Brazil, EU propose reduction in farm subsidies, may impact India

The Dollar Business Bureau

Brazil and the European Union (EU) have jointly proposed a cut in the incentives provided by developing economies to the farmers, a step that could adversely impact India, along with other emerging countries. 

In a paper to the World Trade Organisation (WTO), jointly prepared by the two, it proposed a reduction in the limits on subsidies given to farmers by developing economies. 

If the given proposal is approved, India would not be able to provide any subsidy apart from the minimum support price (MSP) and may have to curb the incentives for disease and pest control, infrastructure, marketing services, etc. 

In addition, the proposal asks to ban exports of food stocks that are meant for public distribution in order to make sure that the food stocks procured for such purposes do not distort the global trade or adversely impact food security of other WTO members. This part in the proposed paper could bring the exports of India under the scanner. 

Abhijit Das, Head, Centre for WTO Studies told a leading news agency that Brazil and the EU want to minimise the difference between de minimis entitlement for developed and developing nations.

“If the proposal is accepted, India and other emerging countries such as Indonesia will be adversely affected,” he added.

De minimis entitlement is the maximum level of farm subsidies a country can provide. The cap on food subsidy is 10% for developing nations and 5% for developed countries, of the overall value of output.

According to experts, developed nations might put pressure to put restrictions on input subsidies like those given for irrigation, fertilisers and electricity. At present, there is no limit on these.

India’s input subsidies declined to $22.8 billion in 2013-14 from $29.1 billion in 2010-11.