sub-sectors. COVID-19 Pandemic,” Indian Journal of Agri- Agricultural Trade,” International Journal of
2 The PLI beneficiaries have reported an invest- cultural Economics, Vol 76, No 3, pp 352–70. Research and Analytical Reviews, Vol 6, No 1.
ment of ` 7,126 crore under the scheme with Ministry of Commerce and Industry (2023): “For- Singh, O P, Anoop Mangalasseri and P K Singh
sales of `49,825 crore up to April–September eign Trade Policy 2023,” Directorate General of (2020): “Revealed Comparative Advantage,
2023. Foreign Trade, Government of India. Competitiveness and Growth Performance:
Murugesan, B (2019): “An Empirical Analysis of Evidences from India’s Foreign Trade of
Agricultural Exports on Economic Growth in Agricultural Commodities,” Indian Journal
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GLOBAL VALUE CHAINS
Exploring Trade, GVCs, and Technology Goods

in India’s FTAs
Saroj K Mohanty
I
To evaluate the efficacy of free trade agreements, ndia embarked on the journey of economic transformation,
15 FTAs implemented between 2000 and 2023 are starting with country-wide economic reforms aimed at
overcoming a foreign exchange crisis in the early 1990s
examined focusing on trade flow patterns, trade
(Ahluwalia 2002). These reforms marked a significant policy
balance, the structure of GVC trade, the composition of shift, as India embraced an outward-oriented trade strategy,
technology-intensive trade, the nature of trade deficits leading to sweeping trade reforms across various sectors
between FTA and non-FTA partners, and market access (Mohanty 2011). India’s trade policy evolved to include both
regionalism and multilateralism. This is evident from its early
for the micro, small and medium enterprises. The
involvement in the Asia Pacific Trade Agreement (APTA) in
findings show that FTA partners have performed 1975, and the implementation of its first free trade agreement
marginally better than non-FTA partners in recent years. (FTA) with Sri Lanka at the beginning of the new millennium,
During periods of global economic buoyancy and the followed by several other FTAs, Comprehensive Economic
Partnership Agreements (CEPAs), and Comprehensive Eco-
initial phase of the recession, FTA partners showed strong
nomic Cooperation Agreements (CECAs). This dual approach of
performance in goods trade. However, they have embracing regionalism alongside multilateralism contributed
struggled to maintain the same momentum due to the significantly to the rise of India’s external sector. The depar-
prolonged global recession. ture from the traditional “Hindu rate of growth” of 3.5% dur-
ing the pre-reform period to a high-growth era represents the
impact of these policy shifts (Rodrik and Subramanian 2004).
Several studies corroborate the pivotal role of the thriving
trade sector in the resurgence of the Indian economy (Hye and
Lau 2015; Chatterji et al 2014).
The recent foreign trade policy of India (GoI 2023) highlights
the significant role of the external sector in wealth creation
and sets an ambitious target for the trade sector to reach
$2 trillion, splitting equally between trade in goods and trade
in services, to support a projected gross domestic product (GDP)
of $7.5 trillion by 2030. Again, in the National Institution for
Transforming India (NITI) Aayog’s Vision for Viksit Bharat@2047
document, export and import targets are set at $8.67 trillion
and $12.12 trillion, respectively, for 2047. The centrality of the
external sector as a driver of growth through FTAs has been em-
phasised in numerous policy documents. India’s gradual trade
association through agreements with the Association of South-
east Asian Nations (ASEAN), South Asia, and Sri Lanka enabled
the country to implement several variants of FTAs in the 2000s.
After two decades of reforms, India witnessed a growing
sense of pessimism and ensuing debate about the efficacy of
the trade and FTAs as drivers of stimulating growth. Critics
argue that India’s strong engagement in several FTAs since
2000 has resulted in macroeconomic and socio-economic im-
balances, including reduced employment prospects, particu-
larly in the manufacturing sector (Francis 2011; Sikdar and
Saroj K Mohanty (skmohanty7@gmail.com) is with the Research and Nag 2020). Moreover, reliance on FTAs has been associated
Information System for Developing Countries, New Delhi.
with an expansion of the trade deficit, leading to significant
GLOBAL VALUE CHAINS
resource outflows, and is linked to deindustrialisation in the However, some studies are critical in the use of gravity models
country (Francis 2020; Chanda 2014). On the contrary, other in evaluating the effectiveness of FTAs due to the issue of endo-
studies argue that the economic imbalances observed are not a geneity within the model. By applying the gravity model with-
result of trade sector activities but rather due to the economic out addressing endogeneity, the impact of FTAs may be signifi-
transition of the country (RIS 2006). Mohanty and Saha (2019) cantly overestimated or underestimated (Trefler 1993). To ad-
suggest that selecting appropriate trading partners for FTAs dress this, alternative methods such as the use of instrumental
can enhance trade gains and employment opportunities. For variables have been suggested to better isolate the influence of
assessing the effectiveness of FTAs, trade flows and reduction regional agreements on trade flows (Magee 2003).
of trade imbalances (Sokolova 2016) are not only important Ghosh and Yamarik (2004) further employed a categorical
but also the structural change in trade, particularly regarding variable to distinguish between different forms of regional
the composition of trade in global value chains (GVCs) (Zhang trading arrangements within a gravity equation. Several studies
et al 2021) and technology-intensive goods (Cheong 2023), have also simultaneously examined the effectiveness of multiple
significantly influence in shaping the pattern of development regional groupings, with as many as 166 such groupings anal-
in the country. ysed in Kohl (2014). Numerous reports, including Joint Study
This paper provides a comprehensive examination of the Group (JSG) reports, have documented the effects of various
efficacy of India’s trade policy regimes since the turn of the forms of regional arrangements on individual countries,
millennium and explores various facets of these policies. particularly concerning FTAs. Several studies have used the
before-and-after approach to examine pre- and post-FTA
Literature Survey effects on the contracting parties of an agreement (Ando et al
Since the formation of the first cohesive regional grouping in 2022; Lakatos and Nilsson 2017).
the world, the European Common Market (ECM) in 1958, the
effectiveness of such regional arrangements has been a subject Methodology
of empirical analysis for policymaking. When examining these To examine post-FTA effects on various factors such as trade
economic issues, two key aspects of regionalism are empha- flows, economic growth, and other macroeconomic varia-
sised: the economic achievements resulting from the regional bles, the before-and-after approach is frequently employed,
integration process (Frankel et al 1994; Subramanian and Wei often in combination with the gravity model and instrumen-
2007) and the quantitative techniques employed to analyse tal variables analysis. Numerous studies have utilised these
these complex phenomena (Tinbergen 1962; Frankel 1997; approaches to assess the effectiveness of FTA s with bilateral
Magee 2003). and regional partners (Lakatos and Nilsson 2017; Okabe
The major issues explored in the literature include trade flow 2015). It has been noted that a sufficient time gap is essential
analysis (Abrams 1980) and its implications for the bilateral in the before-and-after approach to capture the full effects of
trade balance among member countries (Krishna 2019). FTA s on trade, growth, employment, and other macroeco-
Another significant aspect of market access, in the form of nomic variables (Lakatos and Nilsson 2017; Hur and Park
trade creation and trade diversion (Pelzman 1977), frequently 2012). The study by Hur and Park (2012) recommends a
features in such analyses. The manufacturing competitiveness 10-year span for this purpose; however, the paper has opted
of member countries (Chanda 2014) is identified as a crucial for a period of five years before and five years after the im-
factor influencing trade flows and sustaining the trade balance plementation of FTA s in India.
among member countries within regional groupings. Addi- Several studies have observed that the impact of FTAs can
tionally, the impact of FTAs on various aspects of employment vary significantly across agreements. Using the before-and-
generation (Mohanty and Saha 2019) is examined in the con- after approach, some research suggests that FTA-driven trade
text of nations participating in regional alliances. The results creation effects might be underestimated, partly due to chal-
have been mixed over the past six and a half decades of lenges in isolating the influence of third-country interactions
research on the economic outcomes of regional groupings. within a preferential trade area (Ando et al 2022). The impacts
While several countries have benefited from such arrangements, of FTAs on trade flows (Hayakawa 2015), growth (Hur and
many have encountered negative effects, and some have Park 2012), and other macroeconomic variables have been
shown no significant gains (Kohl 2014). widely studied. Furthermore, the literature examines how firms
Various economic models have been employed in numerous within FTA member countries respond, particularly regarding
studies to analyse the effectiveness of FTAs (Frankel 1997; trade linkages established under the new trade policy environ-
Ghosh and Yamarik 2004), with the gravity model emerging ment following the post-FTA implementation (Hayakawa 2015;
as the dominant approach in the literature. In a non-linear Zhang and Li 2024).
gravity model, regional groups are typically represented by From a developmental perspective, the overarching goal of
dummy variables in the equation (Kohl 2014). Many studies FTA s extends beyond immediate trade gains, emphasising
have used cross-sectional data with instrumental variables to structural changes in trade flows. To assess these develop-
capture the trend effects of trade flows over time (Baier and mental dimensions, it is crucial to examine shifts in GVC
Bergstrand 2002). Ghosh and Yamarik (2004) applied extreme structures, the composition of technology-intensive trade
bound analysis to assess the significance of regional dummies. (TIT), and the trade dynamics involving micro, small, and
GLOBAL VALUE CHAINS
medium enterprises (MSMEs). These areas represent some of the standby arrangements and a compensatory financing facility,
critical issues for understanding the broader impacts of FTAs. thus beginning the second phase of economic reforms in 1991.
We estimate time-series data for 15 bilateral and regional India’s trade strategy shifted decisively with the economic
FTAs, encompassing 12 bilateral and three regional agreements reforms of 1991, moving towards an outward-focused approach
formed between 2000 and 2023. In this analysis, one data set in line with the global view of Table 1: India’s FTA and Non-FTA
on GVCs is developed based on the Broad Economic Categories trade as a key driver of growth. Trade Performance during
Different Global Trade Regimes
(BEC) of the United Nations Statistics Division (UNSD), cover- While the 1980s and 1990s saw (compound annual growth rate
ing primary, intermediate, and final goods sectors. Intermedi- moderate gains in the external [CAGR]) (%)
Period FTA Non-FTA World
ate goods are further divided into semi-processed goods and sector, India’s global integration
1981–90 – – 7.7
parts and components, while final goods are classified into fi- deepened around 2000, marking
1991–2001 – – 9.6
nal capital goods and final consumer goods. Typically, FTAs a new era of active regionalism. 2002–07 101.9 27.0 28.9
aim to reduce primary commodity exports from India while From 2002 to 2007, trade via FTAs 2007–11 47.1 15.0 18.7
increasing trade in intermediate goods—especially exports of grew almost four times faster than 2008–16 28.7 0.3 3.7
parts and components—as well as the import/export of final non-FTA trade, spurred by a glob- 2017–23 12.2 5.0 6.8
Source: Author’s estimation based on
capital goods and exports of final consumer goods. ally favourable economic climate. Direction of Trade Statistics, IMF, online
In the technology-intensive goods sector, the technology Trade with FTA partners surged database.
level embedded in a product defines its classification as tech- 33.5 times, compared to a 3.6-fold increase in overall trade.
nology-intensive. Pavitt (1984) initiated a study to categorise However, with the global recession from 2008 to 2011, trade
products in various technology-intensive groups, later expand- growth sharply decelerated from prior highs (Table 1).
ed by the OECD (1994). Lall (2000) refined this work, offering a By 2011, year-to-year trade growth had fallen to below 2%
10-group classification of technology-intensive goods using and turned negative intermittently in 2012, 2013, 2015, 2018,
the Standard International Trade Classification (SITC). Earlier and 2019. Trade performance in both FTA and non-FTA segments
studies, including Lall (2000), did not encompass all globally appeared subdued, with the initial advantages of regionalism
traded products in the technology-intensive goods category. gradually diminishing amid the continued global recession.
Mohanty (2005) later extended this classification to cover all Although FTA trade has faced challenges, it has generally per-
products under technology-intensive goods, using the HS Revi- formed better than trade with non-FTA countries in terms of
sion 2002 for further categories and subcategories. It is antici- growth performance, both during buoyancy and recession
pated that exports of medium and high technology-intensive over the past two decades. The strategic approach reflects
goods should grow, as these goods command higher premiums India’s efforts to balance multilateral and regional commit-
than primary and agro-based commodities. ments, evolving from a multilateral focus to a diversified stance
We also examine MSME trade performance across various trade that embraces regionalism. In doing so, India has aligned with
agreements, acknowledging the critical role MSMEs play in the global trend towards more interconnected and dynamic
many economies as drivers of growth. In 2022–23, MSMEs con- trade relationships.
tributed 43.59% of India’s exports. Literature suggests that
MSMEs thrive in a liberalised regional trade environment, sup- Debate on the Efficacy of India’s FTAs
ported by innovation and a favourable trade policy framework Views on India’s FTAs are mixed, especially amid recent export
(Nguyen et al 2024). FTAs offer MSMEs a platform for engaging slowdowns and a growing trade deficit during the prolonged
with GVCs. In India, however, challenges remain in estimating global recession. Some critics argue that FTAs impose economic
MSME trade data, particularly concerning sector-specific prod- costs with limited gains, while others believe that global con-
uct classification. This study analyses MSME performance ditions, rather than the agreements, are constraining trade
within different FTA frameworks, using product classifications growth. Studies present a nuanced view with varied findings.
established by the Directorate General of Commercial Intelli- Kumar and Prabhakar (2017) reported that bilateral and
gence and Statistics (DGCI&S) to assess the MSME sector across ASEAN FTAs significantly boosted trade efficiency from 2000 to
various partner countries and regional trade agreements (RTAs). 2014, suggesting that stronger regulatory and institutional
frameworks could further unlock trade potential. Similarly,
India’s Trade Performance Kaushal (2022) found increased export efficiency post-FTA,
Following the economic ascent of the newly industrialised and Ghoshal (2015) observed a robust link between exports
economies in the 1960s, a wave of trade liberalisation swept and economic growth, with expansion spurring exports. Ram-
across South and Southeast Asia in the mid-1970s. The ASEAN akrishnan and Varma (2014) also noted a rise in intra-industry
Concord embraced an economic agenda in 1976, and Sri Lanka trade (IIT) due to India’s FTAs.
embarked on its economic reforms in 1977. In response to this Some studies suggest that India’s FTAs have fallen short of
liberalisation among its neighbours, India initiated its first phase expectations. Ohlan (2012) observed that India’s trade intensity
of economic reforms in 1981, drawing on International Monetary with ASEAN declined under the ASEAN–India FTA, contributing
Fund (IMF) credit of special drawing rights (SDRs) 3.9 billion un- to a growing trade deficit. Deshmukh et al (2018) found that
der the extended fund facility. However, another payment crisis while imports have surged, India’s low export market share
surfaced in the early 1990s, prompting India to secure two with FTA partners has limited the benefits of market access.
GLOBAL VALUE CHAINS
Krishna (2019) similarly noted an increasing trade deficit with digitally enabled trade, data security, and intellectual property
FTA partners over time. Reflecting India’s mixed FTA experience, rights must be prioritised to safeguard national interests while
Prasad et al (2017) reported varied impacts, with the Japan FTA fostering an ecosystem for digital innovation and intellectual
reducing exports and leaving imports unchanged, while the property protection.
ASEAN FTA enhanced bilateral trade. Chanda (2014) attributed India’s response to the FTA debate should embody a balanced,
the limited benefits of FTAs to issues like product coverage, rules forward-looking strategy focused on expanding market access,
of origin, narrow preference margins, competition from non- securing advantageous trade terms, enabling technology
FTA countries, and challenges in manufacturing competitive- transfer, market access to the MSME sector and addressing
ness. Ultimately, the debate remains unresolved, as no study emerging digital and intellectual property concerns. Such an
has isolated the impact of FTAs from that of non-FTAs within approach will empower India to strengthen its trade competi-
the context of two decades of persistent global recession. tiveness and position its economy to capitalise on opportuni-
This detailed analysis underscores the ongoing discourse in ties within the evolving global economic landscape.
India regarding the effectiveness and strategic advantages of
FTAs. It signals the need for a balanced approach that weighs Post-FTA Trade Effects
the varied impacts of FTAs across sectors and considers the Studies suggest that India’s experience with FTAs has often
trade-offs between heightened imports and exports alongside been positive. Studies by Ghohsal (2015), Kumar and Prabhakar
broader economic goals aimed at enhancing domestic compet- (2017), among others, indicate that post-FTA outcomes have
itiveness. Recognising that major export-led economies import been encouraging in many cases. Evaluating FTAs requires
a higher capital goods content than India, it is evident that to examining long-term trade flow patterns and shifts in trade
compete globally, India must refine its trade strategy. The re- balance, particularly during global recessions. This analysis is
cent initiatives regarding bilateral FTAs with key economies relevant for both bilateral and regional FTAs. The cumulative
such as the European Union and the United Kingdom reflect a direct and spillover effects of an FTA play a crucial role in
strategic adaptation to shifting global economic trends. strengthening bilateral relations and promoting economic
However, these negotiations should go beyond securing growth. A before-and-after approach is commonly used to
expanded market access for Indian goods and services; they measure FTA effectiveness, comparing trade dynamics before
must also aim for favourable terms that improve the quality of and after implementation. This method sheds light on the
imports, including technology transfers. In addressing the FTA macroeconomic impact of these agreements, mainly focusing
debate, India’s strategy should prioritise bilateral technology- on goods, although services are increasingly significant in
sharing agreements and partnerships in sectors where domestic India’s external trade. According to India’s Foreign Trade Policy,
capabilities are still maturing. This approach would not only trade in goods and services is projected to reach $2 trillion by
elevate India’s high-tech industries but also bolster domestic 2030 (GoI 2023). In this framework, India’s key FTAs—12 bilat-
sectors’ competitiveness and innovation capacity. MSME is a eral and three regional—are evaluated through an empirical
major stakeholder in India’s foreign trade and its relevance in assessment of export and import performance five years before
FTA needs to be examined. Moreover, as global trade becomes and after implementation (Table 2).
increasingly complex, characterised by rising disputes and the Experiences from partner countries reveal that FTA-driven
growing significance of digital trade, India’s trade agreements economic opportunities require a sustained commitment to
must account for modern challenges. Provisions related to maintain trade growth. This paper analyses 12 FTAs from In-
dia’s “first wave of regionalism” and
Table 2: India’s Trade Dynamics with FTA Partners, Five Years Before versus After (million $) three from the “second wave” (post-
Sl FTA Partner Year of 5 Years 5 Years 5 Years 5 Years 5 Years 5 Years After Before After
No Implementation Before After Before After Before
2020). For analysis, India’s FTA part-
Imports Exports Trade Deficit Imports Exports ners are categorised by trade volume:
5 Years 5 Years 5 Years 5 Years 5 Years 5 Years After CAGR (%) large (ASEAN, United Arabs Emirates
Before After Before After Before
[UAE], Australia, Mercosur), medium
1 Sri Lanka 2000 – 340.5 – 1,492.3 – 1,151.8 – –
2 Afghanistan 2003 26.9 72.5 114.0 212.7 87.1 140.2 18.0 11.0 (Japan, South Korea, Malaysia, South
3 Thailand 2004 535.9 2,053.0 722.5 1,551.3 186.7 –501.7 25.1 13.6 Asia), and small (Sri Lanka, Afghani-
4 Singapore 2005 2,168.5 2,598.1 2,396.3 1,768.3 227.8 –829.8 3.1 -4.9 stan, Thailand, Singapore, Chile,
5 Chile 2007 600.4 3,926.8 123.4 2,409.1 –477.1 –1,517.7 36.8 64.1 Nepal, Mauritius). The performance of
6 Nepal 2009 428.2 449.8 1,080.5 2,871.8 652.3 2,422.0 0.8 17.7
large and medium FTAs is crucial to
7 South Korea 2010 6,028.3 12,598.6 2,753.6 4,276.6 –3,274.7 –8,322.0 13.1 7.6
8 Japan 2011 6,425.1 10,147.8 3,500.9 5,488.3 –2,924.3 –4,659.4 7.9 7.8
the overall efficacy of India’s FTAs.
9 Malaysia 2011 5,720.5 9,777.9 2,635.8 4,577.0 –3,084.7 –5,200.9 9.3 9.6 Trade flows increased by double
10 Mauritius 2021 36.6 70.5 695.2 559.9 658.6 489.4 11.6 -3.5 digits post-implementation for ASEAN,
11 Australia 2022 12,958.1 18,546.0 4,192.9 7,721.9 –8,765.2 –10,824.1 6.2 10.7 Australia, and Mercosur among large
12 UAE 2022 30,486.8 37,536.6 26,008.6 33,017.2 –4,478.2 –4,519.3 3.5 4.1 partners, as did all medium FTA s.
13 SAFTA 2006 635.1 1,988.5 3,083.3 9,823.1 2,448.2 7,834.6 21.0 21.3
Most of the smaller FTAs also achieved
14 Mercosur 2009 2,613.1 15,873.0 2,041.3 6,621.4 –571.7 –9,251.5 35.1 21.7
15 ASEAN 2010 11,645.9 42,029.7 6,377.3 32,083.0 –5,268.7 –9,946.7 23.9 30.9
double-digit growth, with exceptions
Source: Author’s estimation based on Comtrade, United Nations. like Singapore and Mauritius.
GLOBAL VALUE CHAINS
Trade flow performance shows that FTA partners generally This continuity suggests that expanded trade could still offer
performed better after implementation, with strong growth avenues to manage these deficits. As India’s economy grows, it
driven by increases in imports and exports. In the post-imple- becomes increasingly important to analyse the structure and
mentation phase, import growth reached double digits for all composition of trade with FTA partners to understand and
large and medium FTAs, except the UAE and Australia, where it address these imbalances effectively.
remained stable. For smaller FTAs, import growth stayed be-
low double digits for Nepal and Singapore. Export growth also Influence on GVC Sectors
remained strong among large and medium FTAs, excluding the India’s engagement in global production networks and value
UAE. Singapore saw a decline in exports from the pre- to post- chains has been significantly enhanced by trade liberalisation
implementation period among smaller FTAs. These FTAs have policies, especially through FTAs, which have driven efficient
reshaped India’s trade landscape, enhancing bilateral trade industrial restructuring. This transformation, largely led by
flows, though they face criticism for the widening trade deficit multinational corporations involved in cross-border produc-
and its cascading effects across sectors in later stages. tion sharing, has fuelled substantial growth in two-way trade,
This trend raises an important question: If Indian FTAs initially notably in the intermediate goods segment. Research high-
exhibit strong trade performance, why are concerns about lights the critical role of FTAs in enabling countries such as India
their efficiency increasing? Analysing trade flow performance to integrate more deeply into GVCs. Mohanty (2014) observed
five years beyond the initial post-implementation phase, up to rising Indian GVC trade with Southeast Asian economies—in-
2023, sheds light on India’s ability to sustain FTA gains. For including Indonesia, Malaysia, Thailand, and Singapore—par-
stance, after implementing the ASEAN FTA in 2010, India saw ticularly in sectors like optical, photo, technical, and medical
import growth rise by 37.8% and export growth by 49.8% apparatus, which are vital to the electronics industry.
from 2004–09 to 2011–15. However, in the subsequent period India’s trade within GVCs through FTAs has shown promising
(2016–23), import growth slowed to 10.1%, and export growth progress, outperforming other trade segments across various
decelerated further to 6.1%. Similar patterns emerge with oth- end-use categories. During the period of global economic
er FTAs, where high initial import growth rates with partners growth from 2002 to 2007, India’s average GVC trade reached
like ASEAN, Malaysia, Sri Lanka, and Afghanistan gave way to $687 million, expanding by 1.8 times with a compound annual
slower or negative rates with Mercosur, Chile, and Singapore. growth rate (CAGR) of 12.6%, aided by partnerships with 15
During this same period, India achieved double-digit export FTA nations/RTAs. However, in the initial phase of the global
growth only with Nepal, while exports declined with Singapore recession (2006–16), GVC growth slowed to 1.4%, though it re-
and Afghanistan. These trends indicate a decline in the growth mained more stable than semi-processed and final capital
momentum of imports and exports under the India–ASEAN goods, reflecting resilience amid economic challenges. In the
FTA, suggesting that the initial boost from the agreement has not recession’s later phase (2017–22), GVC trade rebounded with a
been sustained over time. 9.8% growth rate, surpassing semi-processed, final capital,
Trade deficits have become a contentious point in recent FTA and final consumer goods. Over the entire downturn period
discussions, as these deficits often widen in the five years before (2002–22), GVC trade maintained an annual growth rate of
and after FTA implementation. India’s FTAs can be grouped into 4.9%, outpacing semi-processed goods (4.3%), final capital
three categories based on trade balance: (i) surplus before and goods (2.9%), and final consumer goods (4.1%). India’s FTA-
after implementation; (ii) surplus before and deficit after driven GVC pathway particularly favoured exports, delivering
implementation; and (iii) deficit before and after implementa- more substantial gains than imports with FTA partners.
tion. India maintained a trade surplus before and after imple- Between 2002 and 2007, India’s average annual imports from
menting FTAs with the South Asian Free Trade Area (SAFTA), FTA partners stood at $376 million, with a CAGR of 11.5%, one
Mauritius, and Afghanistan. However, with Thailand and Sin- of the lowest among end-use trade segments, except for final
gapore, India shifted from a trade surplus to a deficit post-FTA. consumer goods. During the global recession from 2008 to 2022,
For FTAs with Chile, South Korea, Japan, Malaysia, Australia, the growth rate of GVC subsector imports slowed to 4.7%, yet
the UAE, and ASEAN, a pre-existing trade deficit persisted after remained the highest among other segments within the end-
implementation. Among major partners, the trade deficit ex- use trade sector. In contrast, during economic buoyancy, the
panded significantly, reaching double digits with ASEAN and GVC subsector’s exports grew at a rate of 14%, outpacing the
Mercosur, and single digits with Australia and the UAE. For growth of imports. Over the two decades covering the reces-
medium-sized trade flows, the deficit grew at a double-digit sion period (2002–22), average annual exports rose to $534.9
rate with South Korea and single digits with Japan and Malay- million, achieving a growth rate of 5.2%, making it the fastest-
sia. Other FTAs, including those with Thailand, Singapore, and growing segment within the end-use trade sector under FTAs.
Chile, also experienced double-digit increases in trade deficits, India’s engagement with various FTA partners in exports
highlighting the persistent challenge of managing trade and imports across end-use trade sectors reveals distinct pat-
imbalances in the post-FTA period. terns in 2023 (Figure 1, p 38). India accounted for 28.1% of its
Though India’s persistent trade deficit is a concern within its imports and 5.5% of its exports in primary goods trade through
FTA landscape, reversing it by removing FTAs is not guaranteed, FTAs. Substantial primary imports were sourced from Australia,
as deficits existed both before and after many agreements. the UAE, and Chile, although India did not count any major
GLOBAL VALUE CHAINS
Figure 1: India’s GVC Trade Patterns with Selected Partners (%)
Distribution in Indian Imports from FTA Partners Distribution in Indian Exports to FTA Partners
100 100
Share of BECs in Imports (%)
Share of BECs in Exports (%)

80 80
60 60
40 40
20
20
0
0
Australia
UAE
ASEAN
Chile
Japan
Mauritius
4PVUIKorea
SAFTA
.FSDPTVS
4PVUI,PSFB
Australia
UAE
ASEAN
Chile
Japan
Mauritius
SAFTA
.FSDPTVS
FTA FTA
Prim Semi-Pro PnC Cap Cons Prim Semi-Pro PnC Cap Cons
Prim = primary goods; semi-pro = semi-processed goods; PnC = parts and components; cap = capital goods; cons = consumer.
Source: Author’s estimates based on Comtrade, United Nations.
primary export destinations among these FTA partners. Inter- final consumer goods were Chile and the UAE. India is nearing its
mediate trade formed a significant portion of India’s FTA-based broader trade objectives with its FTA partners by increasing im-
transactions, with 56.8% of imports and 53.4% of exports. ports of primary products and engaging robustly in intermediate
Within these intermediate imports, parts and components and final goods trade in 2023. In the intermediate trade sector,
represented 10.6% of overall imports, while semi-processed the semi-processed goods segment saw substantial growth,
goods accounted for 46.2%. Similarly, intermediate exports while in the final goods sector, both consumer and capital goods
included 43.1% of semi-processed goods and 10.3% of parts experienced expansion. This aligns with India’s FTA strategy,
and components. In particular, semi-processed trade volume which aims to foster trade growth in these targeted directions.
was nearly four times higher than parts and components, each
representing over 10% of both exports and imports. FTAs and Shifts in Technology-intensive Trade
In final goods trade, India imported 15.1% and exported 41.1% India’s trajectory in the trade of technology-intensive goods has
of its total trade with FTA partners in 2023. Of the total 15.1% of seen a notable transformation, supported by empirical analyses
final goods imports through the FTA route, 9.1% were final capital and the impact of FTAs. Several studies reveal a significant shift in
goods. India demonstrated strength in final goods exports, with India’s export patterns from low-skill, technology-light products
final consumer goods comprising 27.6% and final capital goods such as food and agricultural goods, towards high-skill, tech-
13.4% of exports to FTA partners. While trading with FTA partners, nology-intensive sectors such as computers, information ser-
India faced a trade deficit in primary and intermediate goods but vices, chemicals, and iron and steel (Agarwal and Betai 2022;
achieved a trade surplus in final goods, particularly in final Alam 2015). This shift reflects India’s growing specialisation
consumer goods. India’s specialisation in final consumer goods and comparative advantage in sectors requiring advanced skill
exports marked its competitive edge in the final goods sector. and technology inputs. FTAs have notably bolstered India’s IIT,
To foster trade with its FTA partners, India has focused on especially in technological categories where India demonstrates
specific sectors for exports and imports (Figure 1). In the import strong competitiveness. Contrary to perceptions that India may
sector, India’s primary goods imports in 2023 were largely have reaped limited benefits from its FTAs, empirical evidence
sourced from Australia, Chile, Mauritius, and the UAE. In the underscores that these agreements have indeed strengthened
intermediate sector, semi-processed imports from partners were IIT, yielding concrete advantages. Recent research highlights
notably broader in scope than parts and components. Significant the potential of medium technology process-based manufac-
imports of parts and components and semi-processed goods turing for enhancing IIT, indicating an area where India stands
came from FTA partners like Japan, South Korea, and ASEAN, to benefit substantially (Agarwal and Betai 2022).
with semi-processed imports also being substantial from the As an emerging economy, India’s strong interest in TIT is
UAE and Mercosur. Among FTA partners, the SAFTA region was visibly reflected in its FTAs with various partners in 2023. India
a major source of India’s imports of final consumer goods. has offered substantial market access to its FTA partners for
India’s exports of primary products to FTA partners remained these goods and has actively engaged in such trade with them.
minimal, though it achieved substantial exports of semi-processed Among imports from these FTA partners, medium and high tech-
goods across all FTA partners listed in Figure 1. Exports of parts nology-intensive categories dominate (Figure 2, p 39). India ex-
and components, though smaller in volume compared to semi- ports nearly half of its technology-intensive products as medium
processed goods, still reached most regional FTA partners, except technology-intensive goods and about one-fifth as high tech-
Mauritius, the UAE, and SAFTA. In the final goods export sector, nology-intensive goods, though its technology-intensive export
India targeted select FTA partners with high intensity. In particu- basket remains largely composed of low-tech products.
lar, India exported final capital and consumer goods extensively To examine India’s TIT with these partners, we have analysed
to Australia in 2023. Other major markets for India’s final capital its large, medium, and small FTAs based on trade flows. The
goods included the UAE and ASEAN, while key destinations for trade patterns vary across FTAs in terms of TIT composition,
GLOBAL VALUE CHAINS
Figure 2: Pattern of India’s Technology-intensive Trade with FTA Partners ($ million)
India's Imports in Technology-intensive Goods from FTA Partners India's Exports in Technology-intensive Goods to FTA Partners
12
14.8
10.2
16
10
14
8.4
11.9
Exports ( Billion)
12 8
Imports ( Billion)
5.9
10
5.7
8.0
7.8
6
8
4.1
5.3
3.9
3.3
4.9
6 4
3.1
2.8
2.9
1.6
4
1.5
1.4
1.4
1.6
2.5
1.4
2.1
2
2.0
0.8
0.5
0.9
0.9
0.8
1.0
0.6
2
0.5
0.5
0.5
0.5
0.2
0.4
0.1
0.3
0.3
0.1
0.1
0.1
0.1
0.1
0.2
0.0
0.0
0.0
0.0
0.0
0.1
0.0
0 0
LT MT HT LT MT HT
Technology-intensive Category Technology-intensive Category
ASEAN Australia Chile Japan 4PVUIKorea Mauritius .FSDPTVS SAFTA UAE ASEAN Australia Chile Japan 4PVUIKorea Mauritius .FSDPTVS SAFTA UAE
Source: Author’s estimates based on Comtrade, United Nations.
with medium technology-intensive goods prevailing in both effect in these partner economies remains limited, and efforts
India’s import and export baskets with these FTA partners. should be made to enhance this aspect in the medium term.
When looking at low- and high-tech products, the latter domi-
nate imports, while the former are more prominent in exports. India’s MSME Trade Trends under FTAs
Across trade with these FTA partners, technology products The MSME is a vital component of India’s trade sector, accounting
account for 18.2% in low-tech, 49.8% in medium-tech, and for nearly half of the country’s total trade. In 2023, trade from
31.9% in high-tech categories. Medium technology-intensive this sector through FTAs reached $3.8 billion, a significant in-
goods dominate almost all RTAs, comprising almost half of In- crease from $1.07 billion in 2002. Throughout periods of both
dia’s total imports of technology products. India primarily im- global buoyancy and recession, the MSME sector’s trade—cov-
ports low-technology products from SAFTA member countries. ering both exports and imports—grew at a faster pace than
In 2023, India’s high-technology imports from selected FTA India’s overall trade via FTAs. During the years of global growth,
partners—ASEAN, Japan, South Korea, SAFTA, and UAE—rep- MSME trade through FTAs expanded at an annual rate of 13.1%,
resented a substantial portion of their total technology- with exports increasing by 13.4% and imports by 12.8%. Over this
intensive exports to India. period, the sector’s total trade and exports grew by 1.9 times
In 2023, India’s export basket for technology products con- each, while imports rose by 1.8 times. However, the global re-
sisted of 31.6% low-tech, 49.5% medium-tech, and 18.8% high- cession (2008–23) significantly affected the MSME sector,
tech goods. It is worth noting that the RTAs with which India slowing its trade expansion through the FTA route. During this
engages vary structurally, offering different levels of market period, MSME total trade grew at an annual rate of only 3.8%,
access for India’s diverse technology product groups. In the with exports increasing by 3.7% and imports by 4%. Over the past
medium term, India should consider selectively targeting mar- two decades, spanning 2002–23, India gained limited advan-
kets for specific technology-intensive products. For instance, tages for the MSME sector through its selected 15 major FTAs.
Mauritius and the UAE have proven favourable for low-tech ex- To bolster trade in this sector, FTA negotiations must place
ports, while Australia and SAFTA could serve as strategic mar- greater emphasis on enhancing market access for MSMEs.
kets for both low-tech and other technology-intensive product The performance of India’s MSME sector has varied signifi-
categories. India’s exports in medium-tech products are signif- cantly across different FTAs during the period from 2000 to
icant across most RTAs, as shown in Figure 2, particularly in 2023. A comparison of MSME trade growth rates five years be-
ASEAN, Australia, Chile, Mauritius, and the UAE, where medi- fore and after each FTA shows considerable growth for agree-
um-tech products make up more than half of India’s technolo- ments with partners like Thailand, Chile, Nepal, South Korea,
gy-intensive exports. Structurally, India shows strength in SAFTA, Mercosur, and ASEAN. However, this momentum often
low-tech exports within its FTA framework, while it maintains disappeared after the initial five years of implementation, with
a solid position in medium-tech products, though high-tech only ASEAN and Nepal maintaining a steady growth trajectory
products present opportunities for further growth. up to 2023. Notably, MSME trade with Malaysia took longer to
India’s trade balance with FTA partners is a crucial factor in gain momentum, only picking up well after the FTA’s imple-
shaping its trade policy. In 2023, India achieved a trade surplus mentation and continuing until 2023. The robust MSME en-
of 13.4% in low-tech products but faced a deficit of –14% in gagement with these FTA partners was largely driven by rapid
medium-tech and a substantial 91.9% deficit in high-tech import growth from partners such as Thailand, Chile, Nepal,
products, resulting in an overall trade deficit of 13.1% in tech- South Korea, SAFTA, Mercosur, and ASEAN. However, high im-
nology products from these selected RTAs. India has established port growth from India persisted with just a few partners—
a solid foundation for exporting medium- and high-tech prod- namely Nepal, South Korea, and ASEAN—up to 2023. On the
ucts to many of its FTA partners. In the medium technology- export side, India’s MSME exports saw significant growth post-
intensive goods sector, India has already secured a significant FTA with partners like Thailand, Chile, South Korea, SAFTA,
foothold across most of these partnerships. However, the scale and ASEAN, with particularly strong expansion to Chile and
GLOBAL VALUE CHAINS
Figure 3: Relative Performance of FTAs and Non-FTAs in Managing illustrate their relative performances. The TBR was positive
Trade Deficit
from 2000 to 2009, indicating a favourable balance, but turned
India's Trends in Trade Deficit 3atio with Increasing FTA Partners negative from 2010 to 2023, reflecting a shift towards a deficit
1
1 1 1 1 2 3 9 10 10 15 24 25 25 25 25 25 25 25 25 25 25 26 28 28 under FTAs, which has raised concerns for India. During the
Ratio of Trade Balance to Total Trade
0.8
recession’s first phase (2008–16), the TBR hit its lowest in 2015,
0.6
rebounded slightly in 2017, but remained volatile through 2023.
0.4
In contrast, for non-FTA partners, the TBR turned negative as
0.2 early as 2003 but showed steady improvement until 2016, with
0 minor fluctuations. In 2016, the non-FTA TBR outperformed the
-0.2 FTA TBR for the first time—a trend not sustained in later years.
-0.4 Although FTAs have generally managed trade balance better
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
than non-FTAs, their advantage has diminished over the years.
Year
FTA Non-FTA Noof FTA Qartner Dountries
Given the fiscal cost of implementing FTAs, their role in support-
Source: Author’s estimates using Comtrade, United Nations.
ing India’s trade balance warrants close examination.
This finding is crucial, as it emphasises the potential of FTAs
ASEAN up to 2023. Malaysia’s trade engagement followed a as a strategic tool for managing and potentially reducing India’s
similar delayed pattern, eventually experiencing high MSME trade deficits. The study highlights the importance of FTAs within
export growth until 2023. India’s broader trade strategy, revealing their nuanced and
India’s experience over the past two decades indicates that stabilising effect on India’s economic engagements globally.
the MSME sector has often been overlooked in FTA engage-
ments, with trade growth impulses generally subsiding be- Conclusions
yond five years post-implementation. The MSME sector’s share India has embraced a liberal trade policy, recognising trade as
in India’s total FTA-based trade declined from 2.02% initially central to its growth narrative. In its pursuit of regionalism,
to 1.5% in 2007 and further to 1.04% in 2023. For promoting the country views imports as essential not only for comple-
India’s MSMEs sector, future FTA negotiations should prioritise menting exports but also for meeting rising domestic demand,
enhancing market access for this sector, ensuring that the ben- thus positioning imports as an integral part of its export strat-
efits of these agreements are sustained and impactful. egy rather than considering them in isolation. Among both FTA
and non-FTA partners, a few non-FTA countries have posted
FTA Effects on India’s Trade Balance large trade deficits with India, whereas the influence of FTAs
India’s FTA efficiency is frequently assessed in the context of its has been more balanced. FTAs have notably contributed to
persistent trade deficit, which has remained structurally negative India’s economy, fostering both direct and indirect employment
over recent decades. The FTA regime began optimistically, with a across various sectors, and have also led to the establishment
modest trade surplus recorded from 2002 to 2009, rising from of institutions addressing vital issues like sanitary and phy-
$0.6 billion in 2000 to $1.6 billion in 2009, as FTAs were estab- tosanitary (SPS) measures, technical barriers to trade (TBT),
lished with countries such as Sri Lanka, Afghanistan, Thailand, intellectual property protection, and foreign exchange man-
Singapore, Chile, Nepal, SAFTA, and Mercosur. However, a piv- agement. Empirical evidence underscores the structural trans-
otal shift occurred in 2010 when India’s FTA route encountered formations driven by the spread of FTAs in India.
an unexpected trade deficit of $9.9 billion, which expanded Regionalism has been at the core of India’s trade policy, with
dramatically to $69.9 billion by 2023, sparking public debate trade leveraged as a catalyst for growth. Since 2000, India’s
over the value of such agreements. The FTA-related trade deficit active regionalism has brought positive outcomes, with trade
continued to grow at an annual rate of 16.2% between 2010 gains persisting uninterrupted through the global recession
and 2023. The number of FTA partners also rose steadily, from until 2009. However, the emergence of a trade deficit under
one in 2000 to 15 in 2009, reaching 24 by 2010, and 28 by 2023. FTAs in 2010 sparked debate over their effectiveness, particu-
India’s “first wave of regionalism” suffered a setback after larly considering the associated fiscal and economic costs. This
2011, with the trade deficit growing at 11.9% per year from 2009 paper analyses 15 FTAs, and various other forms of integration,
to 2011, reaching $12.4 billion. After a decade-long pause, a using a before-and-after approach to assess their effectiveness
second phase began in 2021, introducing FTAs with Mauritius, from various perspectives. In terms of trade flows, most FTAs
Australia, and the UAE. In 2024, India signed an additional sustained their targeted growth rates in the post-implementa-
agreement with the European Free Trade Association (EFTA), tion period compared to the pre-implementation phase.
though this latest agreement falls outside the scope of this paper. Despite a successful initial phase, this high growth trend waned,
From 2000 to 2023, India’s trade deficits under both FTAs leading to an unsustainable rise in trade imbalances with FTA
and non-FTAs are depicted in Figure 3, alongside an analysis of partners. The paper also examined the developmental aspects
trends using the trade balance ratio (TBR), which is the trade of FTAs, notably the structural shifts in trade patterns. Several
balance to total trade ratio. A TBR value in the x-axis indicates FTAs reflected a low volume of India’s exports in primary prod-
balanced trade, while deviations signal shifts towards surplus ucts, though imports in this sector remained significant. For
or deficit. For both FTA and non-FTA trade, two TBR indicators intermediate goods, nearly half of the trade consisted of parts
GLOBAL VALUE CHAINS
and components and semi-processed products. In the final FTA trade in 2023. Regarding trade imbalances between FTA
goods sector, imports concentrated on capital goods, while ex- and non-FTA partners, FTAs have provided some advantages in
ports included both consumer and capital goods. moderating trade deficits, although this benefit has gradually
India’s trade profile has shown a marked orientation towards waned over the past two decades. Empirical analysis suggests
technology-intensive sectors with dominated medium- and that India’s trade pattern with FTA partners, especially in GVCs
high-tech imports from FTA partners. On the export side, me- and TIT, is progressing well but requires scaling up to mitigate
dium- and low-tech sectors have been crucial in India’s trade with trade deficits. Therefore, trade policy must be periodically re-
FTA partners. While the MSME sector is integral to India’s trade viewed to reinvigorate negotiations for expanded market ac-
strategy representing half of the country’s total trade, its share cess with current FTA partners and pursue new engagements
within the FTA framework was notably low at just 1% of overall aligned with India’s multifaceted developmental objectives.
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tional Economics, Washington, DC. mestic Demand in India: In Search of a New Suggestions for an International Economic
Frankel, J A, E Stein and S-J Wei (1994): “Trading Paradigm of Development,” Moving towards a Policy,” Twentieth Century Fund, New York.
Blocs: The Natural, the Unnatural, and the New Development Model for East Asia: The Trefler, D (1993): “Trade Liberalization and the
Super-natural,” Working Paper No C94-034, Role of Domestic Policy and Regional Coopera- Theory of Endogenous Protection: An Econo-
Centre for International and Development Eco- tion, ERIA Research Project, pp 191–222. metric Study of US Import Policy,” Journal of
nomics Research, Department of Economics, — (2014): “India-China Bilateral Trade Relation- Political Economy, Vol 101, No 1, pp 138–60.
University of California, Berkeley. ship,” Research Study, Reserve Bank of India. Zhang, R, J Zhao and J Zhao (2021): “Effects of Free
Ghosh, S and S Yamarik (2004): “Are Regional Trad- Mohanty, S K and S Saha (2019): “Manufacturing Trade Agreements on Global Value Chain
ing Arrangements Trade Creating? An Applica- Trade and Employment Linkages in India,” Trade: A Research Perspective of GVC Back-
tion of Extreme Bounds Analysis,” Journal of S Chaturvedi and S Saha (eds), Manufacturing ward Linkage,” Applied Economics, Vol 53, No 44,
International Economics, Vol 63, No 2, pp 369–95. and Jobs in South Asia: Strategy for Sustainable pp 5122–34.
Ghoshal, I (2015): “Trade-growth Relationship in Economic Growth, pp 85–110. Zhang, Z and Q Li (2024): “Assessing the Impact of
India in the Pre and Post Trade Agreements Nguyen, M N, S Sun and R Welters (2024): “FDI and Free Trade Agreement (FTA) Signing on China’s
Regime,” Procedia Economics and Finance, Vol 30, Product and Process Innovation of SMEs in Viet- Outbound Labor Services,” Journal of Interna-
pp 254–64. nam: The Role of Institutions,” World Economy. tional Trade & Economic Development, pp 1–25.
GLOBAL VALUE CHAINS
Special Issue on Trade Policy, FTAs, and Value Chains

An Overview
Sachin Chaturvedi
I
This special issue brings out many important insights n the recent past, two distinct trends have emerged in the
into India’s evolving trade policy architecture. It focuses global trade scenario. First, since the recession of 2008, tech-
nological disruption and value chains have been reshaping the
on how the trade policy engages with different sectors
global landscape of trade, providing a discernible impetus to
in an era in which the momentum of globalisation is no global growth. Prior to that, trade grew at twice the rate of global
longer driven by static comparative advantages or trade gross domestic product (GDP), but since the financial crisis, that
in raw materials and finished products but by global momentum has been stalled. In fact, in 2023, for the first time
in history, merchandise trade contracted (-1.2%) despite global
value chains which are reshaping the trade landscape.
economic growth. Second, as reported by the United Nations
Conference on Trade and Development (2013), supply chains
accounted for 80% of global trade. In the recent years, close
to 70% of world trade has been in parts and components
signifying intense interdependence at the sectoral level
through production networks (World Bank 2017). Countries
having free trade agreements (FTA s) emerged as great survi-
vors with strong production networks.
India has cautiously navigated these troubled times. It has stra-
tegically leveraged the external sector for domestic economic
growth, while the world economy has been in a challenging
situation with a subdued growth rate of 2.7%. India’s economic
growth in recent years has been the most resilient among the
major economies and the country is gradually emerging as the
fifth largest economy. This is also evident from India’s trade to
GDP ratio, which increased from 34% in 2018 to 46% in 2023.
India has focused on trade-facilitating infrastructure for
building competitiveness, by initiating unique incentives for
select sectors, and bringing down trade and logistical costs.
The advantages of such a policy approach have brought sig-
nificant gains at the sectoral level. However, at the same time,
it also calls for a new and practical narrative on India’s trade
policymaking which has largely been caught between the
binaries of exports versus imports, with an excessive obsession
on singular parameters like trade balance, missing out on the
growing convergence among broad sectors (agriculture, man-
ufacturing, and services) with respect to market access, in-
vestments, and technology flows.
In this special issue, we bring out some of the most telling
evidence and practical insights with regard to India’s evolving
The guest editor wishes to thank S K Mohanty, P K Anand, Sabyasachi trade policy architecture and how it engages with different
Saha, Amit Kumar, Pankhuri Gaur, P Srinivasa Rao, Ivy Roy Sarkar, sectors. Globally, trade has played a defining role in pushing
Syed Arslan Ali, Tish Malhotra and Ritu Parnami of the Research and economic growth during buoyancy (2002–07). However,
Information System for Developing Countries (RIS), New Delhi, for
organising this special issue.
EPW is grateful to Sachin Chaturvedi who has been the
Sachin Chaturvedi (sachin@ris.org.in) is director general at the
Research and Information System for Developing Countries, New Delhi.
guest editor for this special issue.
GLOBAL VALUE CHAINS
there has been a growing pessimism about the future of trade demand with the rise in income accompanying their graduation.
as a driver of global economic growth. After the financial It is proposed that consistent efforts are required to enhance
crises and the ensuing recession, the trade sector decelerated the share of value added, processed food in the agriculture
and could not provide the necessary impetus for global GDP trade basket of India and this may need a review of export-
expansion. As a result, India went through a phase of guarded promoting schemes and their possible convergence.
optimism, reflected in a perceived hiatus in negotiating new Rajeev Kher and Anshuman Gupta examine the issue of
regional trade arrangements (RTAs) and FTAs (India’s withdrawal compliance with trade and sustainability, which has emerged
from the Regional Comprehensive Economic Partnership nego- as a major challenge for developing countries, particularly in
tiations is often cited reference in this regard), which has been the absence of their capabilities and capacity to implement
reversed in the recent past through new FTAs with strategically global environmental commitments. The paper has examined
important partners like the United Arab Emirates and Australia. the European Union-Carbon Border Adjustment Mechanism
Saroj K Mohanty’s paper contextualises various strands of this regulations and their compatibility with the provisions of the
debate through rigorous empirics and evaluates the efficacy of World Trade Organization (WTO).
India’s FTAs. The parameters that were considered for a multi- To derive maximum gains from regional integration, en-
dimensional and comprehensive assessment of the FTAs include hance efficiency, and reduce transaction costs, India has im-
trade flow patterns, trade balance, the structure of global value proved its trade facilitation infrastructure and is working with
chain (GVC) trade, the composition of technology-intensive trade, partner countries in the region to streamline specific sectors of
the nature of trade deficits between FTA and non-FTA partners, connectivity for bolstering the movement of goods and services.
and market access for the micro, small and medium enterprises Nisha Taneja et al focus on the Bangladesh, Bhutan, India and
sector. In the Indian context, it is found that during periods of Nepal Motor Vehicle Agreement, an important modality towards
global economic buoyancy and the initial phase of recession, integrating member countries, providing an opportunity for
FTA partners showed a strong performance in goods trade. the development of the north-eastern region of India. This
Nevertheless, it is much less acknowledged that the momen- paper provides an analytical framework to assess the effi-
tum of globalisation is no longer driven by static comparative ciency gains from such initiatives and recommends a better
advantages or trade in raw materials and finished products. organisation of supply chains in the regional context.
The process of integration through GVCs has been accelerated Increasing tendencies of protectionism, particularly across ma-
by RTAs and FTAs, and countries are aligning themselves jor importing countries and a weakening of the WTO process,
according to their needs and short- and long-term competitive- played a significant role in the slowing down of North–South
ness parameters. Based on emerging experience from India, trade. As Atul Kaushik points out in this special issue, the WTO dis-
Darpajit Sengupta and Saikat Sinha Roy also suggest that GVCs pute settlement mechanism functioned well, including for devel-
play a crucial role in lowering exchange rate pass-through by oping countries, until the United States started blocking the ap-
fragmenting production across multiple countries, which dis- pointment of appellate body members, putting the security and
perses costs, encourages price stability, and reduces sensitivity predictability of the multilateral trading system into question.
to exchange rate movements. As highlighted above, India’s trade policy analysis has to rise
In order to deepen the understanding of India’s evolving above sweeping generalisations with regard to emerging ex-
trade policies at the sectoral and regional level, Pankhuri periences vis-à-vis RTAs and FTAs, even as India remains com-
Gaur’s paper analyses a unique experiment being implemented mitted to multilateralism for promoting trade across countries
by India in the form of Districts as Export Hubs (DEH) Initiative. based on the simple reality that every partner country is, in
This decentralised approach for enhancing exports and product fact, part of one or the other FTA. With early gains from “Make
competitiveness at the district level aims at strengthening the in India” and “Atmanirbhar Bharat,” a favourable trade policy
current export market base while venturing into new markets regime has to enable imports for exports and recognise their
with district-specific competitive goods and services to reach interdependence. With proven abilities to export high- and
the $2 trillion export target by 2030. medium-tech products, India should promote supportive com-
Agriculture carries enormous significance for the Indian petitiveness-building strategies, access to trade finance, and
economy, particularly for food and livelihood security. The bring down trade costs. Convergence among agriculture, man-
sector is also at the core of rural transformation, value addi- ufacturing, and services would also enable greater value addi-
tion, and bringing about equitable prosperity. India has always tion in apparently low-tech sectors through productivity and
enjoyed a trade surplus in agriculture, with rising trade com- efficiency gains. In order to achieve greater resilience in eco-
petitiveness in sub-sectors like processed animal products. In nomic growth, sectoral policies on trade promotion and lever-
this context, Sachin Chaturvedi’s paper highlights that the global aging from emerging trading architecture should be prioritised
economy is witnessing a continued rise in agricultural trade as through careful target setting and timely evaluation.
compared to non-agricultural trade over the last two decades. References
There is a distinct shift in demand towards high-value processed United Nations Conference on Trade and Development (2013): Global Value
agricultural products for consumption among countries of the Chains: Investment and trade for Development, World Investment
Report 2013, United Nations Publications.
global South as well. This offers a unique opportunity for India, World Bank (2017): Measuring and Analysing the Impact of GVCs on Economic
as many least developed countries may exhibit a greater Development, Global Value Chains Development Report 2017, Washington DC.
BOOK REVIEW
Demystifying Ageing in India of the elderly from the social viewpoint,

care for the health of the elderly with
A Comprehensive Review with particular emphasis on geriatric services;

policies and programmes targeting sen-
Legal Implications iors in India; and analysis of the status of
older women. The book also includes
considerations on the legal protection
measures for the elderly available in the
Madhurima Sharma country. This issue becomes particularly
relevant in light of the increasing num-
T
he book Ageing Issues and Responses Ageing Issues and Responses in India ber of cases of abuse against the elderly,
in India arrives during a period edited by Mala Kapur Shankardass, Singapore: Springer, especially women. It also addresses the
when the study of ageing in India India: Rawat Books, `9,332 (hardcover), 2020; pp 251, special health issues of the ageing popu-
`1,525 (paperback).
is experiencing what its editor, Mala lation, in particular, post-working age
Kapur Shankardass, refers as a “contem- by central and state governments issues and the management of dementia.
porary phase.” This is a unique work on should be taken to enable them to func- The book is written in an accessible
contemporary gerontology in India. The tion properly in society; (iv) how to way for the reader and the content can
publication comprises 15 chapters, deal- expand the comfort zone that can be be divided into five parts.
ing with various emerging issues of the enjoyed by each one of the older gener-
elderly and reflecting some of the appro- ations; and (v) how to increase aware- Multilayered Vulnerabilities
priate responses in facing the problems ness about major mental health disor- The phenomenon of ageing and issues
in the future. ders, including Alzheimer’s disease and related to it are not primarily confined
In the context of the increasing share dementia, among the elderly. to developed countries alone. The elderly
of the older population, this book raises The authors of the publication are in India face health-, social-, and eco-
issues concerning, including (i) whether experts in various fields: academic science, nomic-level vulnerabilities along with
the states’ resources are sufficient to policymaking, geriatric research, and their implications. It is within this
provide elderly people with adequate medicine, due to which the book presents context that Mala Kapur Shankardass’s
services including housing; (ii) how the researched area from a multidimen- book cuts through the discourses of
to satisfactorily address their concerns; sional perspective. Topics covered in the basic needs, security, dignity, protection,
(iii) what future plans and programmes publications include the marginalisation healthcare, etc, for the older population.
BOOK REVIEW
According to Archana Kaushik, in credibility and authority of social wel- ageing population. Archana Kaushik
Chapter 2 of this book, the reasons for fare systems in the future, especially assesses, in Chapter 6, the trends and
health vulnerabilities among the older through comparative research in the challenges in protecting elderly parents
population in India are varied but pre- framework of projects carried out in the in urban infrastructure in contemporary
dominantly caused by poverty, increas- United States (US), the United Kingdom India. Migration for educational and ca-
ing dependence, gender discrimination, (UK), and at the international level. reer opportunities, women’s employment
shooting medical expenses, and so on. Finally, if the elderly population are engagement, and others are some of the
Social vulnerabilities are the result of vulnerable groups, elderly women are factors that have contributed to the rise
migration and widowhood, which fuels even more so. However, the feminisa- of distance care in recent years. Narrative
elder abuse. A case study shows that an tion of ageing is one of the most impor- studies presented by the author show that
old woman living in a Delhi village had tant changes in the global ageing pat- even elderly people who are economically
been slapped, thrashed, and beaten up tern. In this book, the authors have re- stable and whose children regularly talk
by her son after her husband died, which sponsibly portrayed the problems faced to them over phone and visit sometimes,
she did not expect at all. by older women in India. Chapters 8, experience an ongoing sense of loneli-
The author also emphasises that, 12, and 14 focus on the issues affecting ness. In those cases, the vastness of their
for the elderly, an active lifestyle is older women. In Chapter 8, Pamela loneliness remains untouched. S Anil
achievable only by providing them with Singla describes how ageing women in Chandran presents in Chapter 7 an as-
social support. India are becoming a weaker social sessment of intergenerational support
Chapter 4 by Biju Mathew should be group, and why they are particularly im- based on population data, concluding
read as a continuation of Chapter 2. The portant but are getting forced into a sed- that it is possible to formulate the nec-
study shows how it is possible to create a entary lifestyle. In turn, Chapter 12 by essary policies to anticipate the coming
senior-friendly environment. He empha- Meena geriatric crisis. The book can be regarded
sises the importance of local govern- Yadav is a study on the impact of old age as intellectual, instructive, and scientific.
ments and self-help groups in creating on mental and physical health, especially Each chapter includes tables, graphs,
such an environment. The text exam- in the context of biological changes examples, and case studies. Additionally,
ines the social problems of the elderly, affecting women during menopause. a properly compiled bibliography helps
ways of solving them, and ways of prac- The study presents an analysis of meno- direct the scholars in their subsequent
tical implementation of the concept of pausal symptoms in various countries study of the issue. Each chapter has un-
active ageing. Chapters 3 and 15 present around the world and in various dergone thorough editing and has been
studies of healthcare for seniors. In regions of India. Symptoms include mood beautifully presented. Additionally, each
Chapter 3, Anand Ambali explains the swings, depression, and metabolic dis- chapter is a standalone unit that provides
importance of preventive geriatrics in order. In Chapter 14, Asha Banu Soletti in-depth information, and when read
late life and identifies the different levels and P V Laavanya present an analysis of collectively as a full book, they all work
of preventive mechanisms used to en- the phenomenon of abuse against older together to present the research efforts.
sure physical, mental, and emotional women in the family based on the expe-
well-being. Chapter 15 by Vidya Shenoy riences of three women, using qualitative Critical Review of Ageing
discusses the impact of yoga and music methodology and phenomenological Literature in the Indian Context
on people with dementia. narratives. The study assesses the im- The study of ageing in India presents
Furthermore, the book offers valuable pact of the lack of basic resources, finan- unique challenges and insights, influ-
insights into the legal safeguards and cial resources and intergenerational sup- enced by the country’s socio-economic,
policies designed to protect senior citi- port on the lives of older people, also cultural, and healthcare landscape. This
zens in India. It sheds light on the gaps highlighting the need for macro-level edu- section critically examines existing re-
in the existing legal framework and pro- cation. The above-mentioned chapters search on ageing, highlighting the gaps,
vides recommendations for improve- focus on older women. strengths, and areas needing further ex-
ment. This aspect of the book is particu- ploration to address the needs of India’s
larly beneficial for policymakers, legal Solitary Living sans Support elderly population. India is experiencing
professionals, and scholars. Chapter 5 by The fifth part covers the problems faced by a demographic transition with a rapidly
K R Gangadharan and Chapter 11 by Sar- older people living alone and the authors growing elderly population. By 2050,
ita Kapur provide comprehensive studies have tried to incorporate some probable the number of people aged 60 years and
of current national policies, programmes, solutions for it. In Chapter 13, Jagriti above is expected to reach 323 million
and laws. In the context of social security, Gangopadhyay describes the social and (UN 2019). This trend necessitates a
they set out clearly what the welfare personal problems of the elderly people focused examination of how ageing im-
state should provide, such as healthcare, living alone. The study shows that pro- pacts health and social systems. However,
care, human rights, survival, retire- grammes and policies developed at the existing literature often lacks compre-
ment, and benefits. Further arguments administrative level should be adapted to hensive longitudinal studies that track
are based on statistics to ensure the the needs and concerns of an increasingly these demographic changes and their
BOOK REVIEW
implications over time. There are numer- of the world, predicts future crises in inquiries that warrant exploration on a
ous studies which mainly focused on India and announces the necessary larger scale in the near future. Conse-
depressive symptoms and cognitive de- process of creating new strategies. The quently, the book serves as a wellspring
cline among older adults in India. Exist- publication can be summarised as fol- of inspiration for further advancements
ing studies often overlook the cultural lows: the book presents, in 15 chapters, in the field of social research. Given the
dimensions of ageing, underestimating the most up-to-date research results on immense diversity within the country,
the psychological and social impacts of key issues of older people in India, as addressing social issues, especially those
these changes. There is a need for research well as issues that are insufficiently concerning elderly individuals, demands
that incorporates cultural sensitivity and addressed from a policy and social a region-specific approach. It is not fea-
explores the role of community-based perspective. The publication includes sible to tackle such matters at a general-
support systems. Engaging critically with up-to-date statistics, information on ised level. Moreover, it is imperative to
the literature on ageing in India reveals available services, and many strategies tailor senior care policies to regional
significant challenges and opportunities. for preparing for the future. Hence, this nuances. This approach should also be
There is a clear need for more robust, book holds the potential to captivate attuned to disparities between urban
culturally sensitive research that addresses readers at both local and national lev- and rural areas. So, it will certainly be
the complex interplay of demographic, els. Its value extends to a wide spectrum worth reaching for the next volume
socio-economic, and healthcare factors. of stakeholders, including policymakers, discussing the problems related to ageing
Future studies should focus on longitu- practitioners, and academic scholars. It in specific conditions.
dinal data collection, effective inter- is essential to underscore that the con-
vention strategies, and comprehensive tent within is equally beneficial for the Madhurima Sharma (madhurimasharma1@
gmail.com) is a research scholar at the
policy analysis to better support India’s elderly population, offering a wealth of
International Institute for Population
ageing population. practical solutions that can enhance Sciences, Mumbai.
The book presents contemporary cri- their quality of life.
ses, statistical data on the elderly popu- One clear advantage of this publication Reference
lation in India and practical solutions to is its broad appeal to readers across United Nations (2019): World Population Ageing
the problems discussed. It also com- various levels of expertise. Each chapter 2019, https://www.un.org/en/development/
desa/population/publications/pdf/ageing/
pares systems operating in other parts within the book prompts fresh research WorldPopulationAgeing2019-Report.pdf.
GOKHALE INSTITUTE OF POLITICS AND ECONOMICS

(Deemed to be University u/s 3 of the UGC Act, 1956), PUNE – 411 004
FACULTY RECRUITMENT (Re-Advt)

Gokhale Institute of Politics and Economics, Pune invites the application for the Post
of RBI CHAIR PROFESSOR (OPEN) in Pay Scale: Academic Level 14.
Specialization: In all areas allied to Economics and Finance including (but not limited
to) Macroeconomics, Money & Banking, Financial Technology, Agriculture, Industrial
Economics, International Trade, Development Economics, Public Finance,
Geo-economics, Cooperatives and Regional Studies.
For further details on eligibility, pay, application etc. visit https://gipe.ac.in/careers/
Last date for online applications – December 02, 2024.
REGISTRAR
Governing the North East Frontiers this frontier at the time of the advent of
the East India Company and which
“characterised the indigenous polity of
this region” (Misra 2011: 56) was never
Thongkholal Haokip understood. Nevertheless, as Ray has
shown in this study, the “ambiguity and
W
hen the East India Company book reviewS jurisdictional confusion in fact helped to
acquired the Diwani of Bengal further entrench colonial power in the
in 1765, the present-day Megha- Placing the Frontier in British North-East India: frontier hills.” The strength of this
laya state became the immediate fron- Law, Custom and Knowledge by Reeju Ray, Oxford: work lies in the intricate discussion on
tier of the Company, until Assam was Oxford University Press (2023); pp xxi + 200, `1,295. the law’s movement in Khasi-Jaintia
fully annexed over the next century. The hills “through contractual agreements,
inhabitants of this frontier were, de- with the expansion of the plantation regulations, boundary-making, jurisdic-
scribes Alexander Mackenzie (1884: 245), and extractive economy, there was an tional disputes, and formulation of cus-
Secretary to the Government of India in “immense increase in the number and tom, authority and knowledge.”
the Home Department, “the first of the diversity of the Frontiers that have been In the initial chapter on the “Frontiers
Assam mountain tribes with whom we adopted to protect the possessions and of Law,” the author looks into how raids
came into contact,” who were at that to control the ambitions of States” by Garo mountaineers into the lowlands
time “semi-independent.” The oppres- (Curzon 1907: 48). The non-interfer- of Rangpur, the threat posed by the
sive practices of the zamindars and the ence policy in this so-called “uncivi- Burmese occupation of Manipur and
retaliatory raids and murders from these lised frontier district[s]” was continued Assam valleys, the massacre in Khasi
hills led to the formulation of a non- till 1866, when the Garo Hills district, hills, and other episodes compelled the
regulation pattern of administration and later on, the Khasi Hills district, was mapping of the hills and the determina-
by David Scott, who was the magistrate founded with the passing of Act XXII of tion of boundaries. The agreements
of Rangpur from 1815 to 1821 and was 1869. This was primarily in response to signed between the Company and the
responsible for the Garo frontier. Under a series of raids and plunders committed in local rulers enabled law to travel across
Regulation X of 1822, “the Garo Moun- this frontier during the 1840s and 1850s the Garo, Khasi and Jaintia Hills during
taineers, and other rude tribes on the by tribes to the “south of the Assam Valley,” the early decades of the 19th century.
North-Eastern Frontier of Rungpore” which the book under review mainly Later on, “[t]he revised agreements
were exempted “from the operation focuses on. enhanced the colonial monopoly over
of the existing Regulations.” Giving a resources in the hills.” Indeed, the non-
definition of the directional name— Frontier Governmentality regulation policy under Regulation X of
the “North-East”—Alexander Mackenzie Reeju Ray’s work not only affirms “fron- 1822 merely “suspend[s] the operation of
(1884: 1) explains that tier governmentality” but also shows the existing rules for the administration
that despite “an official sanction of legal of civil and criminal justice,” but rules
the north-east frontier of Bengal is a term
used sometimes to denote a boundary line, pluralism through indirect rule” in the through an appointed officer in conjunc-
and sometimes more generally to describe British Empire, “there was a hardening tion with the village headmen.
a tract. In the latter sense it embraces the of state structures and assertion of colo-
whole of the hill ranges north, east, and nial sovereignty.” Frontier governmen- Border-making
south of the Assam Valley.
tality assumes that: The next chapter titled “Games of Juris-
Two decades later, George Nathaniel diction” intricately looks into how the
Far from not being governed, the peoples
Curzon (1907: 6), delivering “The Ro- of the hills and peripheries were very much Company’s jurisdiction was extended
manes Lecture” on 2 November 1907, ruled, through state sanctioned ‘customs’ into the frontier. The imperial sover-
describes their relationship: “The most and ‘traditions.’ This was another form of eignty at the frontier was initially seen as
arduous struggle in which we have been subjugation and governance rather than the imprecise and ambiguous, but these were,
absence of it. (Hopkins 2020: 7)
engaged in India in modern times was as Ray claims, strategic “responses to
waged with Frontier tribes.” And “[a]s It argues that the ambiguity of the law encounters with the incommensurable
the first among the hill tribes that the and the state apparatus in these hills and varied forms of authority and ruler-
British came in contact with, the policies “was a strategy of governance” and a subject relations in the frontier hills.”
and laws adopted to deal with the Garos “defiance of the very colonial spatial Many areas in which the British wanted
were later extended or replicated in other processes” resulting in the separation of to settle boundaries cannot be clearly
hills of the frontier and beyond,” includ- subjects and the frontier tribes. The demarcated ethnically, which was against
ing the Khasi, Jaintia and Naga hills overlapping of political boundaries and their obsession with well-defined bounda-
(Haokip 2022: 434). Within a century, sovereignties, which was the norm in ries based on ethnicity.
BOOK REVIEW
The Lyngam people were a case in villages and the syiems, ranging from spoke different dialects in the hills they
point in the attempt to demarcate the shared to interchangeable ones, some- occupied, with little or no mutual intel-
boundary between the Khasi and Garo times resulting in disputes. The claims ligibility even among themselves. For
hills. They are said to be the mix-ethnic- of customary jurisdictions were set aside instance, the Baptist missionary in Ma-
ity produced by intermarriage between as conflicting, resulting in the arbitrary nipur, William Pettigrew, who worked
the Khasis and the Garos. They posed a imposition of decisions which often led among the Tangkhuls, standardised the
challenge not only in placing on either to the entrenchment of colonial sover- Hunphun/Ukhrul dialect as Tangkhul
side of the district but also by virtue eignty. Despite the change in colonial language through the publication of a
of their inherent nature of nomadism. governance after 1857 towards an indi- primer and later translated the Bible
This nomadic nature, in the literature rect rule with more sensitivity to local into Tangkhul language. In many fron-
on non-state peoples, is a part of the customs, “the colonial state emerged as tier areas, the standardisation of lan-
“adaptations designed to evade both a paternalistic but dominant political guages led to, as Ray pointed out, “the
state capture,” including taxation (Scott authority.” Ray claims that “indirect rule crystallisation of ethnic categories.”
2009: 9). Thus, several coercive or even was also a mode of organising power, Such ethnic identities today become the
violent measures were adopted by low- fragmenting resistance, and creating, point of mobilisation for greater political
land states to sedentarise such societies. conserving, and subordinating tribal autonomy within the Union of India.
The colonial state’s inclination to deter- political institutions.” In the discussion on place-making,
mine boundaries with ease by following Colonial knowledge on the frontier Ray brings out the myriad issues with
natural markers often ran counter to people was often associated with dif- matrilineal societies mainly in the Khasi
the geographical distribution of groups, ferent tropes of primitivism. In this, the hills. In such societies, the author identi-
which was visible in the Khasi-Garo inhabitants of the North-east frontier fies the “authoritative claims based on
borderland as much as in other parts of were represented as hill tribals by the custom and religion,” which “reinforce
the North-east frontier. For instance, British, by looking into the relationship patriarchal spatiality” and these “patri-
“the natural land-marks” that define the between space or landscape and people archal interests representing Hindutva
boundary between Burma and Manipur, in the frontier. The colonial production ideology have aligned with ethnocentric
which was decided by the British Com- of knowledge relied heavily on “local interests.” The indigenous politics that
missioners in 1834 but “never laid down knowledge to build, develop, and legiti- has been played through matrilineal
on the ground” (Mackenzie 1884: 207), mise all forms of colonial knowledge kinship within and also outside the Kha-
and even the later boundary commis- that were crucial for the Empire,” as si society is examined. However, such
sions that finally attempted to settle this Ray points out in the next chapter on politics in relation to the “others” is in-
stretch of boundary, divide ethnic the relationship between space and adequately analysed, perhaps due to a
groups today into two countries and people. Yet, the doubting of local conscious choice. Meghalaya has a size-
across two sub-continents. The normal knowledge for its accuracy, by brand- able population of ethnic groups other
tribal polity in the form of the villagers’ ing the bearer of such knowledge as than the majority Khasi, Jaintia and
recognition of more than one political “savage” and “half-civilised people” is Garo tribes. These include several indig-
or religious syiems and the payment of not uncommon, not only during the enous or tribal communities such as
blackmail, as colonial officials insist, assists Victorian era but throughout the entire Hajong, Rabha, Koch, Synteng and Mikir,
them in the submission and incorpora- colonial period. This colonial predispo- among others. When the Subcommittee
tion of the frontier communities, as the sition on the knowledge of the frontier on North-East Frontier (Assam) Tribal
British were unfamiliar with such system tribes is a form of epistemological and Excluded Areas of the Constituent
of overlapping jurisdictions. The settle- violence. Despite the fact that such Assembly visited these hills, there was
ment of boundary disputes between the local “knowledge has increasingly gained no attempt to elicit their opinions on
hill and plain, and the violence associated attention among policy makers, devel- their future. The Constitution (One
with such border-making, argues Ray, is opment practitioners, academic, and other Hundred and Twenty-Fifth Amendment)
at the heart of the “governance strategy” scientific communities in recent decades” Bill, 2019 that was introduced in the
of the East India Company. (Haokip 2023: 72), even today, it struggles Rajya Sabha proposed that the governor
In the chapter on “Colonial Governance to overcome its earlier label of being
and Customary Authority,” Ray demon- unscientific and is still discounted by a
strates how the colonial policy of non- large number of people.
interference in customary affairs was not available at
practicable by looking into the jurisdic- Language and Identity
Vidhi News Agency
tional disputes between the syiems of Ray continues with the discussion on the
Rustom Ali Dhal, B/H KB Comm Centre
Nongstoin and Rambrai, and also between efforts of standardisation of vernacular
Near Gujarat Samachar, Kanpur
the syiems of Mylliem and Khyriem languages by missionaries, particularly Ahmedabad 380 001
in the Khasi hills. There were myriads the Khasi language by the Welsh mission Ph: 2530064, 2530024
of jurisdictional relationships between in the next chapter. Many frontier tribes
BOOK REVIEW
nominate two women and two unrep- the same way as Providence is brought Guha, Ranajit (1987): “Chandra’s Death,” Subaltern
Studies V: Writings on South Asian History and
resented tribes to the Autonomous Coun- to impose itself upon mere human Society, Ranajit Guha (ed), New Delhi: Oxford
cils. However, the Meghalaya government destiny.” Looking into some aspects of University Press, pp 135–65.
was opposed to these nominations of how “[t]he imperial/colonial law … had Haokip Thongkholal (2021): “Making a Case for the
Formation of Regional Councils within Sixth
marginalised groups, despite the pro- a clear hegemonic task to perform” Schedule Areas,” Social Sector Development in
posed amendment being “still short (Baxi 1992: 257), will highlight “the North-East India, Atul Sarma, Ashok Pankaj
and Antora Borah (eds), New Delhi: Sage Publi-
of the expectations of minority tribes failure of the Raj to incorporate some cations, pp 361–80.
in such districts or territorial areas” of the most vital issues of indigenous — (2022): “Territoriality,” The Routledge Compan-
(Haokip 2021: 364). social confl ict within its hegemonic ion to Northeast India, Jelle J P Wouters and
Tanka B Subba (eds), Delhi: Routledge India,
This volume is a much-needed addi- judicature” (Guha 1987: 150). pp 434–39.
tion to the understanding of law and — (2023): “Indigenous Knowledge as Early Warn-
ing Guide in Disaster Management,” Interna-
governance in colonial North East India. Thongkholal Haokip (th.robert@yahoo.co.in) tional Handbook of Disaster Research, Amita
However, its limitation lies in its uncriti- teaches at the Centre for the Study of Law and Singh (ed), Singapore: Springer Nature, pp 71–82.
cal view of how the law travels, particu- Governance, Jawaharlal Nehru University, Hopkins, Benjamin D (2020): Ruling the Savage
Periphery: Frontier Governance and the Making
larly in the deafening silence of the sub- New Delhi.
of the Modern State, Cambridge: Harvard
altern’s view. In the case of “Chandra’s University Press.
Mackenzie, Alexander (1884): History of the Rela-
Death,” Guha (1987: 141) construed that References
tions of the Government with the Hill Tribes
“a matrix of real historical experience Baxi, Upendra (1992): “‘The State’s Emissary’: The of the North-East Frontier of Bengal, Calcutta:
Place of Law in Subaltern Studies,” Subaltern Home Department Press.
was transformed into a matrix of Studies VII: Writings on South Asian History Misra, Sanghamitra (2011): Becoming a Borderland:
abstract legality so that the will of the and Society, Partha Chatterjee and Gyanendra The Politics of Space and Identity in Colonial
state could be made to penetrate, reor- Pandey (eds), New Delhi: Oxford University Northeastern India, New Delhi: Routledge.
Press, pp 247–64. Scott, James C (2009): The Art of Not Being Gov-
ganise part by part and eventually control Curzon, George Nathaniel (1907): Frontiers, Oxford: erned: An Anarchist History of Upland South-
the will of a subject population in much Clarendon Press. east Asia, New Haven: Yale University Press.
GLOBAL VALUE CHAINS
Dispute Settlement and Efficacy of the

Multilateral Trading System
A Dysfunctional Appellate Body Erodes the Credibility of the WTO
Atul Kaushik
D
The elaborate procedures for rules-based, automatic and id the dispute settlement mechanism (DSM), often
prompt settlement of disputes in the World Trade called the crown jewel of the World Trade Organiza-
tion (WTO), function too well to outlast the recent geo-
Organization functioned quite well until the United
political and geo-economic convulsions? Its appellate body has
States started blocking the appointment of appellate been dysfunctional since December 2019, unable to process
body members, putting the security and predictability more than 30 petitions that have been appealed into the void.
of the multilateral trading system into question. Several It was not intended to be so. While reviewing the DSM of the
General Agreement on Tariffs and Trade (GATT) era, the major
attempts have been made to clarify and improve the
trading powers wanted dispute procedures that enabled rapid
dispute procedures but no consensus has emerged so and automatic resolution of disputes. Indeed, their dissatisfac-
far. This has not only led to adverse implications for tion with the system and the failure to respect adverse panel
countries of the global South but also undermined the reports were primarily responsible for the addition of an ap-
peal stage and the legalistic character of the WTO system that
efficacy of the WTO itself.
emerged out of the Uruguay Round (Srinivasan 2005). How-
ever, the United States (US) started losing disputes and chose to
block the appointment of appellate body members, resulting
in emptying out the body in December 2019. Since then, the US
has stonewalled several attempts to revive the appellate body.
This paper examines the WTO dispute settlement narrative
with a view to assess the efficacy of the WTO. It looks at the is-
sue from the perspective of developing countries, taking into
consideration the experiences India and other developing
countries have had in accessing the DSM of the WTO. India has
been a part of the journey since the inception of GATT and its
stake in the multilateral trading system has increased mani-
fold with its comparatively small but growing share in world
trade, its leadership of countries of the global South, and its
resolve to become a developed country by 2047. The first part
of this paper deals with the history of the WTO and its origin in
GATT. Then the paper briefly summarises the key aspects of the
DSM that bring in automaticity and enforceability in dispute
settlement. It later discusses the efforts to improve these pro-
cedures. Lastly, the paper delves into the implications of the
ongoing uncertainty on countries of the global South and then
sums up the role of DSM in ensuring the efficacy of the WTO.
History
The intervening period between the two world wars witnessed
great upheavals in the global economy characterised by the
Great Depression of the 1930s, deteriorating economic rela-
tions, competitive devaluations and autarkic patterns of pro-
Atul Kaushik (atul.kaushik@gdcin.org) is a fellow at the Research and duction with trade restrictions (Garraty 1987). To ameliorate
Information System for Developing Countries.
the situation, in July 1944, the Bretton Woods Conference
GLOBAL VALUE CHAINS
decided to establish three international institutions, of which called because bilateral agreements involving import restric-
the World Bank and the International Monetary Fund came tions were entered into with the consent of the other party, by
into being, but not the International Trade Organization (ITO). taking advantage of genuine or perceived ambiguities in GATT
It is noteworthy that the draft ITO charter contemplated a rig- law, with an understanding that these will not be contested in
orous dispute settlement procedure involving voluntary arbi- GATT (Shukla 2000). There was also pressure on the multilat-
tration and the possibility of appeal to the International Court eral trading system to address certain developments that were
of Justice (ICJ) in some circumstances.1 While the ITO could not only against the doctrine of comparative advantage but
not be established then because the US did not ratify it, efforts were in violation of the non-discrimination principles of GATT,
were made, mostly by the developed world, to organise the and had increased after the Tokyo Round: emergence of the
world economy, liberalise trade restrictions, and channelise multi-fibre arrangement (MFA) that restricted textile trade lib-
the flow of capital from the developed to the developing coun- eralisation; rapid increase of agriculture subsidy budgets in
tries (Kaushik 2001). the European Union (EU) and the US; and voluntary export re-
GATT came into effect on 1 January 1948 based on a protocol straints, particularly by Japan on its automobile exports to the
of provisional application and continued functioning until US, to protect their domestic industry at the latter’s instance.
1994 without a legal persona. Its contracting parties failed in The sentiment in India on the issue of patents, especially on
an attempt in 1955 to create an organisation for trade relations pharmaceuticals, is well illustrated by the statement made in
(Jackson 1997). The trade and development interface became 1982 by the then Prime Minister Indira Gandhi at the World
a part of its lexicon in 1965 when Part IV was added to GATT,2 Health Assembly: “The idea of a better-ordered world is one in
and progressive rounds of GATT trade negotiations focused which medical discoveries will be free of patents and there will be
only on the reduction of tariffs in developed countries until no profiteering from life and death” (Lanjow 1997). However,
the Dillon Round. The Kennedy Round resulted in the first at- developed countries were increasingly leveraging their advan-
tempt to tackle non-tariff barriers to trade through the code on tage in IPRs. According to a 1986 report of the US Congress
anti-dumping, followed by the Tokyo Round which added (1986), contribution of knowledge products (excluding the ed-
codes on subsidies, import licensing, customs valuation, and ucation sector) in the US increased from 17.9% of GDP in 1967
technical barriers to trade (TBT). These codes also saw the to 24.5% in 1980. Similarly, over 25% of the US exports in the
emergence of a few dispute settlement procedures specific to 1980s contained a high IP component compared to 10% in the
them. The development dimension of trade was largely miss- post-war period (Jones et al 2010).
ing in this period. While developing countries feared the introduction of disci-
The principle of non-discriminatory application of GATT plines relating to IPRs, they agreed to discuss only two aspects:
rules (most-favoured-nation treatment rule and the national piracy in copyrights and counterfeiting in trademarks. The re-
treatment rule) applied to all contracting parties. Tariff reduc- sult, however, was a broader agreement to establish minimum
tion through specific schedules of commitments by each con- standards of protection for all IPRs.4
tracting party individually may adversely affect the domestic In return, new agreements establishing disciplines on agri-
industry of the country reducing its tariffs. On the other hand, culture trade and elimination of the MFA in textiles were se-
rules for the reduction of non-tariff barriers affect market ac- cured by them. The Uruguay Round also resulted in the estab-
cess conditions for all contracting parties. Participation and lishment of the WTO as a separate legal entity. The Dispute Set-
concerns of countries of the global South including India on tlement Understanding (DSU) elaborating the rules and proce-
non-tariff barriers, therefore, increased as successive rounds dures governing the settlement of disputes, the crown jewel of
progressed. India has been an integral part of this journey, ac- the multilateral trading system, came in this round with a
tively engaging in the negotiations, even though its share in two-tier automatic DSM with elaborate rules on submissions,
global trade was decreasing and minimal.3 hearings and timelines.
The eighth round of trade negotiations, the Uruguay Round, The most important innovation in the DSU is the possibility
was launched in 1986 at a time when significant structural of an appeal (Hughes 2006). From the broader perspective of
shifts had occurred in developed economies: services had be- the political balance and separation of powers in the WTO, the
come the predominant constituent of their GDP, declining agri- appellate body has been successful as the highest quasi-judi-
cultural export earnings and growing protectionism had re- cial organ of the institution and has acted as an important
sulted in a crisis in the agriculture sector, and manufacturers “stabiliser” within the overall framework of the organisation
sought global protection for their intellectual property rights (Howse and Esserman 2006). It is a pity that the appellate
(IPRs). A major reconfiguration of global economic and politi- body has been rendered dysfunctional now.
cal balance of forces was emerging (Sandiford 1993). Devel-
oped countries wanted trade disciplines in new areas such as Operation of the Dispute Settlement Mechanism
services, IPRs and investment, while developing countries The GATT era of the multilateral trading system saw 316 dis-
wanted the application of trade disciplines to the agriculture putes in its 47-year history, but only 136 of them resulted in
and textile sectors. the issuance of panel reports and only 96 of those reports were
Also, faced with increasing competition, the US and Europe- adopted. The rest were considered by the contracting parties
an countries started resorting to “grey area” measures, so but not adopted (28), not considered for adoption (9), the
GLOBAL VALUE CHAINS
council “took note” (2), or in one case, it could not even be sur-
Panel
mised whether it was adopted or not.5 If consultation does not result in a resolution of the dispute, the logical sequence is the
Disputes were not always referred to panels; they were also request for the establishment of a panel. All consultations are not necessarily followed
by a request for a panel. Threat of action may be more powerful than the action itself
addressed by a working party, the contracting parties directly, and may lead to a successful resolution of the dispute. A panel is a three-member
or through other means. In the GATT system, ad hoc panel re- body selected either by mutual agreement between the parties or nomination by
the director general (DG) WTO. A panel takes the assistance of the WTO secretariat
ports did not establish consistent jurisprudence and were little for legal, procedural, and technical support regarding the case. They are at liberty to
more than advisory opinions or non-binding conciliatory pro- obtain qualified legal opinion from outside experts also. The panel may also allow WTO
members to participate as third parties, provided they have a substantial trade interest
posals, which would not be effective within a multilateral sys- in the proceedings. The panel is expected to complete its work within six–nine months
tem (Sacerdote 2020). The major trading powers wanted to and submit a report. If not appealed, the DSB of the WTO must adopt the panel report
unless the entire membership of the WTO by consensus decides not to adopt it.
better secure the trade interests of their businesses and there-
fore to negotiate tighter rules for procedures to settle disputes Appeal
during the Uruguay Round of trade negotiations. They had After the panel decision, either of the parties has the right to appeal against the ruling
of the panel. It is very frequently seen that both sides appeal against the panel’s
their way in the final results. decision. However, the subject of appeal is limited to points of law and/or the legal
Determined to preserve the basic principles underlying the interpretations of the ruling and as such, no request for any fresh evidence or re-
examination of earlier evidence is entertained at this stage. The appeals are preferred
multilateral trading system at Marrakesh, the WTO members before the appellate body (AB) which again is set up by the WTO members. The AB is
resolved to develop an integrated, and more viable and dura- a seven-member permanent body of experts. These members have four-year terms
with the possibility of a single extension for another four years, and they are essentially
ble multilateral trading system in the Uruguay Round. An effi- independent individuals with international standing in the matters of trade and
cient, cost-effective, and impartial dispute settlement mecha- international law and also not affiliated with any government. The AB is assisted by a
secretariat that is independent of the WTO Secretariat. The appeal process should be
nism is the cornerstone for ensuring an equitable, effective, concluded within 60–90 days. The AB can take a decision either to reverse the panel
secure and predictable multilateral trading system. Therefore, findings, modify it or uphold it. Within 30 days of circulation of an AB decision, the
dispute settlement body has to adopt the final report of the AB, unless of course the
in their declaration adopting the final act of the Uruguay entire membership of the WTO forms a consensus not to accept it.
Round negotiations, the ministers welcomed the stronger and
clearer legal framework established through the WTO agree- retaliation. On the other hand, ICJ is dependent upon the con-
ments, including a more effective and reliable DSM. sent of both parties to a dispute. In the United Nations Conven-
The DSM provided through the DSU is the central element in tion on the Law of the Sea (UNCLOS), there are compulsory
providing security and predictability to the multilateral trading procedures leading to binding decisions and compulsory con-
system. It serves to preserve the rights and obligations of the ciliation, both theoretically and legally binding, but except
members under the WTO agreements. It recognises that prompt for cases of compulsory conciliation, parties have not uniform-
settlement of disputes is essential to the effective functioning ly accepted them. Further, there are no appeal provisions.6
of the WTO and the maintenance of a proper balance between Though an appeal provision exists, with the exception of
the rights and obligations of members. It achieves such promp- Chapter 19, in NAFTA (now the United States–Mexico–Canada
titude by laying down definitive timelines for each stage of the Agreement), cases were decided by positive consensus where-
dispute procedures: consideration of a request for consultation as DSU decided by negative consensus. These unique elements
by a member, establishment of a panel if consultations fail to of the WTO DSM make it more effective than other DSMs.
settle the dispute, an appeal procedure, a reasonable period of
time to comply with the rulings of the panels/appellate body, Reforms of the Dispute Settlement Understanding
and the ability to retaliate in the case of non-compliance. Auto- Review of the DSU was part of the built-in agenda of the Uru-
maticity of access to the procedure is ensured as any member guay Round but was not concluded in the stipulated four years.
may make a request for consultation. Automaticity of the re- One reason was that some members were waiting for the
sult of the procedures is ensured by applying the doctrine of launch of a new round of negotiations and enabling the emer-
negative or reverse consensus in decision-making at three cru- gence of consensus on a larger set of issues, but the chief rea-
cial stages: establishment of a panel when a second request to son was that the DSU was working fine. However, at the launch
establish it is made, adoption of panel/appellate body reports, of the Doha Development Agenda (DDA) in 2001, members de-
and authorisation to retaliate. As distinct from the normal pos- cided inter alia to continue the review, which has continued
itive consensus which requires every member to give consent, since then, keeping in view the fundamental objective of DDA
reverse consensus means that a request is automatically ap- to improve the trading prospects of developing countries.
proved unless all members oppose it. While the explicit reason for the lack of progress has been the
These few innovations in the dispute settlement mechanism disagreements on certain technical issues, the implicit reason
of the WTO make it unique among international treaties. On has been that the political will to make improvements petered
average, WTO disputes run significantly faster than cases in out because the US was aiming to increase member control of
other international or regional forums such as the Internation- the dispute procedures whereas members generally wanted an
al Court of Justice (ICJ), the European Court of Justice (ECJ) automatic set of procedures that provided clarity and consist-
and the North American Free Trade Agreement (NAFTA). As an ency in dispute decisions and their assured compliance.
international forum, the WTO demonstrated the willingness of Progress in the DSU review further slowed down when the
states to submit to compulsory jurisdiction and the mecha- appellate body stopped functioning at the end of 2019. In Feb-
nisms for the enforcement of decisions through procedures for ruary 2019, David Walker, New Zealand’s Ambassador to WTO,
GLOBAL VALUE CHAINS
presented a draft general council decision that largely ad- Two Indians have been members of the appellate body and
dressed the procedural concerns of the US with the AB, but seven have been panellists; only nine WTO members have had
the US blocked it. WTO members have been proposing a re- a higher number as panellists.
vival of the selection process for filling the vacancies of the India has a systemic interest in a rule-based multilateral
AB members; reflecting their common interest in its func- trading system; it became a disputant in GATT as early as
tioning and, more generally, in the functioning of the dispute 1948,12 and filed its first complaint in 1952. With the advent of
settlement system.7 The US has been blocking the proposal the WTO came some of the most intensely fought legal battles
single-handedly. for India: on IPRs, on quantitative restrictions, and on trade-
At the 2020 World Economic Forum held annually at Davos, related investment measures (TRIMS). Similarly, the participa-
Switzerland, ministers of 16 WTO members led by the EU an- tion of developing countries in the DSM has considerably in-
nounced that they had decided to put in place a multi-party creased over the years, implying their successful adaptation to
interim appeal arbitration arrangement (MPIA), closely follow- the new legal system (Kaushik 2008). China joined the WTO in
ing the existing arbitration arrangement available through 2001, and is already the third most complained against WTO
Article 25 of the DSU as an interim measure to resolve appeals member. Traditionally, the Chinese preferred to settle their
against panel reports until the AB was restored. This was for- disputes through negotiations rather than through the West-
mally notified to the WTO in April 2020.8 Though the MPIA is ern adversarial approach (Zhang 2007). However, its integra-
functional, it has so far addressed only one appeal. tion into the multilateral trading system has resulted in China’s
The US initiated informal discussions in April 2022, wanting growing capacity and expertise in WTO law and becoming a
them to be interest-based, and arguing that position-based dis- major participant in the DSM (Zhou 2023). Increasing usage of
cussions have not brought any results. From February 2023, the system by developing countries is evidenced by the fact
the US handed over the facilitation of the discussions to the that of the 5313 WTO members that have initiated at least one
deputy permanent representative of Guatemala, Marco Moli- dispute, 45 are developing countries.
na, but the appeal/review mechanism and accessibility to the With the appellate body rendered dysfunctional, these ben-
system, both important for developing countries as well as for efits are at threat. As of date, 31 panel reports have been ap-
the revival of the mechanism, were not discussed at all. In- pealed into oblivion. The security and predictability of the
stead, he presented an incomplete text to the General Coun- multilateral trading system is at stake now. Even though ca-
cil.9 It was clear that the Molina process was not inclusive, and pacity-constrained, developing countries are actively partici-
may have been driven by the US interests. In the latest, and the pating in the ongoing discussions on dispute reforms and hop-
13th Ministerial Conference, the ministers instructed officials ing to resurrect the appeal mechanism. The EU-led MPIA has
to accelerate discussions, build on the progress already made, been proposed as an alternative, at least until the revival of the
and work on unresolved issues, including, notably, issues re- appellate body. The 54 WTO members that have subscribed to
garding appeal/review and accessibility, and to conclude the it include major developing countries including Brazil, China,
discussions by 2024. and most recently, the Philippines. However, Egypt, India,
In April 2024, Ambassador Usha Dwarka-Canabady of Mau- Indonesia, South Africa, South Korea and others are wary of it,
ritius was appointed as the new facilitator, this time under the not only because it does not add anything to the already-avail-
auspices of the WTO General Council, thus clearing some of the able arbitration option under Article 25 of the DSU, but also
operational confusion, and bringing in some hope of inclusivi- because the availability of such a sub-optimal option may lead
ty in the discussions. In her latest meeting with ambassadors,10 to the slowing down of the efforts to resurrect the appeal
she has reported some progress, but no conclusion. Given that mechanism and enable the US to move the dispute settlement
this is an election year in the US, there seems to be little hope towards greater member-control, thereby bringing back power
of a result within the year as per the ministerial mandate. play into the settlement of disputes. This will harm the inter-
ests of developing countries.
Implications for the Global South There is an ongoing debate about the right balance between
The DSM, complete with the two-tier adjudication system, re- the increased judicialisation of the DSM on the one hand and
verse consensus provisions and power of members to retaliate, the settlement of disputes through diplomacy on the other. It is
has been the biggest achievement of the WTO. Against 316 dis- true that the complicated procedures and a very legalistic or-
putes in the 47 years of GATT, WTO has already seen 629 con- der of analysis of claims in the DSM have cast a greater burden
sultations on disputes in its 30 years.11 India has been an active on developing countries with scarce legal resources and an
participant: the first complaint was filed within 10 days of the inability to bear the high costs of litigation. The trend of the
WTO coming into force. As of today, the number is 24, with only appellate body to bat for consistency of interpretation and
seven members ahead. Similarly, 32 complaints have been filed rules of interpretation has, however, brought predictability to
against India; only three (US, EU, China) members have had dispute outcomes, which favours developing countries who
more complaints against it. India has been a third party in 182 can learn from decided cases while formulating their trade
disputes; again, only three other members have participated in policies and ensure they do not fall foul of the trade rules and
more disputes as third parties. Indians have also been active suffer complaints. Settlement of disputes through diplomatic
participants as arbitrators in dispute settlement proceedings. endeavours, on the other hand, will enable larger trading
GLOBAL VALUE CHAINS
partners like the US and the EU to arm-twist developing coun- Figure 1: Evolution of World Trade, 1950–2022, Volume Index (1950=100)
tries into accepting their points of view. In balance, judicialisa- 5,000
tion is a necessary concomitant of a rule-based two-tier dis- 4,500
pute settlement system, and much better than diplomatic set-
4,000
tlement of disputes.
There is, nevertheless, a broader downside of the current 3,500
impasse in dispute settlement on the performance of the WTO 3,000

itself based on the bicycle theory of trade, which states that the 2,500
best way to reduce international trade barriers is to continu-
2,000
ously negotiate mutually beneficial improvements since, just
like a bicycle, if you stop negotiating (pedalling) you lose mo- 1,500
mentum and fail (fall down). The impact is already demon- 1,000
strated by the failure of the Doha Round of negotiations 500
launched 23 years ago, and more recently the move towards
0
plurilateral negotiations in the absence of consensus on nego- 1950 1958 1966 1974 1982 1990 1998 2006 2014 2022
tiations under the aegis of the WTO on contentious issues like Source: Compiled by the author from various sources.
trade and climate change, e-commerce, and investment facili- Figure 2: Evolution of World Trade, 1950–2022 ($ billion)
tation. Issues like trade and gender, trade and labour stand- 3,000
ards, and trade and sustainability are also looming on the ho-
2,500
rizon. It is believed that if further trade liberalisation does not
progress, economic operators worldwide will lose faith in the 2,000
WTO, leading to its eventual demise. The weakening of the dis-
pute settlement system has already contributed to the in- 1,500
creased use of industrial policies by trading nations, particu-
1,000
larly those who want to bring production back home or resort
to friend-shoring and near-shoring to address increasing vola- 500
tility in the global peace and security ecosystem.
For developing countries, however, trade rules and disci- 0
1950 1958 1966 1974 1982 1990 1998 2006 2014 2022
plines for new issues can wait. The foundational principles
Source: Compiled by the author from various sources.
of the multilateral trading system, which include a two-tier
dispute settlement system with security and predictability Previous studies have mainly focused on the efficiency aspects
that it provides are paramount. The African Group and In- of international institutions. In one view, openness in the
donesia have submitted position papers on these lines in the world economy is most likely to occur during periods when a
ongoing discussions, and so have Egypt, India, and South hegemonic state is in its ascendancy. Conversely, when several
Africa jointly.14 large, unequally developed states coexist, the more backward
states will find openness economically and politically costly
Dispute Settlement and WTO Efficacy and will therefore resist it (Krasner 1976). So, if you are strong
GATT arose out of the need to address the trade and economic and have an interest, you may be able to carry it through.
challenges of the autarkic times between the two world wars. However, a critic argues that interests, alone, have not been
Internationally agreed trade rules evolved over time, and have enough to constitute an international order. It has always been
survived several economic shocks. Enforcement of trade rules necessary to have some political power that can provide col-
was weak in the GATT days; WTO addressed the problem lective good and enforce rules and norms (Keohane 1997). The
through the DSU. Global trade volumes have multiplied 45 key to the efficacy of the WTO, therefore, comes from the abili-
times since 1950 and trade value has multiplied 400 times. ty to enforce the rules. For that, we need an effective dispute
More importantly, trade volumes and values have expanded settlement mechanism that the parties must adhere to.
4% and 6% respectively on average since 1995, when the WTO Hudec (1993) states that in the GATT dispute settlement ex-
came into being, showing a steeper rise compared to the GATT perience, an incidence of blocking or delaying the legal pro-
days, as Figures 1 and 2 indicate.15 Clearly, there is evidence of cess usually involved the strongest states in the system—the
the WTO’s efficacy in trade liberalisation. While there is an on- US and the European Community (Hudec 1993). Cameron and
going debate on the attendant socio-economic benefits to Campbell (1998) on the other hand contend that resolving dis-
member nations, from 1990 to 2017 developing countries in- putes through the judicial route is “particularly beneficial for
creased their share of global exports from 16% to 30%; in the smaller countries, as without the rules and procedures of the
same period, the global poverty rate fell from 36% to 9%. Not DSU and the extensive obligations in the WTO agreements,
all countries have benefited equally, but overall, trade has gen- they would not have the necessary bargaining power vis-à-vis
erated unprecedented prosperity, helping to lift some 1 billion the larger powers” (Cameron and Campbell 1998). Neverthe-
people out of poverty in recent decades.16 less, many international relations experts are suspicious of the
GLOBAL VALUE CHAINS
equality before the law argument and claim that stronger of argument is the biased operation of the legal bodies of the
states acquire favourable outcomes and weaker states unfa- WTO which favour stronger actors and they expect “the appel-
vourable outcomes. These arguments find the cause of in- late body to be reluctant to make strong and unequivocal ad-
equality to be from various sources. The primary one is the verse rulings against powerful members on issues of consider-
unevenly distributed legal resource argument. able domestic salience” (Garrett and Smith 1999). It is also
In addition to reducing the transaction costs surrounding true that as the weaker parties during treaty-making, develop-
dispute settlement, the DSM is also responsible for a significant ing countries may not have achieved a balance in the terms of
distributive effect on member countries, and to answer wheth- the treaty negotiated. Therefore, even if the adjudicator were
er the legalised DSM favoured stronger powers in the system or to be fair and favourable to them, the treaty terms may come
whether the status of developing countries has been enhanced in the way of justice.
under the DSM. This needs to be further assessed empirically Thus, it can be said that the arguments that anticipate dis-
and not with simple logical induction or normative assertions advantageous outcomes against developing countries under
and can be examined by the participation trends of developing the DSM find the source of inequality from (i) the lack of legal
countries as well as the patterns of disputes filed. The logical resources for developing countries, which restricts their access
response, however, remains that developing countries have ac- to the DSM; (ii) biased decisions made in favour of developed
tively participated and have successfully defended their inter- countries; and (iii) the disadvantageous content of law that is
ests as complainants or defendants in the DSM when the appel- applied and interpreted.
late board was operational. Despite these disadvantages, developing countries have used
Nevertheless, it is possible to make some preliminary judg- the DSM. Data demonstrates that the larger developing coun-
ments. Such judgments depend very much on the question one tries and emerging market countries like South Korea, India,
is asking. For example, we could appraise the dispute settle- Brazil, Argentina, Mexico, and Thailand, have aggressively
ment system by asking how effective it is in promoting the set- utilised the DSM, even against developed countries. However,
tlement of cases or how it develops jurisprudence in the sense less developed countries have seldom participated in disputes
of providing greater certainty and stability while resolving as complainants through their participation as a third party in
ambiguities in the rule structure. Another possibility is to ask a dispute has increased since 2001 (Browne 2005). This offers
how effectively the results of dispute settlement cases have valuable experience for learning and becoming familiar with
been implemented. One can also evaluate the extent to which the legal mechanisms of dispute resolution and demonstrates
the results of the dispute settlement process have been accept- how actively they have adapted to the DSM. The support in the
ed, both politically and publicly. form of the Advisory Centre on WTO Law or the WTO Trade-
An effective dispute settlement mechanism supports all Related Technical Assistance and Training (TRTA) programmes
WTO members in the resolution of their disputes in an efficient also contributes to more active utilisation of the DSM by devel-
manner. Such effectiveness is wrought by the DSB being given oping countries. In sum, the increase in the number of disputes
the authority under the DSU to establish panels, adopt panel filed by developing countries since 2001 represents the prog-
and appellate body reports, maintain surveillance of imple- ress made by developing countries in enhancing their legal
mentation, and authorise retaliation. Effective functioning of and administrative capacity for utilising the DSM. It is a pity
the WTO and fair implementation of the provisions of its agree-
ments is facilitated by prompt and satisfactory settlement of EPWRF India Time Series
disputes. Members must recognise that the system is aimed at (www.epwrfits.in)
clarifying these provisions where such clarity is necessary on
An online database on the Indian economy and society
account of claims made by parties, yet without modifying the developed by EPW Research Foundation, Mumbai.
commitments of the parties; that prerogative rests exclusively
with the members under Article IX: 2 of the Marrakesh Agree- Food Grain Statistics
ment establishing the WTO. The policy space left with WTO
This module contains the following sections:
members is also defined in the same provisions: the treaty
● Production, Procurement, Import-Export and Stock of Food Grains
terms. Since such a DSM delivers quality, consistent, and effi- ● Allocation and Offtake of Food Grains from Central Pool
cient decisions through a fair interpretation according to the ● Central Pool Storage Capacity
terms of the treaty, it is considered reliable. ● Movement of Food Grains
Developing countries, as weaker/poorer actors in the WTO, ● Prices
usually have few legal resources available for complaining and ● Food Subsidy
● Public Distribution System (PDS) Beneficiaries
defending themselves in disputes under the legal system. The
● Sugar
lack of financial capacity, trained personnel, and information
Contains state-wise data from 2000-01, depending on availability.
needed to engage the legal system inevitably results in unfa-
The EPWRF ITS has 38 modules covering a wide range of India’s
vourable outcomes for developing countries. It is even argued macroeconomic, financial and social sector indicators.
that compared to the GATT era, developed countries—ones For subscription details, visit www.epwrfits.in or write to us
with greater capacity—are much more likely to utilise dispute at its@epwrf.in
settlement in the WTO than developing countries. Another line
GLOBAL VALUE CHAINS
that the appellate body has been rendered dysfunctional due To quote,
to the intransigence of the US to restart the appointments of its The chief value of the automatic procedures for settlement of disputes
members. This has resulted in the efficacy of the WTO itself be- … lies not in their precise content but in their mere existence. What is
important—what is indeed crucial—is that there should always be in
ing immensely undermined.
the background, as a necessary check upon the making of unjustified
To sum up, one of the most noted legal pundits has beauti- claims, or upon the denial of justified claims, automatically available
fully explained the benefit of automatic dispute procedures. procedures for the settlement of disputes. (Sir Sinclair 1984)
Notes 15 WTO statistics available at: https://www.wto. Keohane, Robert O (1997): “Problematic Lucidity
org/english/res_e/statis_e/trade_evolution_ Stephen Krasner’s ‘State Power and the Struc-
1 The Final Act of the United Nations Conference
e/evolution_trade_wto_e.htm#:~:text= ture of International Trade’,” World Politics,
on Trade and Employment, Havana Charter for
Trade%20Growth&text=World%20trade%20 Vol 50, No 1.
an International Trade Organization (1948); volume%20today%20is,400%20times%20 Krasner, Stephen D (1976): “State Power and the
Articles 92–97. from%201950%20levels. Structure of International Trade,” World Poli-
2 This followed the United Nations Conference 16 https://www.worldbank.org/en/topic/trade/ tics, Vol 28, No 3.
on Trade and Development (UNCTAD) meet brief/trade-has-been-a-powerful-driver-of- Lanjow, Jean (1997): “The Introduction of Pharma-
held the previous year and resulted in the in- economic-development-and-poverty-reduction. ceutical Product Patents in India: ‘Heartless
clusion of three articles favouring the interests Exploitation of the Poor and Suffering’?”, Eco-
of developing countries. The next such big step nomic Growth Center, Yale University.
was the enabling clause, introduced through a R eferences
Sacerdote, Georgio, Yanovich Alan and Bohanes
GATT decision in 1979, enabling developed Browne, Dennis (2005): “Dispute Settlement in the Jan Eds (2006): The WTO at Ten: The Contribu-
countries to breach the MFN rule to provide WTO: How Friendly Is It for the LDC,” CPD tion of the Dispute Settlement System, Cam-
better market access to developing countries. Working Paper 45, Centre for Policy Dialogue. bridge University Press.
3 There is a view that India engaged in GATT ne- Cameron, James and Karen Campbell (1998): “Dis- Sacerdote, Georgio (2020): “Modernizing the
gotiations not because it would liberalise world pute Resolution in the WTO,” London: Camer- World Trade Organisation: A CIGI Series Essay
trade or for its economic and welfare benefits, Series,” Center for International Governance
on May.
but for its political and strategic benefits. See Innovation.
Saggi (2010). Garraty, John A (1987): The Great Depression, An-
chor Publishing. Saggi, Kamal (2010): India and the WTO: From Uru-
4 It is important to note here that developing guay Round to Doha and Beyond, Stanford Cen-
countries insisted that non-violation com- Garrett, Geoffrey and James McCall Smith (1999):
“The Politics of WTO Dispute Settlement,” pa- tre for International Development Working Pa-
plaints would not be permitted on IP issues, per No 425.
and built a provision to that effect in the TRIPS per presented at the Annual Meeting of the
American Political Science Association, Atlan- Sandiford, Wayne (1993): GATT and the Uruguay
agreement. Non-violation complaints are those Round, available at https://www.academia.
where there is no failure of a WTO member to ta, GA, 1–5 September. It can be accessed on
edu/1443860/GATT_AND_THE_URUGUAY_
meet its obligations, nor is the impugned meas- Research Gate at https://www.researchgate.
ROUND.
ure in conflict of a provision of the WTO, but net/publication/2637716_The_Politics_of_
Shukla, S P (2000): From GATT to WTO and Be-
another member considers that the benefits ac- WTO_Dispute_Settlement.
yond, UNU/WIDER Working Paper 195.
cruing to it under the WTO agreements are be- Howse, Robert and Susan Esserman (2006): “The
Sir Sinclair, Ian (1984): The Vienna Convention on
ing nullified or impaired. Appellate Body, the WTO Dispute Settlement the Law of Treaties, 2nd edition, Manchester
5 GATT Disputes: 1948–1995 (Volume 1); WTO System, and the Politics of Multilateralism,” University Press.
publication; ISBN 978-92-870-4260-6. The WTO at Ten: The Contribution of the Dis- Srinivasan, T N and Tendulkar Suresh D (2003):
6 Dong, L A comparative analysis of compulsory pute Settlement System, Georgio Sacerdoti, Reintegrating India with the World Economy,
conciliation under the United Nations Conven- Alan Yanovich and Jan Bohanes (eds), Cam- Peterson Institute for International Economics.
tion on the Law of the Sea. Mar Dev 1, 7 (2023). bridge University Press. Srinivasan, T N (2005): “The Dispute Settlement
7 WT/DSB/W/609/Rev.25, WT/DSB/M/479 and Hudec, Robert E (1993): Enforcing International Mechanism of the WTO: A Brief History and an
discussions in the DSB meeting of July 28, 2023 Trade Law, Butterworths, London. Evaluation from Economic,” Contractarian,
8 WTO Document JOB/DSB/1/Add.12. Hughes, Valerie (2006): “The WTO Dispute Settle- and Legal Perspectives, Stanford Law and Eco-
9 WTO Document JOB/GC/385 dated 16 Febru- ment System—from Initiating Proceedings to nomics; Olin Working Paper No 320, available
ary 2024. Ensuring Implementation: What Needs Im- at SSRN: https://ssrn.com/abstract=898904 or
10 Report of her meeting on 11 October 2024, provement?,” The WTO at Ten: The Contribu- http://dx.doi.org/10.2139/ssrn.898904.
available at: https://www.wto.org/english/ tion of the Dispute Settlement System, Georgio US Congress (1986): Hearing before the Committee
news_e/news24_e/dsr_11oct24_e.htm. Sacerdoti, Alan Yanovich, and Jan Bohanes on Foreign Affairs, House of Representatives,
11 It is difficult to assess the value of trade in- (eds), Cambridge University Press. 81st Congress, 2nd Session, on H J Res. 236; US
volved in these disputes. The Director General Jackson, John H (1997): The World Trading System: Government Printing Office, Washington,
WTO while speaking at a Confederation of In- Law and Policy of International Economic Rela- 1950, available at https://www.princeton.
dian Industry event at Jaipur on 16 January tions, Second Edition, Cambridge, MA, MIT edu/~ota/disk2/1986/8610/8610.PDF.
2015 stated that the WTO has helped resolve Press. World Trade Organisation (WTO) available at
numerous trade disputes relating to $1 trillion. www.wto.org.
Jones, Emily, Deere-Birkbeck and Woods Ngaire
See http://www.wto.org/english/news_e/ World Trade Law available at WorldTradeLaw.net.
(2010): “Manoeuvring at the Margins: Con-
spra_e/spra46_e.htm. straints Faced by Small States in International Zhang, Qi (2007): “Consultations within WTO Dis-
12 GATT/CP.2/SR11 (BISD II/12); India-Tax re- Trade Negotiations,” Commonwealth Secretariat. pute Settlement: A Chinese Perspective,” Peter
bates on exports (1948); request for interpreta- Lang AG.
Julia Ya Qin in Sornarajah M and Wang J (eds)
tion by Pakistan. India filed a formal complaint Zhou, Weihuan (2023): “The Impact of the WTO
(2010): China, India and the International Eco-
against Pakistan relating to export fees on Jute Dispute Settlement System on China” in the
nomic Order, Cambridge University Press. book China and the WTO: A Twenty-Year Assess-
in 1952 (GATT/L/41). After these two disputes,
however, India became a disputant only in Kaushik, Atul (2001): “Challenges of WTO, Patent- ment, Cambridge University Press.
the 1980s, raising questions in 1980 and 1982 ing and Intellectual Property Rights, in the
about countervailing duties and other similar book Technology for Small Scale Industries:
trade remedies adopted by the US, European Current Status and Emerging Needs: Small In-
Community, Japan and responded to two com- dustries Development Bank of India (SIDBI),
plaints in 1987 by the US on export restrictions Tata McGraw-Hill Publishing Company Limit-
ed, New Delhi.
available at
on almonds. See Julia Ya Qin in Sornarajah and
Wang (eds) (2010). — (2007): “WTO Dispute Settlement: A Chinese Gyan Deep
13 The European Union brings and defends dis- Approach,” Economic & Political Weekly, Vol 42,
putes as a single contracting party that in- No 40. Near Firayalal Chowk,
cludes all its 27 member countries. — (2008): “Dispute Settlement System at the Ranchi 834 001, Jharkhand
14 WTO Documents JOB/DSB/5, JOB/DSB/6 and World Trade Organisation,” Economic & Politi- Ph: 09470564686
JOB/DSB/7 respectively. cal Weekly, Vol 43, No 02.
GLOBAL VALUE CHAINS
Intermingling of Trade and Environment Policy

Implications of EU–CBAM on India and LDCs
Rajeev Kher, Anshuman Gupta
T
The old position of keeping trade and sustainability he infusion of sustainability issues in trade policies is
issues separate seems to be an unviable option today. getting increasing traction of late. After the Singapore
ministerial declaration in 1996, the developing coun-
Strategic thinking and coordinated as well as collective
tries were generally not in favour of including core labour
diplomacy by countries of the global South are required. standards and environmental issues in the main agenda of ne-
This paper studies the European Union-carbon border gotiations under the World Trade Organization (WTO). Following
adjustment mechanism regulation, its impact on the Seattle Ministerial failure in 1999, the core labour stand-
ards and trade issues were taken out of the agenda and the envi-
developing and least-developed countries, and its
ronment and trade concerns were significantly diluted in the
compatibility with the World Trade Organization Doha round. However, developed countries were insistent on
provisions, along with giving a few suggestions to deal introducing them in their international trade policies. As there
with this challenge. was less traction for such issues in the WTO, they took the al-
ternative route of regional/free trade agreements (RTAs/FTAs).
Though economists like Jagdish Bhagwati have negated the
idea of mixing trade with environment and labour policies, the
truth, however, is that sustainability issues are being progres-
sively included in new FTAs (OECD 2023). Since the WTO is largely
dysfunctional or progressing at a snail’s pace, developing coun-
tries are compelled to seek market access through these FTAs.
Though WTO’s preamble makes broad and generic references
to the environment and also recognises the importance of pre-
serving and protecting the environment, it also acknowledges
that it will be done in a manner consistent with members’ needs
and concerns at different levels of economic development.
Since most of the multilateral environmental agreements
and international labour conventions do not have enforceability
mechanisms, sustainability provisions in trade policies might
be a viable option for them. Many environmental issues have
been brought before the WTO dispute settlement body for reso-
lution (Johnson 2015). Likewise, many FTAs include dispute
settlement mechanisms applicable to environment and labour-
related provisions too. While it has the advantage in terms of
increasing commitments to these issues, it also has disadvan-
tages as it undermines the principle of common but differenti-
ated responsibility in the environmental sphere (Jinnah and
Morgera 2013) and genuine comparative advantage in labour
issues. Since developing countries are incapable of meeting
the environment and labour standards demanded by devel-
oped countries, these provisions can be used as protectionist
tools—new non-tariff barriers—against developing countries.
However, it is inconclusive whether including these provisions
Rajeev Kher (rajeevkher1@gmail.com) is with Research and Information in FTAs produces the desired environmental consequences.
System for Developing Countries (RIS) as a distinguished fellow. The developing countries are gradually giving up their re-
Anshuman Gupta (anshuman.gupta@ris.org.in) is with RIS as a sistance by agreeing to include some sustainability provisions in
consultant.
their FTAs with developed countries. India is not an exception
GLOBAL VALUE CHAINS
in this regard. Its position has evolved over time to include en- worse is yet to come. The developed countries find the trade
vironmental provisions in its FTAs. Indian FTA with South Ko- route easier to pursue for their environmental objective, as
rea signed in 2009 can be regarded as a watershed in this re- well as, to use it as a non-tariff barrier against their growing
gard. Thereafter, the India–Japan FTA in 2011 and the recently imports. In such circumstances, it is difficult for the develop-
concluded FTAs with the United Arab Emirates (UAE) and ing countries to sustain their old argument that trade policy
member states of the European Free Trade Association fol- and the environment policy should be kept in their respective
lowed the same trend. However, India is still way behind the silos. It is, therefore, not surprising that developed countries
expectations of developed countries. are likely to adopt measures which will have cross-border im-
Sustainability issues have many dimensions from the devel- plications. From a pragmatic standpoint, it may not be possible
oping countries’ perspectives. First, most of them do not have to reject outright this intermingling of trade and environment
the capacity and capability to carry out the required changes policies at the global level. What it requires is strategic think-
to meet various sustainability parameters, without sufficient ing on the part of the global South nations and coordinated
financial and technical help from the developed countries (RIS and collective diplomacy by them.
2015). Even the promised $100 billion per year by developed Trade and sustainability issues have many dimensions,
countries is not forthcoming regularly, let alone the much which are difficult to cover in detail in one paper. Hence, the
more estimated finance needed for adaptation and mitigation paper in hand will deal with the issue of the EU–CBAM and its
to climate change in the developing and least developed coun- developmental implications for the less-developed countries,
tries (LDCs). Many of the countries, especially LDCs, are reeling especially LDCs and India. The CBAM, part of the “fit for 55/
under debt stress, especially after the COVID-19 pandemic, green deal” of the EU, is a tax on imports at the border equiva-
squeezing their domestic public finances required for climate lent to the embedded carbon emission in a product during pro-
action plans and other developmental needs. Most of the green duction. It will initially cover energy-intensive sectors, includ-
technologies are patented by private entities of developed ing iron and steel, cement, electricity, fertiliser, aluminium,
countries, which have commercial objectives. and hydrogen (EC 2023). Its stated objective is to arrest the
Second, many of the environmental regulations initiated by carbon leakages and give a level-playing field to EU industries.
developed countries have cross-border developmental conse- The CBAM started in 2023 as a trial, where EU importers will
quences for the LDCs and developing countries. The Carbon Bor- have to report embedded emissions of products they import,
der Adjustment Mechanism (CBAM), the European Union De- for which they would not be charged. The scheme will be fully
forestation Regulation (EUDR) and the Inflation Reduction Act operational from 2026 when authorised importers will have
(IRA) by the United States (US) are prominent among them. to buy CBAM certificates equivalent to the embedded carbon
Similar regulations by other developed countries are in the emission in imports made during the year. The CBAM, as a
pipeline. These regulations will undermine the efforts of less- trade regulation, has created extensive turbulence in coun-
developed countries, especially LDCs, to meet their many Sus- tries connected to the EU economy. As it evolves over time
tainable Development Goals (SDGs), especially SDGs 1, 2, and 8 covering more products, it is likely to have a far-reaching im-
relating to no poverty, zero hunger, and decent work and eco- pact on developing countries with significant economic links
nomic growth. It assumes further importance against the with the EU.
backdrop of a very limited atmospheric carbon space now The next section critically studies the literature relating to the
available, which will be occupied in less than six years or 23 CBAM as a measure to tackle the problem of carbon leakages,
years to meet the targets of a 1.5 or 2 degree Celsius tempera- from legal, feasibility, enforceability, and moral perspectives. This
ture increase to pre-industrial levels, as the case may be, with is followed by studying the impact of CBAM on LDCs and India,
the current level of emission rate (MCC 2024). and by exploring the compatibility of the CBAM with WTO provi-
Third, geostrategic developments are making the green sions. In the end, the paper suggests some alternatives/chang-
transition costly and arduous because of the ongoing geopoliti- es in provisions to make the CBAM more acceptable, striking a
cal conflicts and emerging global power dynamics. The value balance between the developmental aspirations of the devel-
chains are being reconfigured often ignoring competitive oping countries and LDCs and environmental concerns.
sourcing in favour of friend shoring or promoting costly do-
mestic manufacturing. Literature Review
Fourth, the path of dependency on fossil fuel-based ecosys- The CBAM has been studied on the legal, feasibility, enforcea-
tems is coming, in a significant way, as an impediment to the bility, and moral fronts, and the results are inconclusive. Some
transition to the green economy. Since the world economy has studies find it WTO-compatible, while others see it as violating
been based on fossil fuels for more than two centuries, the many provisions of the WTO. As per Article XX of the General
whole ecosystem is developed around it, which will foil any Agreement on Tariffs and Trade (GATT), the WTO permits excep-
attempt to transition to the green economy. The present fossil tions to free trade with some safeguards to protect human, ani-
fuel-based development paradigm is too deeply entrenched mal, plant life, or health and to conserve exhaustible natural
and will resist all efforts to transition to the green paradigm. resources. Thus, a country can impose its product standards at
Fifth, climate change is no longer a prognosis but a reality the time of import to safeguard the health and life of its citi-
faced by all, every day. All scientific predictions show that zens, animals, and plants as well as protect the environment
GLOBAL VALUE CHAINS
(RIS 2015). Morris (2018) argues that a border tax applied to all the globe is seeking consensus among nations as per the Unit-
countries indiscriminately irrespective of their stage of devel- ed Nations Conference on Trade and Environment (UNCTAD).
opment and emission standards is WTO-compatible. Similarly, The LDCs and developing countries should not face the same
Ismer and Neuhoff (2007) argue, that the carbon border tax mitigation burden as developed countries. The United Nations
should not violate the most-favoured nation (MFN) and nation- Framework Convention on Climate Change (UNFCCC) and the
al treatment (NT) clauses of WTO if excessive charges are not Paris Agreement are premised on the principle of common but
made on similar products to discriminate among exporting differentiated responsibility (Nedumpara and Pradeep 2020;
countries and between domestic and foreign goods. They also Zachmann and McWilliams 2020). Recently, the UNCTAD criti-
argue that the carbon border tax can also be justified on the cised the EU’s CBAM and rich countries’ other trade measures
basis of protecting human, animal, plant life or health, which for side-tracking the principle of common but differentiated
is also asserted by the European Commission. responsibility (Bounds and Espinoza 2023). Almeida et al
However, some studies question its legality under WTO pro- (2023) accuse the EU of using the CBAM and other elements of
visions. Nedumpara and Pradeep (2020) see the problem in the “green deal” to maintain its supremacy in the new growth
taxing the emission, which is a tax on the by-product rather model based on green technologies and businesses. Another
than the tax on the good itself. Lowe (2019) argues that though study also indicates the same by accusing the EU and the US of
GATT/WTO allows the charging of extra tax on imports as long seeing the environmental crisis as a significant green window
as it is equivalent to the internal tax on similar products, the EU of business opportunities by transforming early to low-carbon
would have to prove that similar foreign and domestic goods businesses rather than truly addressing the challenge. The US
are charged equivalently with no discrimination. Some fea- is also interested in geostrategically countering China’s domi-
tures of the CBAM, like exempting some countries from its ap- nance in low carbon technologies (Lebdioui 2024).
plication, providing an allowance to carbon prices paid in the Some researchers conclude that it is an important measure
country of origin, and estimating embedded emissions based to fight the challenge of climate change. The carbon border tax
on non-product-related process and production methods (NPR would give the right price signal to economic actors and they
PPMs), violate MFN and NT principles (Hufbauer et al 2021). would take the right decisions for reducing emissions (Kuik
Moreover, permits under EU–ETS are tradeable, while CBAM and Hofkes 2010; Acar et al 2021). As per the Research Insti-
certificates are not tradeable, which is discriminatory. For the tute for Sustainability (2023), both positive and negative reac-
CBAM and other nations’ industrial policies and trade mea- tions to the CBAM are prevalent. Only those countries will be
sures to promote the growth of green technologies to be widely negatively affected which have not yet started transitioning to
acceptable, the WTO’s NT principle needs to be renegotiated (Col- a low-carbon economy. As a result of rising costs because of
gan and Hinthorn 2023). Though it is difficult, the formation of CBAM compliance, low and unskilled employment would be at
the Coalition of Trade Ministers on Climate in 2023 indicates risk. However, it might also offer some positive possibilities
that the link between trade and climate is being acknowledged by pushing climate issues to the top of the political agenda and
by many governments (Buylova and Nasiritousi 2024). by strengthening regional cooperation for sharing knowledge
Some studies argue that CBAM-like measures might impact and capacity building to tackle CBAM jointly (Hermann
world trade and globalisation adversely, as some countries et al 2023).
might see it as a protectionist measure. They might initiate There are studies pointing out the positives of the introduc-
retaliatory measures and erect similar or other trade barriers, tion of CBAM too. Acar et al (2021) studied the Turkish econo-
undermining the efforts for globalisation (Lowe 2019; Zach- my and concluded that if some proactive measures are taken
mann and McWilliams 2020). Some industries using energy- on the energy-efficiency front by the government, the carbon
inefficient technologies would be at a disadvantage on the border tax can increase private and social welfare by increas-
competitiveness front vis-à-vis EU’s or foreign countries’ coun- ing economic gains and environmental and health conditions.
terparts using energy-efficient technologies, having adverse The CBAM has already prompted Turkey to introduce a
impacts on their exports (Mattoo et al 2013; Aylor et al 2020). climate law and domestic carbon pricing (Weise 2021).
The enforceability of CBAM is also questioned, especially in Böhringer et al (2021) demonstrate that the effect of the car-
poor countries, as a result of lack of or poor institutional ca- bon border tax has been modest after the 2008 financial
pacity, resulting in increasing compliance costs with all ad- crash. Hecht and Peter (2018) conclude positively about the
verse consequences in these economies (Nedumpara and carbon border tax in terms of reducing carbon emissions by
Pradeep 2020; Lowe 2019). Therefore, there is a need to do charging a tax on consumption rather than on production. Is-
hand-holding of such countries through technical and finan- mer and Neuhoff (2007) support and argue that the carbon
cial support. Other studies question the effectiveness of these border tax is an economically viable approach to mitigate the
measures in reducing emissions. Some countries may use leakage effect. Kuik and Hofkes (2010) suggest that iron and
trade diversion and reroute their products to other destina- steel being highly energy-intensive sectors and so susceptible
tions having lax environmental provisions (Zachmann and to carbon leakage, should be subjected to a carbon border tax.
McWilliams 2020). However, studies on India suggest that an increase in fuel
The CBAM is debated on the morality front by some other cost decreases export earnings, return on assets, and post-tax
studies. A prerequisite for initiating such measures impacting profits for energy-intensive industries, like cement, coal,
GLOBAL VALUE CHAINS
fertiliser, and steel and iron (Grover et al 2023; Best 2023; and the Paris Agreement, CBAM fails the test. In fact, global
Majumder et al 2024). warming is the cumulative effect of GHGs, broken up into stock
Measures to deal with the challenge immediately include and flow of GHG emissions. As far as the stock is concerned, it
calculating embedded carbon footprints by individual compa- has been mainly contributed by developed countries in pursu-
nies by using the greenhouse gas (GHG) Protocol–Product Life ing their material prosperity. Of course, emerging economies,
Cycle Accounting (LCA) and Reporting Standard, PAS 2050, including China and India, are contributing significantly to the
and DIN EN ISO 14067, and reducing scope 1 and scope 2 emis- current annual flow of GHGs. Currently, China is the top emitter
sions. The government can also support these industries by ac- (12466 MT CO2), emitting over two and a half times more CO2
celerating the decarbonisation of the power sector, strength- annually than the US in 2021. India ranks at number three
ening climate goals, and joining international climate club. emitting MT 2648 CO2, though its per capita emission was sig-
The domestic carbon trading system would also save revenue nificantly low at 1.82 tonnes in 2021. However, LDCs do not be-
for India (Best 2023). To meet the CBAM challenge, Gupta et al long to any category. Their economies still depend on primary
(2024) suggest measures, like strengthening monitoring, re- activities and other energy-intensive sectors. The CBAM would
porting, and verification (MRV) system, changing coal cess to have developmental implications for them and likely impede
carbon tax, and development of a national emission trading the attainment of their SDGs. Their economies are fragile, with
system. The carbon border tax can be applied on the basis of negligible diversification and very thin export baskets. In some
per capita income, which would be fairer. energy-intensive sectors (covered under the CBAM), some LDCs
export a substantial proportion of their total exports to the EU
Impact on Low-income Countries and India and their gross domestic products (GDPs). For example, Mo-
The most controversial measure in the proposed “fit for 55” zambique had almost 60% CBAM-covered commodities of its
package is the CBAM. It will have increasingly far-reaching total exports to the EU, accounting for almost 6% of its GDP in
consequences for the trading partners, especially those from 2023 (UNCOMTRADE 2024; IMF 2024).
low-income countries. The stated objective of the proposed On the other hand, the developed economies with a com-
mechanism is to prevent, without breaching any rule of inter- plete cycle of development evolution—from the primary to in-
national trade agreements, any carbon leakages by the reloca- dustry to the high-valued services sector—have enjoyed the
tion of industries covered under the CBAM in countries with benefits of both worlds. They have had material prosperity
lenient environmental regulations or imports of covered ener- while now pursuing a developmental path decoupled from en-
gy-intensive products. The CBAM will function in parallel with ergy intensity. They are now either following prominently ser-
the EU’s emission trading system (EU–ETS) on the imported vices-based development or less/green energy-based industri-
products, and it will gradually replace the existing free allow- alisation. For example, the services sector accounted for 80.4%
ances given to industries to minimise carbon leakages. of the US’s GDP, whereas agriculture and industry contributed
When seen from a worsening environmental perspective, 1.1% and 18.5%, respectively, in 2020. For the Euro area, the con-
the CBAM seems to be a viable option in the absence of a com- tributions of agriculture, industry, and services sectors to GDP
prehensive international emission trading market, like one en- were 1.7%, 25.1%, and 73.2%, respectively, in 2021. The share
visaged in the Kyoto Protocol in 1997, to reduce the GHGs most of industry and manufacturing and services sectors increases
cost-effectively. However, it could not be successful, given the as a country climbs up the ladder of development, and corre-
US opting out of protocol and lack of transparency and regula- spondingly, the share of agriculture declines. The rich countries’
tory certainty. The idea of an international emission trading services and industries are highly valued and sophisticated,
market can be revived. It can be gradually implemented in with less energy/emission per dollar of output. The total emis-
some countries that have resources and institutional capabili- sion of the US has been reduced by over 11%, from 5,067 MT CO2
ties to design and implement an effective market-based mech- in 1990 to 4,752 MT CO2 in 2020, whereas its GDP has increased
anism and then incentivise other countries to follow it by help- by almost four times. In the same way, the EU has reduced its CO2
ing them develop an effective scheme and their institutional emission from 3,819 MT CO2 to 2,605 MT CO2 during 1990–2020.
capabilities. The “climate clubs” comprising a limited number Moreover, there is limited carbon space available, which
of countries have been favoured by some economists for their will be spent in a short time. It further reinforces the argu-
greater chances of securing consensus on global warming poli- ment that the developed countries should accommodate the
cies and easy implementation. The EU–ETS and CBAM are sup- developmental aspirations of developing countries. They
posed to work in this spirit. The CBAM is likely to strengthen should target net-negative emissions instead of net-zero emis-
the resolve of participating countries in EU–ETS because of less sions to create extra carbon space for poor countries along
chance of carbon leakages. It will serve the objectives of miti- with making their environmental regulations accommoda-
gation as well as securing a level playing field to protect their tive to their needs.
commercial interests, along with motivating other countries to India exports mainly four items covered in the CBAM—iron
follow ambitious environmental targets. and steel, aluminium, cement, and fertilisers. Iron and steel is
However, from an equity perspective, as it does not cross the a dominant sector in all four CBAM-covered Indian exports to
threshold of common but differentiated responsibility and re- the EU. Its share has decreased in the total CBAM-covered com-
source capacity (CBDR–RC), the bedrock of the Kyoto Protocol modities from 95% in 2014 to 75% in 2023. It has increased in
GLOBAL VALUE CHAINS
value terms from $2,962.59 million in 2014 to $5,557.09 million whether the CBAM is WTO-compatible or not. However, the bal-
in 2023 (with a steep dip during COVID-19 in 2020), with a com- ance seems to be tilted against it mainly because of many likely
pound annual growth rate (CAGR) of 7.25% (Appendix Figure 1, discriminations (at the implementation level) against foreign
p 57). Aluminium is the second-most important commodity countries’ firms vis-à-vis domestic ones violating the NT clause
under the CBAM being exported where its share in CBAM com- and among exporting nations violating the MFN principle of WTO.
modities has increased from 4.85% in 2014 to 24.44% in 2023. The worst affected 10 countries include, in descending order,
The bilateral export value has increased from $151.42 million China, Turkey, the United Kingdom (UK), India, Russia, South
in 2014 to $1,801 million in 2023, with a dipping of $343.76 Korea, US, Serbia, Ukraine and Japan, collectively accounting
million in 2020 and reaching a peak at $2,188.38 million in for almost $68 billion CBAM goods’ exports to the EU in 2023.
2023 (Appendix Figure 2, p 57). It grew with a CAGR of 31.72%, Many studies have advised for the exemption of the LDCs
showing its further potential in the coming time. from the CBAM and apply some special and differential treat-
Cement and fertilisers are relatively insignificant items in ment (S&DT) for the developing countries, allowed under WTO’s
value terms with an increase from $4.21 million and $0.72 mil- Enabling Clause. Paragraphs 2(a) and 2(b) of the Enabling
lion in 2014 to $8.26 million and $2.03 million, respectively, in Clause are most relevant in this regard. Paragraph 2(a) allows
2023 (Appendix Figures 3 and 4, p 57). They grew with a CAGR preferential treatment with respect to the agreed MFN tariff
of 8.01% and 12.21%, respectively. The share of CBAM exports rates when trading with developing countries, administered
in total Indian exports to the EU has increased substantially through the Generalised System of Preferences (GSP). Para-
in the recent decade from 6.34% in 2014 to 10.53% in 2023 graph 2(b) deals with the non-tariff barrier. If CBAM is regard-
(Appendix Figure 5, p 57). ed as an internal tax, paragraph 2(b) can be invoked to give
exemption to less-developed countries (Sasmal et el 2023). It is
CBAM and the WTO also possible to use paragraph 2(d), which allows LDCs to be
The WTO does not have any specific agreement on the environ- treated separately from other developing countries while de-
ment yet. Whether the CBAM is WTO-compliant or not is a designing any blanket exemption for LDCs. Part IV of the GATT ti-
batable question. The EU claims it to be WTO-compliant. As per tled “Trade and Development” provides another set of relevant
EU contention, CBAM is non-discriminatory, so it does not violate provisions to give exemptions to less-developed countries. It
the MFN and NT clauses. Moreover, the EU has justified protecting comprises mandatory obligations to reduce barriers on an urgent
the environment and restricting free trade under GATT Articles basis to products of particular export interest to “less-devel-
XX(b) and XX(g). The former is used to protect human, animal, oped countries” and to refrain from imposing new barriers or
plant life or health, while the latter is for conserving exhausti- increasing existing ones on such products (Sasmal et al 2023).
ble natural resources. However, critics have opposite views,
citing, that it violates the core provisions of WTO, like Article I Conclusions and the Way Ahead
(relating to MFN treatment), Article II (tariff schedule), and Ar-
ticle III (national treatment). As per their arguments, some fea- Consequences for developing countries: There has been a
tures of the CBAM, like exempting some countries from its ap- wide-scale reaction against the CBAM in the developing world.
plication, providing an allowance to carbon prices paid in the Some industry segments within the EU have also shown their
country of origin, and estimating embedded emissions based reluctance to its full-scale implementation. However, the EU
on non-product-related process and production methods (NPR seems determined to implement the regulation to its full ef-
PPMs) violate MFN and NT principles (Hufbauer et al 2021). fect. There is apparently a recognition that it will be an evolu-
Moreover, permits under EU–ETS are tradeable, while CBAM tionary process. Nevertheless, it is apparent that the EU will
certificates are not tradeable, which is discriminatory (Huf- pursue CBAM as a policy instrument to achieve two objec-
baurer et al 2021). So, they believe that the WTO dispute settle- tives—prevent carbon leakage which is perceived as having
ment body would likely be flooded with many cases after the caused economic disadvantage to the EU (stated) and protect
regulation comes into force in 2026. Still more, if the existing domestic industry from global competition in selected areas
free allowances continue even after the CBAM comes into force, (unstated). There is also a stated intention to promote decar-
as they will be completely phased out only by 2034, it would be bonisation in parts of the global economy which are integrated
in gross violation of the NT clause. Though there is a provision with the EU economy.
for adjusting the free allowance to the CBAM-covered commod- As a responsible global constituent, the EU should find an
ities, how it will work is not clear. It would be equivalent to optimal solution to reconcile two contrasting challenges of
giving subsidies to EU domestic industries. So, the CBAM violates pursuing serious climate mitigation policies and at the same
the core provisions of WTO and can also not be shielded behind time avoiding adverse impacts on the chances of development of
Article XX, as it is “arbitrary or unjustifiable discrimination” or LDCs and developing countries. It is quite clear that the rational
“disguised restriction on international trade” (Bacchus 2021). pricing of carbon emissions is an important policy to combat
Even the use of the default emission value is not free from legal climate change, and emission cap and trading is a cost-effective
challenges under Article XX (Sasmal et al 2023). way to do it. The stated objective of the CBAM is to check carbon
So, in view of the contrasting opinions among economists leakage, which the EU has been experiencing for long. It was
and experts, the jury is still out to decide on the question of also putting the EU’s industry at a competitive disadvantage
GLOBAL VALUE CHAINS
along with defeating the purpose of mitigating climate change. earned by the EU through CBAM should also be used to mitigate
Climate change is a global problem and it can be tackled at the climate change, primarily in developing and LDCs. They should
global level. However, the CBAM in the current format is not be provided technical and financial assistance, such as grants
the best method to deal with the carbon leakage problem from or concessional loans, to help them transition to the low emis-
an equity perspective. The CBDR–RC principle of environmen- sion economies. It would enhance the credibility and accepta-
tal agreements negates such unilateral application of meas- bility of the regulation.
ures without seeking consensus from the affected countries at
the global level. The United Nations Conference on Trade and The need for a collective position of the global South: The
Environment recommended seeking consensus among all EU is unlikely to entertain bilateral concessions as that would
countries before initiating such measures. Moreover, it is weaken its own position that the regulation is not discrimina-
against the spirit of the Enabling Clause and Part IV of GATT tory. But there is a strong need for like-minded countries to
titled Trade and Development, which have provisions to give come together to bring issues, such as its incompatibility with
exemptions to the LDCs and S&DT to the developing countries. WTO provisions and likely adverse impacts before multilateral
The CBAM in its present form would have a distributional fora such as the WTO and UNFCCC. A coordinated and collec-
impact. Resources would flow from the poor countries to de- tive approach on the part of the global South to negotiate with
veloped ones (EU) in two ways. First, mandating the purchase the EU to make CBAM more balanced and fairer is required.
of certificates by importers in the EU from 2026 onwards,
would render the exports of poor countries uncompetitive in The need for a unique treatment of small and micro enter-
relation to the domestic industry of the EU, even in product prises: The present coverage of the CBAM is limited to six prod-
lines where the former have genuine comparative advantage. ucts but the expansion of product coverage is intrinsic to the
Second, several developing countries would suffer revenue regulation over time. The measurement, reporting, verification,
leakages to the EU because they lack capacities to put together certification, and audit requirements for the implementation
an indigenous market mechanism and retain and use such rev- of the CBAM when they fall upon the small and micro enterprises
enues for green transition. Though the stated objective of the (SMEs) might cause a regressive impact upon them. Hence,
CBAM is to incentivise countries with less ambitious environ- these enterprises would require special treatment. Based on
mental targets to adopt commensurate strategies, they might some objective criteria, such enterprises could be exempted from
have a debilitating impact on such poor economies. It is note- the implementation of the CBAM. The experience of the imple-
worthy that CBAM-like regulations will soon be adopted by mentation of the EU-REACH (Registration, Evaluation, Authorisa-
some other developed countries such as the UK (2027), Cana- tion and Restriction of Chemicals) regulation is a case in point.
da, Japan, and the US. Extensive data management and several related compulsions
had serious adverse impacts on the chemical industry in devel-
An approach to make CBAM more credible: An alternative oping countries, including India. As a matter of fact, REACH
approach could have been to adopt a more facilitative, sup- reconfigured the structure of the chemical industry in the EU
portive, and incremental approach towards the achievement and connected industries in developing countries, significantly
of the climate objectives, given the multiple inadequacies of impacting the latter. The EU should not be hasty in applying the
the developing countries and LDCs. One such idea could be to provisions of CBAM on SMEs unless adequate safeguards to build
support countries in developing their own “environment their capacities have been institutionalised. Though much of
clubs.” Many developing countries and LDCs lack the capacities this handholding will have to come from the domestic govern-
and capabilities to design and implement effective carbon ments, the EU must recognise the serious consequences of the
pricing and trading schemes, and correctly measure, report, regulation of this segment of industry in the developing world.
and verify carbon emissions—the hallmark of an effective trad- In India, SMEs make up a major chunk of existing enterprises,
ing scheme. The EU in cooperation with other developed coun- contributing substantially to the GDP, employment generation,
tries can help such economies in developing their own carbon and exports. However, individually they do not possess the
emission trading ecosystems. In the meantime, at least the wherewithal to be CBAM-compliant. If they were left to their
LDCs should be exempted from the implementation of CBAM. own, they might have faced yet another blow after the pan-
Paragraphs 2(a), 2(b), and 2(d) of the WTO’s “enabling clause” demic. They should be helped through institutional support,
can be invoked to give exemption/concession to less-devel- either by providing them funds to install energy-efficient tech-
oped countries. nologies at the concessional rate or supporting their buying of
The EU–CBAM can use different phase-in periods for differ- CBAM certificates. India has the unique experience of having
ent sets of less-developed countries based on some objective been an important participant in the clean development mech-
criteria. It might provide different transition periods for differ- anism (CDM) under the Kyoto Protocol. That experience helped
ent sets of countries on the basis of their developmental status. India develop an active system for the measurement, report-
Differentiated CBAM rates could also be considered for Annex I ing, verification, certification, and auditing of emissions.
countries and non-Annex I countries of UNFCCC, giving the Based on this experience, we should create a system of verifi-
most preferential treatment to LDCs. The carbon border tax cation of the emission statements locally and negotiate with
can be applied on the basis of per capita income. The revenue the EU for its acceptance. It would greatly benefit the industry
GLOBAL VALUE CHAINS
rather than individual manufacturers submitting emission The industry associations need to play a proactive role in
statements directly to the EU. A similar system is in place in educating businesses, especially small enterprises, about the
several product areas of exports to the EU. This can be done CBAM. They should help firms, especially small ones, to be-
even as a “carbon credit trading scheme” being developed and come CBAM-compatible regarding assessing and reporting the
does not have to wait for it, which will help the SMEs immensely. embedded emissions in their products, through seminars and
workshops. They should also mobilise some monetary help
Review domestic policies and create a domestic ecosys- from the government, especially for small players.
tem: The CBAM is likely to induce the evolution of a very com-
prehensive framework of policies running across different sec- Bilateral engagement with the EU: The EU–India FTA has
tors of the economy. The response mechanism so evolved will been under negotiation for several years. Trade and sustaina-
be an intimate part of a comprehensive policy on green transi- bility are a critical area on which negotiations are reported to
tion for any country. Domestic experiences and knowledge be hanging for long. Given the size of the potential regional
base will have to be carefully augmented by learnings from market, there is a lot at stake for both sides. It is unlikely that
advanced nations. A silo approach would not work for it, as it the EU will agree to any concessions in the FTA under negotia-
entails overlapping disciplines covering many areas and relat- tion on the applicability of the regulation, as that would create
ed ministries, such as finance, industry, welfare, trade, labour, contradictions within its own policy framework. However,
etc. Institutional capacity to steer successful transformation is seen from a trade perspective, recognising that CBAM will im-
required. A nodal agency covering all the areas mentioned pact the Indian economy significantly as it evolves, India must
above can be considered for green transition. It would require insist on meaningful cooperation and support for programmes
strategic multidisciplinary domestic policymaking. on promoting awareness; creating human resource capacities;
In some countries, the internal tax on fossil fuels is already developing and sharing of relevant technologies; development
very high. The government could follow a revenue-neutral and setting up of an indigenous standards, verification, and
strategy to meet the CBAM challenge by accounting for both the certification system; helping facilitation in addressing non-
carbon tax and the fossil fuel tax. The fossil fuels’ taxes should tariff barriers against eligible Indian products, etc.
be reduced along with introducing the carbon tax in a calibrat- The developing and LDCs need help to transition to a low
ed manner to remain competitive in the international market. carbon economy through the provision of financial and tech-
India, building on the experience of its Perform, Achieve and nical support from international institutions and the devel-
Trade (PAT) scheme, is starting its cap-and-trade market in car- oped countries. A transition to the green economy in the de-
bon emissions from 2026. Indian carbon trading scheme will veloping world requires honest efforts towards the imple-
be limited to a few sectors initially, which should be made more mentation of decisions already taken through multiple insti-
comprehensive soon. The revenue so earned could be distrib- tutional processes and rewriting rules for a fair and equitable
uted among states objectively to avoid any losses to them. global economy.
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Border-tax Schemes,” Review of World Econom- Paris Organization for Economic Co-operation European Carbon Border Tax: Much Pain, Lit-
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Appendix Figure 4: India's Fertilizers Exports to EU

Figure 1: India’s IronFigure
and1:Steel
India'sExports
Iron and Steel
to EUExports to EU Figure 4: India’s Fertiliser Exports to EU
2.50
8,000
2.03
6,827.21
7,000 2.00
1.77
6,120.17
5,557.09
6,000
1.50
Million $
5,000 1.16
Million $
4,267.96 4,211.49 1.08

4,000 0.91
3,596.87 1.00
2,962.59 0.72 0.74 0.78
3,000 2,719.70 0.64
2,423.83 2,546.36 0.51
0.5
2,000
1,000 0
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
0
Years
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Source: UNCOMTRADE Database (2024).
Years
Figure 5: Percentage
Figure 5: Percentage of
of India’s CBAM
India's CBAM Exports
Exports To EUtotoEU to Total
Total Indian Indian Exports
Exports to
to EU EU
Figure 2: India's
Figure 2: India’s Aluminium ExportsAluminium
to EU Exports to EU 14 12.76 12.69
2,500 12
10.53
2,188.38
2188.38 9.76 9.56
10
8.19
2,000
Percentage
7.63
1801.25
1,801.25 8
6.34 6.06 6.31
1,500 6
Million $
Million $
957.97
4
1,000 823.39
2
557.17 503.34
500 0
343.76
151.42 215.40 180.64 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Years
0
Source: Calculated by authors on the basis of data from UNCOMTRADE Database (2024).
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Years
Source: UNCOMTRADE Database (2024). EPW E-books
Select EPW books are now available as e-books in Kindle and iBook (Apple) formats.
Figure 3: India’s Cement Exports
Figure toCement
3: India's EU Exports to EU
The titles are
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PERSPECTIVES
A Missed Opportunity record-holder Gujarat’s 6% agricultural

growth in the same period (Gulati et al
2021). The same study identified three
Rice Cultivation in Madhya Pradesh major interventions that are driving this
growth: (i) expanded irrigation, (ii) a
strong procurement system for wheat at
Arvind Sardana, P S Vijayshankar or over MSP, and (iii) all-weather roads
to connect farmers to markets. Rice was
I
The expansion of rice cultivation t is now well documented that state indeed one of the major crops in undi-
in Madhya Pradesh since 2000 support in terms of high input subsi- vided MP, accounting for about 22% of
dies coupled with assured procure- the gross cropped area (GCA). The major
is due to the support provided
ment at minimum support prices (MSPs) rice-growing tracts were in the eastern
through public procurement has significantly pushed the cultivation part of undivided MP. With the bifurca-
as well as the ready market of certain crops like rice and wheat in tion of the state in 2000, these rice tracts
provided by numerous private many parts of India, particularly in the went into the newly formed state of
north-west region in the Indo-Gangetic Chhattisgarh. Consequently, the share
companies. However, the state’s
plains. The Punjab model of input-inten- of rice in the GCA of MP came down to
focus on supporting only rice, sive agriculture focused on a few crops about 10%.
wheat, and soybean has missed has raised questions regarding the nega- Table 1 indicates that there has been an
the opportunity to diversify its tive impact of the agrarian economy on increase in the area under rice cultiva-
the environment and natural resources tion for MP from 17 lakh hectares (ha) in
cropping system by supporting
such as land and water. Despite this, this 2000–01 to 31 lakh ha in 2019–20. Rice
crops like pulses and oilseeds. model has become entrenched as the production went up even more dramati-
This is symptomatic of a larger mainstream mode of doing agriculture cally from 9.75 lakh tonnes to 73 lakh
malaise in Indian agriculture, in India. It eventually gets “locked in” tonnes during the same period. The turna-
with investments and the creation of round in production appears to have
where the absence of a clear policy
supply chains by both the state and pri- taken place from 2010 onwards. The
has resulted in the input-intensive vate markets. combination of the sharp rise in produc-
green revolution model For decades, experts have been sug- tion combined with a moderate increase
remaining dominant, missing gesting that Punjab should move out of
Table 1: Area and Production of Rice in
paddy and focus on alternative crops Madhya Pradesh, 2000–20
the opportunity for alternative
such as pulses and oilseeds, however, Year Area Five-Yearly Production Five-Yearly
agricultural development. these have remained pious suggestions. (‘000 Ha) CAGR (‘000 MT) CAGR
(Area) (Production)
The nagging problems endemic to this 2000–01 1,708 975
model are what create huge farmer un- 2001–02 1,776 1,686
rest and protests in the north-west re- 2002–03 1,681 1,025
gion. Even as the search for alternatives 2003–04 1,719 1,743
continues, the model has now moved 2004–05 1,623 –1.3% 1,303 7.5%
2005–06 1,658 1,688
beyond the Indo-Gangetic plains to oth-
2006–07 1,661 1,389
er agroclimatic regions that have an en-
2007–08 1,559 875
tirely different natural resource configu- 2008–09 1,662 1,037
ration. We examine some new trends in 2009–10 1,446 –2.7% 1,356 –4.3%
agriculture in Madhya Pradesh (MP) that 2010–11 1,603 1,767
show how this state is trying to copy the 2011–12 1,693 2,273
The authors would like to express their high-input model. We explore its conse- 2012–13 1,791 3,106
gratitude to Halkebai Sen from Raisen and quences and examine if MP is poised to 2013–14 1,882 3,322
M L Patel and Anjelo Barwa from Piparia for 2014–15 2,057 5.1% 3,523 14.8%
inputs from the field.
repeat the Punjab story.
2015–16 2,027 3,547
We discuss the expansion of rice culti-
Arvind Sardana (arvindewas@gmail.com) 2016–17 2,260 5,401
vation in MP since 2000. The state’s agri- 2017–18 2,035 4,899
was formerly with Eklavya Foundation.
P S Vijayshankar (viju28@gmail.com) is one culture as a whole performed remarka- 2018–19 2,794 5,239
of the co-founders of Samaj Pragati Sahayog, bly well in the last two decades. The agri- 2019–20 3,110 8.9% 7,363 15.7%
Dewas. Both the authors have lived and cultural gross domestic product (GDP) of CAGR—compound annual growth rate; Ha—hectares;
worked in Madhya Pradesh for over three MP increased at 8.1% per annum from MT—metric tonnes.
Source: Directorate of Economics and Statistics,
decades.
2005–06 to 2016–17, surpassing even Government of Madhya Pradesh.
PERSPECTIVES
in cropped area clearly indicates that the Table 2: Principal Agroclimatic Zones Growing Rice in MP
yield per ha has gone up in the state. This Type of Zone ACZ No ACZ Name Districts
Traditional zones 1 Chhattisgarh plains Balaghat
could be due to the use of high-yielding
2 Northern Hills Region (NHR) Shahdol, Mandla, Dindori, Anuppur,
varieties of seeds as well as increases in Siingroli, and Umaria
the irrigated area in MP. 3 Kymore Plateau and Satpura Hills Rewa, Sidhi, Satna, Panna, Jabalpur,
The picture becomes even more inter- Katni, and Seoni
esting when we disaggregate area and Non-traditional zones 4 Central Narmada Valley Harda, Narmadapuram, and Narsinghpur
production figures into the 11 agrocli- 5 Vindhyachal Plateau Bhopal, Sagar, Damoh, Vidisha, Raisen,
Sehore and parts of Guna (Chanchoda,
matic zones (ACZs) identified in the state Raghogarh, and Aron tehsils)
by the Indian Council of Agricultural Source: JNKVV (2015).
Research (ICAR) (JNKVV 2015). Rice is cur-
Table 3: Distribution of Area and Production of Rice across Agroclimatic Zones in MP, 2004–20
rently grown in five out of the 11 ACZs in
Share in Cropped Area (%) Share in Total Production (%)
the state. Zones 1–3 could be called the 2004–05 2011–12 2019–20 2004–05 2011–12 2019–20
traditional rice-growing zones adjoining Traditional zones 83.3 80.9 70.1 82.7 76.4 69.8
Chhattisgarh, while zones 4 and 5 are Non-traditional zones 5.9 8.2 18.1 5.8 8.9 17.4
the non-traditional zones where rice cul- Other zones 10.9 10.9 11.8 11.5 14.8 12.8
tivation has expanded significantly after Total 100.0 100.0 100.0 100.0 100.0 100.0
2010. We designate the remaining ACZs Area (‘000 ha)/production (‘000 MT) 1,676 1,693 3,110 1,303 2,273 7,363
Source: Directorate of Economics and Statistics, Government of Madhya Pradesh.
of the state as other zones. The tradi-
tional and non-traditional ACZs and the the expansion of rice area and production some of the major rice-producing dis-
districts included in each are shown in in MP since 2000. tricts of MP. Needless to add, this shift is
Table 2. accompanied by an increased use of syn-
Further examination of the zone-wise Factors Contributing to Rice thetic chemical inputs such as fertilisers
data reveals that ACZs 1 to 3 (traditional Area Expansion and pesticides in these districts.
zones) accounted for 83% of the rice An additional reason for the expan-
acreage and production in 2004–05. Access to irrigation: Rice cultivation was sion of rice cultivation to non-traditional
Zones 4 and 5 (non-traditional zones) ac- not unknown in the non-traditional zones, areas is the search by farmers to look for
counted for 6% of the area and 9% of however, its cultivation was restricted to alternatives to soybean over the past
rice production. Other zones contribut- smaller plots on the farmland known as two decades. Soybean is a major kharif
ed 11%–12% of the rice area and produc- gadhia khet. This was mostly for occa- season crop in most parts of MP. The vol-
tion. These proportions underwent a sional home consumption, not for sale in atility in soybean prices has reduced
significant change by 2019–20. The share the market. With the expansion of the margins drastically during some years
of the traditional zones in rice area and area, rice has now become a valuable cash
Table 4: Proportion of the Cropped Area under
production declined to about 70%, com- crop with good export potential and ur- Rice Receiving Irrigation, 2004–20
pensated by an increase in the share of ban demand. A major factor supporting ACZ ACZ Name Cropped Area under Rice
No Receiving Irrigation (%)
the non-traditional zones, which now this growth was the expansion in irriga- 2000–01 2019–20
contributed 18% of the cropped area un- tion in these districts. A much larger pro- 1 Chhattisgarh plains 50.7 69.2
der rice and 17% of rice production. portion of the area under rice received 2 Northern Hills Region 5.6 19.7
There was no significant change in the irrigation in 2019–20 compared to 3 Kymore plateau 4.4 69.0
share of the other zones in area or pro- 2000–01. Much of this additional irriga- 4 Central Narmada Valley 11.3 91.0
duction (Table 3). tion in the area is sourced from ground- 5 Vindhyachal plateau 4.1 60.5
These changing shares should be seen water. As a result, the irrigated area un- Total irrigated area under rice
in the five ACZs (‘000 ha) 185.3 1,632.5
in light of the overall increase in abso- der rice in these five ACZs together went Source: Directorate of Economics and Statistics,
lute terms of rice area and production in up from around 1.8 lakh ha to over 16 Government of Madhya Pradesh.
both traditional and non-traditional zones lakh ha from 2000 to 2020 (Table 4).
of the state. The increase in rice acreage Table 5: Yield (Kg/Ha) of Rice in Some Major
Producing Districts of MP, 2000–20
and production is significant, especially Changes in crop varieties: Increased District 2000–01 2009–10 2019–20
in districts of the Narmada Valley (Nar- access to water and the expansion of ir- Balaghat 850 1,360 2,300
madapuram and Narsinghpur) and Vin- rigated areas were accompanied by a Seoni 400 1,050 1,870
dhyachal (Raisen, Vidisha, and Sehore) shift away from less irrigated varieties of Mandla 350 530 1,930
ACZs. There was a significant expansion rice to varieties requiring much higher Rewa 550 640 2,700
of area and production in the traditional doses of irrigation. These new high- Jabalpur 550 710 2,538
Narmadapuram 1,150 1,660 2,910
zones as well (for instance, in Balaghat yielding varieties have been developed
Raisen 550 970 2,110
district, adjoining Chhattisgarh) but the and introduced in the past two decades.
Sehore 520 1,040 4,380
rate of expansion was considerably low- The dramatic effect of yield is noticeable Source: Directorate of Economics and Statistics,
er. We now examine the key drivers of in Table 5, showing the increase for Government of Madhya Pradesh.
PERSPECTIVES
and this has been an enduring feature. passed through either government or fertilisers and pesticides to be used. They
Paddy has emerged as an attractive cooperative channels (NSSO 2021: A-536). often collect paddy from the farm itself
choice for the kharif season, in ACZs 4 The decentralised procurement has and get it tested in their labs, a condition
and 5. While paddy has higher input proved effective in encouraging the required for export. The second layer is
costs in terms of chemical fertilisers, spread of rice, as seen from the number smaller mills, which purchase directly
and pesticides, and requires additional of farmers registering for this process from the farmers who bring the paddy to
irrigation, the high productivity of the and those availing of this facility to sell the mandi for sale. The milled rice is sent
crop with assured markets enables high- at MSP. The MP Civil Supplies Corpora- to urban markets across the country.
er returns per acre, provided markets tion website1 shows that 7.3 lakh farmers Given the increasing area and produc-
are accessible. This has made farmers were registered for rice procurement in tion of rice in MP, the government has
shift to paddy in a big way, especially in 2020–21, of which 5.9 lakh farmers been emphasising the need to increase
the central MP districts. (81%) sold rice to government procure- milling capacity. In a statement to the
In Narmadapuram district, for exam- ment agencies. Though there is a sizea- cabinet subcommittee on paddy milling
ple, the area under soybean declined ble private market for rice operational in in kharif 2020–21, then chief minister
rapidly from 2 lakh ha in 2011–12 to MP, the key driver of the shift in crop- Shivraj Singh Chouhan said that large
72,000 ha in 2020–21, a decline matched ping patterns towards rice in the state is milling units will be set up to enhance
by an increase in the rice acreage from public procurement. milling capacity. It was informed in the
25,000 ha to 1.5 lakh ha. The experience meeting that the production of paddy
of other districts in the central zone is Encouraging private companies: In was increasing every year in the state. A
not different. The private companies that addition to stepping up public procure- total of 37.26 lakh metric tonnes (MT) of
have been invited to MP introduced spe- ment, the MP government also invited paddy were procured in 2020–21, while
cial varieties of basmati that they find several private industries such as it was just 16.6 lakh MT in 2017–18. Out
suitable in certain regions such as the Daawat Foods Ltd to start production in of a total of 804 millers in the state, 396
Narmada Valley. The variety of Pusa MP. These companies have tie-ups with mills have a milling capacity of 4 MT per
Basmati 1 has become very popular and large rice mills for basmati varieties. hour and 392 millers have a milling ca-
is now a major export product of this re- Over the past decade, a large network of pacity of 4 MT to 8 MT per hour. Only 16
gion to West Asia and Europe. rice mills, large and small, has come up units have a milling capacity of more
in the rice-growing districts. The large than 8 MT per hour. The present milling
Decentralised public procurement: MP ones deal in special varieties and supply capacity of the state is 35,000 MT per
began its experiment with decentralised directly to companies. They act as agents day. The chief minister directed that
procurement of wheat from 2008 on- of the company, promoting products necessary action should be taken to set
wards. Within a few years, MP became along with supplying liberal doses of up rice mills with more capacities in the
the second-largest contributor of wheat state (Pioneer 2021).
Table 6: Production and Procurement of
to the central pool, overtaking other Rice (‘000 MT) in MP, 2000–20 There were only 288 rice mills in
wheat-producing states such as Uttar Procurement Production % 2008–09, whereas in 2020–21, there
Pradesh and Haryana. Following this 2000–01 176 975 18.0 were over 804 rice mills in the state. Yet,
2001–02 274 1,686 16.3
experience, MP seems to have escalated the government is facing shortages of
2002–03 159 1,025 15.5
its procurement of rice as well. Public milling capacity. Hence, the government
2003–04 112 1,743 6.4
procurement of rice in MP went up from 2004–05 43 1,303 3.3
is assuring sufficient quantities to new
about 0.7 lakh tonnes in 2007–08 to 2005–06 136 1,688 8.1 private mills interested in expanding
over 30 lakh tonnes in 2021–22. As a pro- 2006–07 73 1,389 5.3 their operations in MP. This intent is
portion of production, it went up dra- 2007–08 69 875 7.9 made clear in the note titled “Empanel-
matically from about 8% in 2007–08 to 2008–09 247 1,037 23.8 ment of Rice Mills under Minimum
24% in 2019–20 (Table 6). 2009–10 255 1,356 18.8 Guarantee of Paddy,” prepared by the MP
2010–11 516 1,767 29.2
The high participation of rice-growing State Civil Supplies Corporation (MPSCSC
2011–12 635 2,273 27.9
farmers in public procurement in MP is 2022). The note explains that the pro-
2012–13 898 3,106 28.9
supported by evidence from other sources 2013–14 1,045 3,322 31.5
cured paddy is not being converted to
as well. The National Sample Survey 2014–15 807 3,523 22.9 rice in time because of a lack of milling
Office’s (NSSO 2021) Situation Analysis of 2015–16 849 3,547 23.9 capacity. It invites tenders from interest-
Agricultural Households and Land and 2016–17 1,314 5,401 24.3 ed private parties to set up mills in the
Livestock Holdings of Households in Ru- 2017–18 1,096 4,899 22.4 rice-growing districts. Table 7 (p 29) gives
ral India, 2019 gives information about 2018–19 1,395 5,239 26.6 the assured milling quantities of paddy
channel-wise sales of agricultural com- 2019–20 1,740 7,363 23.6 and the number of mills required for
2020–21 2,497 NA –
modities. The data shows that 23% of processing outside of the traditional ar-
2021–22 3,070 NA –
the farmers reported the sale of rice Source: Directorate of Economics and Statistics,
eas. Clearly, the MP government expects
crops and 33% of the total rice sold Government of Madhya Pradesh. rice production to grow continuously in
PERSPECTIVES
the coming years, especially in the non- Like Punjab, MP is not a primarily rice- the application of higher doses of these
traditional zones. consuming state. The total production of highly hazardous chemicals than recom-
The spurt in rice production in MP af- rice in 2019–20 in the state was about 73 mended. Rice is described by farmers as
ter 2010 owes largely to state support in lakh MT. Out of this, the net production having a high-cost and high-yield cycle.
terms of public procurement and the in the state could be about 64 lakh MT The use of such agrochemicals is known
rapid expansion of private markets. (after deducting 9 LMT for seed and to cause harm to soils, the environment
These factors encouraged rice produc- wastage). As per the NSSO’s Consumer and human health through the pathways
tion in the ACZs 4 and 5, outside the tra- Expenditure Survey, 2019 (NSSO 2023), of transmission through the food chain.
ditional rice-growing tracts of MP. These domestic consumption of rice in the Some indicative signs such as the rejec-
changes have important implications for state was about 2.64 kg and 1.94 kg per tion of a farmer’s lot for export because
the agricultural development of the state capita per month, respectively in rural of pesticide residues have been noticed.
in the coming years. It is well known that and urban areas of the state. At the pro- Finally, the spread of highly irrigated
in recent years, the crop cycle with two jected population figures for 2020, this crops such as rice is known to have a sig-
alternating crops (soybean in the mon- works out to about 21 lakh MT for domes- nificant impact on the natural resources
soon season and wheat in the winter tic consumption. The balance of 43 lakh of the region, especially groundwater.
season) has become well-entrenched in MT is exported from the state to the out- The latest estimates of the dynamic ground-
MP. Since its introduction in the mid- side world through public procurement water balances by the Central Ground-
1970s, the area under soybean has stead- and private channels (59% of total pro- water Board show that 30 of the 317 as-
ily grown and now occupies about 40% duction).2 MPSCSC (2022) states that for sessment units (blocks) in MP are in the
of the total cropped area under oilseeds 2020–21, 30.70 lakh MT was supplied by semi-critical, critical or overexploited
in India (Shah et al 2021). MP was the MP to the central pool, out of which the categories (CGWB 2023). Most of these
largest producer of soybean. However, yearly allotment for MP was only 7.69 are in the western part of MP, where
in these non-traditional districts such as lakh MT. This means that only a part of high-input agriculture has been prac-
those in the Narmada Valley, rice has the rice procured is domestically con- tised for over four decades now. The
come up as an economic alternative to sumed. The rest is supplied to the cen- chemical contamination of groundwater
soybean. Effectively, this amounts to re- tral pool to service public distribution is also widely reported. The non-tradi-
placing one monocrop with another. The system (PDS) requirements elsewhere in tional districts, which have taken up the
rice–wheat cropping cycle, similar to the country. rice–wheat cropping cycle in earnest,
that in the Indo-Gangetic plains, is get- Rice in MP, grown under irrigated can also be seen to be moving on a path
ting established here. We feel the state is conditions, is a heavy user of agri-chem- of unsustainability. A course correction
missing out on the opportunity to en- icals such as chemical insecticides and should be the priority now. Considering
courage a diversity of crops suitable for herbicides. The package of practices (PoP) the experience of other regions such as
the different ACZs of the state. The his- recommended for rice by ICAR institu- Punjab and Haryana (Singh et al 2024),
tory of many other states being stuck tions and Krishi Vigyan Kendras (KVKs) waiting for another decade may make
with paddy is before us, however, MP is contains advice to use heavy doses of the restoration of natural resources al-
being pushed into the same quagmire. herbicides such as butachlor and preila- most irreversible.
This comparison across states is im- chlor as well as monocrotophos and me-
portant when we examine the question: thyl parathion. This advice given to the Is There an Alternative?
Where is the rice produced in MP going? farmers is interpreted by them to mean By choosing to procure rice at MSP, the
Table 7: Assured Milling Quantities of Paddy and the Number of New Mills Required in MP MP government has taken the path of
District Milling Guaranteed Number of New Mills Required least resistance. The agenda of diversify-
Volume of Paddy (LMT)
ing the cropping system, reducing the
Narsinghpur 1.00 2, each would be provided with 50,000 MT of paddy
Jabalpur 1.25 3, two provided with 50,000 MT and one with 25,000 MT
pressure on natural resources, and sup-
Sehore 0.50 2, each provided with 25,000 MT porting rainfed crops is being bypassed.
Shivpuri 2.00 1, provided with 25,000 MT There is a range of crops grown in the
Narmadapuram (Hoshangabad) 1.25 3, two provided with 50,000 MT; one with 25,000 MT state which does not enjoy the level of
Source: MPSCSC (2022). support that rice and wheat have re-
Table 8: Procurement of Crops Other Than Rice and Wheat by MPSCSC (Lakh MT) ceived. In 2020–21, for example, about
Year Chickpea Lentils Red Gram Black Gram Green Gram Maize Jowar Bajra Mustard 15% of the GCA of the state was under
2014–15 – – – – – 3.02 0.02 – – pulses, of which chickpeas (7.3%) had
2015–16 – – – – – 0.10 – – –
the largest share. Similarly, oilseeds other
2016–17 – – – – – 2.34 0.04 – –
than soybean accounted for 6.6% of the
2017–18 – – 0.94 0.42 2.13 – – 0.04 –
2018–19 16.11 2.33 0.03 4.25 4.25 – 0.06 0.43 1.2
total cropped area of MP. However, the
2019–20 5.76 0.56 0.03 – – – – – 1.82 extent of state support to these crops in
2020–21 7.07 0.69 – – – – – – 1.15 the form of public procurement is erratic,
Source: https://mpscsc.mp.gov.in/pr. minimal or nil (Table 8).
PERSPECTIVES
The state government has no plan In hindsight, it is the synergy created this model is a missed opportunity, not
such as decentralised procurement for by the state that has encouraged rice only for MP but for Indian agriculture as
these crops. Since there is no commit- production in the non-traditional dis- a whole.
ment by the central government to con- tricts of central MP. The combination of
Notes
sider these for the central pool (unlike factors such as research on new paddy
1 mpscsc.mp.gov.in\pr.
rice and wheat), the state government is varieties, decentralised procurement 2 The anomaly of the figures for overall food-
unwilling to take the risk of procuring providing an assured market, incentives grain production, consumption, and the conse-
quent “cereal gap” has been highlighted in
these crops. The low volumes shown in for private players to create more milling some recent studies (Drèze and Oldiges 2024).
Table 8 can be explained by this hesita- capacity, and incentives for companies
tion on the part of the state government, catering to special varieties that have an References
for whom it is safer and easier to negoti- export and domestic urban market CGWB (2023): National Compilation of the Dynam-
ic Groundwater Resources of India, 2023, Cen-
ate and increase the procurement target moved the rice production in the state tral Groundwater Board, Department of Water
for rice. For rice, the possibility of export- along these channels. There is enough Resources, River Development and Ganga Re-
juvenation, Ministry of Jal Shakti, Government
ing the surplus quantities procured to field experience to show that the same of India, New Delhi.
the central pool always exists. The via- synergy could be provided to other Drèze, J and C Oldiges (2024): “Cereal Guzzler in
the Indian Economy: 100 Million Tonnes of
ble alternatives are indicated in Table 8. crops, especially pulses and oilseeds, Grain ‘Missing’,” Wire, 28 June.
A shared model would benefit both the that could encourage crop diversifica- Gulati, A, R Roy and S Saini (eds) (2021): Revitaliz-
ing Indian Agriculture and Boosting Farmer
procurement agencies such as the Food tion away from monocropping systems Incomes, India Studies in Business and Eco-
Corporation of India (FCI) and the state in the state. This will not hamper food nomics, Singapore: Springer.
JNKVV (2015): Agro-climatic Zones of Madhya
government. This would help FCI to diver- security if we conceptualise the buffer Pradesh, Jawaharlal Nehru Krishi Vishva Vidy-
sify its stock and also help the state govern- stocks to be also diversified with oil- alay, Jabalpur, Madhya Pradesh, http://jnkvv.
org/Departments/Dep_DRS_AgroClimatic-
ment in providing food security through seeds, pulses, and millets. Rice and Zones.aspx.
the wider set of cereals and pulses. wheat will remain important but their MPSCSC (2022): “Empanelment of Rice Mills Un-
For example, pulses could be pro- share in procurement by FCI should be der Minimum Guarantee of Paddy,” Madhya
Pradesh State Civil Supplies Corporation,
cured at MSP by FCI and dal mills can be brought down. This is what might break 26 August.
encouraged. Dal mills had closed down the barriers for agroecology and would NSSO (2021): Situation Analysis of Agricultural
Households 2019, National Sample Survey
in the traditional pulse area such as induce similar synergy to start working Office, Ministry of Statistics and Programme
Piparia in Narmadapuram after the intro- on other crops (Shah 2022). Implementation, Government of India, New
Delhi.
duction of soybean and rice mills rapidly We observe that encouragement given — (2023): “Household Consumer Expenditure
came up. The steady increase in rice pro- to a few crops like rice, wheat, and soy- Survey, 2019,” National Sample Survey Office,
Ministry of Statistics and Programme Imple-
curement in the past decade stands in bean in MP at the cost of the neglect of mentation, Government of India, New Delhi.
sharp contrast to the total neglect of any many others is symptomatic of a larger Pioneer (2021): “Large Paddy Milling Units to be Set
Up in MP,” 10 June.
support to other crops. Evidence from malaise that has affected Indian agricul-
Shah, M (2022): “Dismantling Barriers to Upscal-
the National Family Health Surveys re- ture. It is the lack of clear articulation of ing Agro-ecological Farming in India,” Ecology,
veals an alarming picture of the state of the policy goals in agriculture that rec- Economy & Society: INSEE Journal, Vol 5, No 1,
pp 31–62.
undernutrition in MP. Public support for onciles agroecological transitions, agri- Shah, M, P S Vijayshankar and F Harriss (2021):
crops such as pulses is important from cultural productivity, and elimination of “Water and Agricultural Transformation in
India: A Symbiotic Relationship, Part I,” Econo-
the point of view of providing nutritional pervasive hunger and malnutrition. In mic & Political Weekly, Vol 56, No 29, pp 43–55.
security as well. the absence of such a policy articulation, Singh, R, P Thangaraj, R Juneja and A Gulati
(2024): “Saving Punjab and Haryana From
The inertia lies with the central govern- the input-intensive green revolution mod- Ecological Disaster: Re-aligning Agri-food Pol-
ment and the FCI. This was perceptively el continues to be the ruling paradigm of icies,” Policy Brief 21, Indian Council for Re-
search on International Relations, New Delhi.
pointed out by D S Tyagi, the chairper- agricultural development in India. The Tyagi, D S (1990): Managing India’s Food Economy:
son of the Commission for Agricultural failure to search for an alternative to Problems and Alternatives, New Delhi: Sage.
Costs and Prices, several decades ago:
In the case of rice and wheat, the procure-
ment agency in its price support operations EPW Index
undertakes to purchase the entire grain
whether brought to the cooperative shop or An author-title index for EPW has been prepared for the years from 1968 to 2012. The PDFs of the
to the shops of commission agents. Why then Index have been uploaded, year-wise, on the EPW website. Visitors can download the Index for
should a distinction be made between wheat
and rice on one hand and coarse cereals on all the years from the site. (The Index for a few years is yet to be prepared and will be uploaded
the other? It appears that since the National when ready.)
Oilseeds Federation (NAFED) does not have
an assured outlet and a built-in system for EPW would like to acknowledge the help of the staff of the library of the Indira Gandhi Institute
disposing off the grain procured by it, in its of Development Research, Mumbai, in preparing the index under a project supported by the
anxiety to contain losses it decided to oper-
RD Tata Trust.
ate the Minimum Support Price scheme on a
limited scale. (Tyagi 1990: 106)
CURRENT STATISTICS EPW Research Foundation
Wholesale Price Index Foreign Trade

The year-on-year WPI-infl ation rate increased to 1.8% in September 2024 The trade deficit widened to $20.8 bn in September 2024 from $20.1 bn registered
from -0.1% registered a year ago and 1.3% a month ago. The index for a year ago. Exports increased by 0.5% to $34.6 bn from $34.4 bn a year ago and
primary articles rose by 6.6% compared to 4.4% a year ago and 2.4% a imports by 1.6% to $55.4 bn from $54.5 bn. Oil imports declined by (-)10.4% to
month ago. The rate of inflation for food articles surged to 11.5% from 3.8% $12.5 bn and non-oil imports increased by 5.8% to $42.8 bn from $14.0 bn and
a year ago and 3.1% a month ago. The index for fuel and power declined $40.5 bn, respectively. During April–September 2024–25, cumulative exports
further by -4.1% against -3.4% a year ago while the index for manufactured increased by 1.0% to $213.2 bn and imports by 6.2% to $350.7 bn from $211.1 bn
products grew by 1.0% compared to -1.3%. and $330.3 bn, respectively, registered during the corresponding period last year.
Consumer Price Index Index of Industrial Production

The CPI-inflation rate increased to 6.2% in October 2024 from 4.9% registered The y-o-y growth rate of IIP decreased to 3.1% in September 2024 from 6.4%
a year ago and 5.5% a month ago. The consumer food price index rose by 10.9% registered a year ago with growth rate of manufacturing segment falling to 3.9%
compared to 6.6% reported a year ago and 9.2% a month ago. The CPI-rural from 5.1%. Growth rate in the mining segment was down to 0.2% and electricity
inflation rate increased to 6.7% and urban inflation rate to 5.6% from 5.1% and generation to 0.5% from 11.5% and 9.9%, respectively. As per use-based classification,
4.6%, respectively. According to Labour Bureau data, the CPI for agricultural production of capital goods grew by 2.8% and infrastructure goods by 3.3% against
labourers (CPI–AL) stood lower at 6.4% in September 2024 compared to 6.7% a 8.4% and 10.1%, respectively, reported a year ago. Production of consumer durables
year ago and that for industrial workers (CPI–IW) at 4.2% against 4.7%. grew by 6.5% compared to 1.0% a year ago and non-durables by 2.0% against 2.7%.
Movement of WPI-Inflation Rate January 2023–September 2024 Merchandise Trade September 2024
Year-on-Year in % September 2024 Over Month Over Year April–September
($ bn) (%) (%) (2024–25 over 2023–24) (%)
20
Exports 34.6 -1.8 0.5 1.0
Imports 55.4 -1.5 1.6 6.2
10
Primary Articles 6.6% Trade balance -20.8 -1.0 3.5 15.3
Data is provisional. Source: Ministry of Commerce and Industry.
1.0%
0
Trade Balance January 2023–September 2024
Manufactured -4.0% $ billion
Products Fuel and Power
-10 7
0
-20 Non-oil -$7.8 bn
Jan F M A M J J A S O N D Jan F M A M J J A Sep*
Oil
2023 2024 -7
* Data is provisional; Base: 2011–12 = 100.
-$13.0 bn
-14
Trends in WPI and Its Components September 2024* (%)
Financial Year (Averages) -21
Weights Over Month Over Year 2021–22 2022–23 2023–24
Total Trade Balance
All commodities 100 0.1 1.8 13.0 9.4 -0.7 -28
Primary articles 22.6 0.4 6.6 10.2 10.0 3.5 -$20.8 bn

-35
Food articles 15.3 0.9 11.5 4.1 7.3 6.6 Jan F M A M J J A S O N D Jan F M A M J J A Sep*
Fuel and power 13.2 -0.8 -4.0 32.5 28.1 -4.7 2023 2024
Oil refers to crude petroleum and petroleum products, while non-oil refers to all other commodities.
Manufactured products 64.2 0.1 1.0 11.1 5.6 -1.7
*Data is provisional; Base: 2011–12=100. Source: Ministry of Commerce and Industry.
Movement of Index Values of Components of IIP January 2023–September 2024
Index Value
Movement of CPI Inflation January 2023–October 2024
230
Year-on-Year in % Electricity
206.9
15 184
147.0
Consumer Food
138
12 111.7
10.9% Mining
92
9
CPI Manufacturing
6.2% 46
6
4.3% 0
Jan F M A M J J A S O N D Jan F M A M J J A Sep
3 2023 2024
Miscellaneous
* September 2024 are quick estimates; Base: 2011–12=100.
0
Industrial Growth: Sector-wise September 2024* (%)
-3
Jan F M A M J J A S O N D Jan F M A M J J A S Oct* Weights Over Over Financial Year (Avgs)
2023 2024 Month Year 2022–23 2023–24
* Data is provisional. Source: National Statistical Office (NSO), Ministry of Statistics and Programme Implementation,
Base: 2012=100.
General index 100 0.7 3.1 5.2 5.9
Mining 14.4 4.3 0.2 5.8 7.5
CPI: Rural and Urban October 2024* (%) Manufacturing 77.6 0.7 3.9 4.7 5.5
Latest Over Over Financial Year (Avgs) Electricity 8.0 -2.5 0.5 8.9 7.1
Month Index Month Year 2022–23 2023–24
CPI Combined 196.8 1.3 6.2 6.7 5.4 Industrial Growth: Use-based
Rural (2012=100) 199.5 1.4 6.7 6.8 5.6 Primary goods 34.0 -0.2 1.8 7.5 6.1
Urban (2012=100) 193.7 1.2 5.6 6.4 5.1 Capital goods 8.2 7.3 2.8 13.1 6.3
Intermediate goods 17.2 -0.9 4.2 3.8 5.3
CPI: Occupation-wise# Infrastructure/Construction goods 12.3 -1.2 3.3 8.4 9.7
Industrial workers (2016=100) 143.3 0.5 4.2 6.1 5.2 Consumer durables 12.8 2.6 6.5 0.6 3.6
Agricultural labourers (1986-87=100) 1304 0.5 6.4 6.8 7.1 Consumer non-durables 15.3 2.7 2.0 0.7 4.1
* Provisional; # September 2024; Source: NSO (rural and urban); Labour Bureau (IW and AL). * September 2024 are quick estimates; Base: 2011–12=100. Source: NSO, Ministry of Statistics and Programme Implementation.
Comprehensive current economic statistics with regular weekly updates are available at: http://www.epwrf.in/currentstat.aspx.
CURRENT STATISTICS EPW Research Foundation
India’s Quarterly Estimates of Final Expenditures on GDP
2022–23 2023–24 2024–25
` Crore | At 2011–12 Prices Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Private final consumption expenditure 2166248 (18.5) 2282920 (8.2) 2473262 (1.8) 2401395 (1.5) 2286468 (5.5) 2342610 (2.6) 2572957 (4.0) 2497179 (4.0) 2456777 (7.4)
Government final consumption expenditure 416509 (9.8) 336707 (3.4) 352789 (7.1) 507720 (13.9) 415961 (-0.1) 383709 (14.0) 341402 (-3.2) 512261 (0.9) 414945 (-0.2)
Gross fixed capital formation 1303951 (13.9) 1285349 (4.7) 1282287 (5.0) 1474836 (3.8) 1414918 (8.5) 1435079 (11.6) 1406689 (9.7) 1570194 (6.5) 1520625 (7.5)
Change in stocks 44647 (19.6) 44039 (8.7) 42943 (11.5) 51836 (18.2) 45182 (1.2) 48535 (10.2) 46183 (7.5) 54448 (5.0) 47712 (5.6)
Valuables 35436 (58.4) 109678 (-19.6) 46214 (-38.2) 37839 (-23.6) 27991 (-21.0) 108733 (-0.9) 75756 (63.9) 65376 (72.8) 24796 (-11.4)
Net trade (Export–Import) -23414 -80422 -28286 60844 -231335 -151830 -80230 64473 -204089
Exports 935660 (19.1) 948378 (11.7) 939984 (10.9) 1023721 (12.4) 873875 (-6.6) 996098 (5.0) 971873 (3.4) 1107101 (8.1) 949854 (8.7)
Less imports 959074 (26.1) 1028800 (16.1) 968270 (4.1) 962877 (-0.4) 1105210 (15.2) 1147928 (11.6) 1052103 (8.7) 1042628 (8.3) 1153943 (4.4)
Discrepancies -163422 (89.5) -105414 (-18.9) -134318 (-3.9) -150742 (6.1) 132299 (-181.0) 18943 (-118.0) 17917 (-113.3) -40147 (-73.4) 102967 (-22.2)
Gross domestic product (GDP) 3779954 (12.8) 3872858 (5.5) 4034890 (4.3) 4383726 (6.2) 4091484 (8.2) 4185779 (8.1) 4380675 (8.6) 4723784 (7.8) 4363732 (6.7)
India’s Overall Balance of Payments (Net): Quarterly

2023–24 ($ mn) 2024–25 ($ mn) 2023–24 (` bn) 2024–25 (` bn)
Item Q1 Q2 Q3 Q4 Q1 Q1 Q2 Q3 Q4 Q1
Current account -8967 -11286 -10431 4569 -9765 -737 [-1.0] -933 [-1.3] -869 [-1.1] 379 [0.5] -815 [-1.1]
Merchandise -56701 -64544 -71641 -52009 -65122 -4661 -5335 -5966 -4318 -5433
Invisibles 47734 53258 61210 56579 55357 3924 4402 5097 4698 4618
Services 35121 39940 45007 42684 39725 2887 3302 3748 3544 3314
of which: Software services 33928 35237 36267 36643 37447 2789 2913 3020 3042 3124
Transfers 22838 24926 29302 28719 26350 1877 2060 2440 2384 2198
of which: Private 23073 25170 29438 28950 26598 1897 2081 2451 2404 2219
Income -10225 -11608 -13099 -14824 -10718 -841 -960 -1091 -1231 -894
Capital account 33816 12841 17291 25560 14406 2780 [3.9] 1061 [1.5] 1440 [1.9] 2122 [2.7] 1202 [1.6]
of which: Foreign investment 20459 4112 15964 13675 7259 1682 340 1329 1135 606
Overall balance 24432 2519 5998 30754 5226 2008 [2.8] 208 [0.3] 499 [0.7] 2553 [3.3] 436 [0.6]
Figures in square brackets are percentage to GDP.
Foreign Exchange Reserves Variation

1 November 3 November 31 March Month Year Financial Year So Far Financial Year
Excluding gold but including revaluation effects 2024 2023 2024 Ago Ago 2023–24 2024–25 2019–20 2020–21 2021–22 2022–23 2023–24
` crore 5113141 4496432 4913067 -185984 616709 156136 200072 668976 590416 302585 102680 572770
$ mn 608068 539871 589082 -23000 68197 11788 18986 56831 94535 21435 -31532 60999
Monetary Aggregates Variation

Outstanding Over Month Over Year Financial Year So Far Financial Year
` Crore 2024 2023–24 2024–25 2021–22 2022–23 2023–24
Money supply (M3) as on 18 October 26288515 334298 (1.3) 2548582 (10.7) 1261978 (5.6) 1348655 (5.4) 1649151 (8.8) 1984226 (9.7) 2461905 (11.0)
Components
Currency with public 3415233 22949 (0.7) 213550 (6.7) -74753 (-2.3) 4957 (0.1) 283860 (10.3) 240747 (7.9) 133840 (4.1)
Demand deposits 2687848 46857 (1.8) 297435 (12.4) 69816 (3.0) 100960 (3.9) 217871 (10.9) 107606 (4.9) 266291 (11.5)
Time deposits 20087143 260285 (1.3) 2012246 (11.1) 1271736 (7.6) 1238983 (6.6) 1136327 (8.1) 1616556 (10.6) 2044999 (12.2)
Other deposits with RBI 98292 4207 (4.5) 25352 (34.8) -4821 (-6.2) 3755 (4.0) 11093 (23.4) 19317 (33.1) 16776 (21.6)
Sources
Net bank credit to government 7922190 296385 (3.9) 546810 (7.4) 98591 (1.4) 318619 (4.2) 627255 (10.7) 799160 (12.3) 326782 (4.5)
Bank credit to commercial sector 18005845 116162 (0.6) 1812641 (11.2) 1177138 (7.8) 803013 (4.7) 948054 (8.1) 2399546 (19.0) 2186766 (14.6)
Net foreign exchange assets 5933081 1222 (0.0) 886268 (17.6) 135047 (2.7) 389381 (7.0) 275216 (6.0) 57704 (1.2) 631934 (12.9)
Banking sector’s net non-monetary liabilities 5607434 79710 (1.4) 700321 (14.3) 150162 (3.2) 163760 (3.0) 202475 (6.2) 1274455 (36.6) 686723 (14.4)
Reserve money as on 1 November 4718068 79629 (1.7) 335392 (7.7) -4083 (-0.1) 86622 (1.9) 468905 (13.0) 317872 (7.8) 244687 (5.6)
Components
Currency in circulation 3562099 68804 (2.0) 249208 (7.5) -65629 (-1.9) 50638 (1.4) 279954 (9.8) 244803 (7.8) 132941 (3.9)
Bankers’ deposits with RBI 1056267 6981 (0.7) 60759 (6.1) 65031 (7.0) 30819 (3.0) 177859 (25.4) 53751 (6.1) 94971 (10.2)
Other deposits with RBI 99701 3843 (4.0) 25425 (34.2) -3485 (-4.5) 5165 (5.5) 11094 (23.4) 19316 (33.0) 16775 (21.6)
Sources
Net RBI credit to government 1211153 83177 (7.4) 94650 (8.5) -334623 (-23.1) 17940 (1.5) 350911 (31.9) 529 (0.0) -257913 (-17.8)
of which: Centre 1179902 87693 (8.0) 90137 (8.3) -360612 (-24.9) -6754 (-0.6) 352626 (32.2) 1405 (0.1) -263721 (-18.2)
RBI credit to banks and commercial sector -206205 72833 (-26.1) -202303 (5184.6) 90541 (-95.9) -160059 (346.9) -174345 (47.2) 449259 (-82.6) 48297 (-51.1)
Net foreign exchange assets of RBI 5582596 -148092 (-2.6) 806339 (16.9) 188902 (4.1) 341773 (6.5) 243079 (5.8) 144876 (3.3) 653468 (14.2)
Govt’s currency liabilities to the public 34833 239 (0.7) 2894 (8.3) 1654 (5.5) 1401 (4.2) 1101 (4.1) 2271 (8.1) 3147 (10.4)
Net non-monetary liabilities of RBI 1904309 -71472 (-3.6) 366187 (23.8) -49443 (-3.1) 114434 (6.4) -48160 (-3.5) 279065 (21.3) 202310 (12.7)
Scheduled Commercial Banks’ Indicators ( ` Crore) Variation

Outstanding Over Month Over Year Financial Year So Far Financial Year
(As on 18 October) 2024 2023–24 2024–25 2021–22 2022–23 2023–24
Aggregate deposits 21807565 302004 (1.4) 2291755 (11.7) 1471896 (8.2) 1332339 (6.5) 1351801 (8.9) 1578601 (9.6) 2431312 (13.5)
Demand 2544470 46090 (1.8) 295732 (13.2) 68307 (3.1) 100616 (4.1) 211554 (11.4) 107684 (5.2) 263423 (12.1)
Time 19263096 255915 (1.3) 1996023 (11.6) 1403589 (8.8) 1231722 (6.8) 1140246 (8.6) 1470918 (10.2) 2167890 (13.7)
Cash in hand 91269 5023 (5.8) 466 (0.5) 540 (0.6) 1835 (2.1) -4823 (-5.3) 4338 (5.0) -829 (-0.9)
Balance with RBI 984541 28286 (3.0) 66685 (7.3) 107949 (13.3) 53058 (5.7) 140745 (25.9) 126469 (18.5) 121576 (15.0)
Investments 6487716 85664 (1.3) 434287 (7.2) 638281 (11.8) 381158 (6.2) 266422 (6.0) 686200 (14.5) 691410 (12.8)
of which: Government securities 6486975 85572 (1.3) 434242 (7.2) 638411 (11.8) 381366 (6.2) 266547 (6.0) 686143 (14.5) 691287 (12.8)
Bank credit 17238250 112879 (0.7) 1780363 (11.5) 1782651 (13.0) 806086 (4.9) 1044026 (9.6) 1783922 (15.0) 2756928 (20.2)
of which: Non-food credit 17219596 114151 (0.7) 1781550 (11.5) 1782716 (13.1) 810513 (4.9) 1050269 (9.7) 1819027 (15.4) 2753753 (20.2)
Capital Markets 8 November Month Year Financial Year So Far 2023–24 End of Financial Year
2024 Ago Ago Trough Peak Trough Peak 2021–22 2022–23 2023–24
S&P BSE SENSEX (Base: 1978–79 = 100) 79486.32 (22.3) 81634.81 64975.61 (6.2) 72079.05 85836.12 59106.44 74119.39 57362 (18.4) 58992 (0.7) 73651 (27.8)
S&P BSE-100 (Base: 1983–84 = 100) 25503.64 (27.5) 26499.64 20005.02 (7.5) 23063.21 27689.88 17644.91 23408.17 17423 (20.1) 17602 (-0.7) 23294 (35.6)
S&P BSE-200 (1989–90 = 100) 11109.17 (29.7) 11564.02 8563.25 (7.8) 10049.61 12072.35 7406.09 10158.44 7412 (20.9) 7389 (-2.0) 10100 (40.0)
CNX Nifty-50 (Base: 3 November 1995 = 1000) 24148.20 (24.2) 25013.15 19443.50 (6.8) 21884.50 26216.05 17398.05 22493.55 17153 (19.7) 17360 (-0.6) 22327 (31.7)
CNX Nifty-500 22645.65 (31.2) 23512.55 17259.70 (10.5) 20323.85 24496.90 14601.95 20434.80 14652 (22.2) 14558 (-2.3) 20255 (42.5)
Figures in brackets are percentage variations over the specified or over the comparable period of the previous year. | (-) = not relevant | - = not available | NS = new series | PE = provisional estimates
Comprehensive current economic statistics with regular weekly updates are available at: http://www.epwrf.in/currentstat.aspx.

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LETTERS

I t was unclear what would happen in

Notes for Contributors

Endorsement of Republicans or Rejection of Democrats?

KYC and Access to Bank Accounts

was only 30.8%. More than one-fifth of

INSTITUTE OF ECONOMIC GROWTH

According to our estimates, aggregate

rate, % per year

of the industrial revolution. However,

THE MALCOLM ADISESHIAH AWARD – 2025

Export Prices, Exchange Rate Pass-through,

Darpajit Sengupta, Saikat Sinha Roy

In this specification, an appreciation dummy (AP) is introduced ܲ௝,௧ െ ܸ‫ܥ‬௝,௧

Bangladesh, Bhutan, India, Nepal

300 281 270 15 12

in the North East. The pharmaceutical industry in the North

Notes References 291362523/291369117/The+Innovative+

Micro-level Export Management

Share in total exports (%)

Agricultural Exports and Trade Policy Responses

Exploring Trade, GVCs, and Technology Goods

Share of BECs in Exports (%)

Special Issue on Trade Policy, FTAs, and Value Chains

Demystifying Ageing in India of the elderly from the social viewpoint,

A Comprehensive Review with particular emphasis on geriatric services;

GOKHALE INSTITUTE OF POLITICS AND ECONOMICS

FACULTY RECRUITMENT (Re-Advt)

Dispute Settlement and Efficacy of the

impasse in dispute settlement on the performance of the WTO 3,000

Intermingling of Trade and Environment Policy

Rajeev Kher, Anshuman Gupta

Appendix Figure 4: India's Fertilizers Exports to EU

4,267.96 4,211.49 1.08

A Missed Opportunity record-holder Gujarat’s 6% agricultural

Wholesale Price Index Foreign Trade

Consumer Price Index Index of Industrial Production

Primary articles 22.6 0.4 6.6 10.2 10.0 3.5 -$20.8 bn

India’s Overall Balance of Payments (Net): Quarterly

Foreign Exchange Reserves Variation

Monetary Aggregates Variation

Scheduled Commercial Banks’ Indicators ( ` Crore) Variation

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