American farmers and food product maker lose millions of dollars each year in lost sales to India because of high tariffs and non-tariff measures, which raise the cost or prohibit agricultural exports to the country, an official US report has said.
The report "India: Effects of Tariffs and Non Tariff Measures on US Agricultural Exports" was released by the US International Trade Commission (USITC), an independent, non- partisan fact finding federal agency, at the request of the Senate Committee on Finance.
"Indian WTO bound tariff rates on agricultural products, averaging 114 per cent, are among the highest in the world. The majority of rates are between 50 and 150 per cent, much higher than the average bound rates for other major developing countries such as Brazil and China," the report said.
Noting that though average applied farm tariff rates have declined significantly from 113 per cent in 1991, prior to Indian economic liberalization, to about 34 per cent in 2007, USITC said they are still remain among the highest globally.
The gap between high bound rates and lower applied rates allows India to vary its tariff rates frequently and substantially on some commodities, which creates uncertainty for US agricultural exporters, it said.
USITC said despite the size of the Indian market, inefficiencies in its marketing and distribution system due to high government interventions, poor quality and inadequate infrastructure, make it less attractive for US farm producers.
In its 284 page report, the USITC gives an overview of Indian agricultural production, its imports and consumption during 2003-08; tariffs and non-tariff measures; food marketing and distribution system; and government norms relating to the agricultural market, including FDI and intellectual property rights (IPR) policies.
It also gives economic modeling analysis of the effects of Indian tariffs and certain non-tariff measures (NTMs) on US agricultural exports. US agricultural firms are active players in the Indian market through FDI. FDI allows US firms to adapt products to local needs and bypass tariffs and NTMs that constrain exports.
Indian IPR policies are reportedly of importance to the US seed firms operating in the Asian nation India, but the American firms in most other agricultural sectors do not identify IPR as a significant trade or investment barrier.
USITC said agriculture is vital to the Indian economy, representing 17 per cent of GDP and providing employment for more than 60 percent of the population. India is a major global producer of farm products and largely self sufficient. Indian agricultural imports are relatively small and supplied only 3 percent of it demand in 2008, the report said.
Indian per capita food consumption, centered on staple foods, is low compared to other developing countries, but is rising with income growth. Rising income among middle-class Indians (200 300 million consumers) is driving increased consumption of non-staple foods, it said.
