India’s ‘no’ at WTO meeting this week may just mean ‘not yet’

It is this antiquated farm subsidy system that lies at the heart of India’s most intractable dispute at the WTO. — Bloomberg

AS trade ministers gather at the World Trade Organisation (WTO) summit in Abu Dhabi this week, one of the villains will, as usual, be India. And, certainly, there’s some justice to the complaint that Indian negotiators are far too ready to block consensus at such confabs unless granted concessions on their own priorities. Saying “no” often comes too easily to them.

But those priorities need to be viewed in the context of India’s fiendishly complicated domestic politics. This is a country the size of a continent, and achieving internal consensus on a drastic shift in policy is as hard – or harder – than getting agreement at the WTO

Prime Minister Narendra Modi is the strongest, and most popular, leader India has had in decades. But he has always been particularly careful not to provoke widespread protests against his decisions.

Although he hates to retract policies after investing political capital in them, he has twice in the past decade withdrawn legislation that enraged some of India’s farmers – a law early on in his tenure that would have made it easier to acquire agricultural land for industry, and a package of reforms in 2021 meant to liberalise India’s complicated farm subsidy system.

India’s welfare state, as so many others, is not set up for modern concerns and problems. It induces rent-seeking, and that can hold New Delhi back when it comes to making international commitments.

Agriculture – one of India’s most unreformed, unproductive and politically sensitive sectors, on which a majority of Indians continue to depend – is the one subject on which no Indian leader can concede abroad what they have not yet won democratically at home.

It is this antiquated farm subsidy system that lies at the heart of India’s most intractable dispute at the WTO – its demand that temporary permission to hold large public stocks of food grain be made permanent.

This very week, some of India’s farmers are protesting again – a reminder that, if India says no, it is because a large subset of Indians are saying no. And a large subset of Indians can often mean a group of people larger than the populations of most WTO member states.

That doesn’t mean the objectors are always right, or that their demands don’t change over time. To see why, take a closer look at how these farmers’ stated concerns have evolved in just a few years.

In 2020-2021, when farmers from northern states blocked road access to India’s capital for 16 months, they wanted to defend a farm subsidy system that guarantees state purchases, at a government-set price, of food grain.

This process, as many pointed out at the time, no longer fits the needs of a country which is rich enough to participate in global grain markets, which is unlikely ever to run out of food grain, and which desperately needs its farmers to diversify into crops other than wheat and rice – to reflect modern diets and to conserve scarce water resources.

Three years on, the same group of farmers are haggling over how the switch to other crops should be underwritten. They want a new law that would guarantee them similar state purchases and a similar mandated price for two dozen other crops.

The government is willing to promise only that state-run companies will buy whatever farmers can sell for five years after they move away from food grains to other, more climate-sensitive, crops.

If they can reach agreement, then over time India’s most productive farmers will lose their incentive to focus on rice and wheat that the government must buy.

The country then will only need to maintain a grain pile sufficient to protect its population from price spikes and sudden shortages. That will, in turn, make it much easier to commit at the WTO to changes in stock-holding rules. India’s political dispute has shifted in just two years from whether to change, to how to change.

From the outside, it’s easy to think of India as an undifferentiated mass of individuals with leaders who turn up in places such as Abu Dhabi to reject everything the rest of the world suggests. But this is the world’s most complex democracy, and sometimes we just have to wait while it fights its internal battles over policy that affects the rest of the world. India’s “no” at the WTO is sometimes “not just yet”. — Bloomberg

Mihir Sharma is a Bloomberg Opinion columnist. The views expressed here are the writer’s own.

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