Essays in Honour of J. George Waardenburg
Edited by Servaas Storm and C. W.M. Naastepad
Chapter 13: Opening up India's agriculture: Close versus strategic integration
13. Opening up India’s agriculture: Close versus strategic integration Servaas Storm* 1. INTRODUCTION How open in agricultural trade should a developing country be to the world economy? Is there a case for complete agricultural trade liberalization? If not, how much liberalization should a country attempt? The answers to these strategic questions depend on the implications of agricultural trade liberalization for both growth and income distribution (Levy and van Wijnbergen, 1995; Storm, 2000). While the size of the eﬃciency gains and growth stimulus due to trade reform is disputed (Ocampo and Taylor, 1998), it is generally accepted that trade liberalization entails signiﬁcant, and generally regressive, shifts in income distribution (Bourguignon et al., 1992; Rodrik, 1995; Rattsø and Taylor, 1999). Distributional concerns are in fact the single most important factor explaining developing countries’ reluctance to liberalize their agricultural trade. This raises new questions. Who beneﬁts and who loses from the change in policies? Is it possible to identify alternative or supplementary policies that can be put in place to alleviate possible negative distributional shifts? And how is food price stability to be maintained in a liberalized open economy? These questions are addressed in this chapter for the Indian economy. The analysis, however, is of wider interest than the Indian reform process itself, because agriculture has often been a major stumbling block in trade reform negotiations in other (developing) countries as well. This chapter relies on counterfactual simulations performed with the help of the multiperiod computable general equilibrium (CGE) model...
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