India's $48 Billion Farm Subsidies Spark International Scrutiny at WTO

India's $48 Billion Farm Subsidies Spark International Scrutiny at WTO. India's farm input subsidies have surged to $48.13 billion in the fiscal year 2022-23, sparking scrutiny and criticism from several World Trade Organization (WTO) member nations. New Delhi has attributed this significant increase to inflation and rising fertilizer costs, emphasizing that these subsidies are primarily aimed at providing power, irrigation, and fertilizers to farmers. The Indian government has duly notified the WTO about these expenditures, according to a Geneva-based official quoted by Agrotech Consultancy.

Exemptions for Developing Nations

India's agricultural input subsidies are designed to support low-income and resource-poor farmers and are thus exempt from limits on domestic subsidies under the special and differential treatment measures offered to developing countries by the WTO. This carve-out is crucial for countries like India to maintain support systems for their agricultural sectors without breaching international trade rules.

India's $48 Billion Farm Subsidies Spark International Scrutiny at WTO

International Concerns

The United States has raised significant concerns, pointing out that India's input subsidies are more than twice the value of all trade-distorting support notified by the US in 2021-22. This has led to apprehensions about both the scale and the rapid increase in India's subsidy expenditures. New Zealand, Canada, and the US have expressed dissatisfaction with the explanations provided by India, deeming them insufficient. These countries have called for greater transparency regarding the increase in expenditure. Brazil and Japan have also joined in raising concerns over the matter.

India's Position on Subsidies

India has defended its stance by highlighting that 99.43 percent of farm holdings in the country are classified as low-income or resource-poor, according to the Agricultural Census for 2015-16. This classification allows India's input subsidies to remain uncapped, facilitating increases without limitations. The lack of a cap has drawn more peer group scrutiny, with officials noting that such scrutiny is expected given the potential for unlimited subsidy growth.

Ongoing WTO Negotiations

The debate over India's farm subsidies is part of a broader conversation within the WTO regarding agricultural subsidies. Several WTO members are pushing for negotiations to reform all pillars of the Agreement on Agriculture (AoA), including the capping of input subsidies. However, India has steadfastly opposed any discussions around capping input subsidies. The Indian government argues that such subsidies are essential for ensuring the food and livelihood security of marginal farmers and for promoting rural development.

Push for Developed Nations to Cut Special Subsidies

In contrast to calls for capping its subsidies, India, along with several other developing nations, is advocating for developed countries to reduce their special subsidy entitlements. These entitlements, known as Additional Measurement of Support, allow developed nations to provide extra subsidies beyond the limits set in the AoA. India and its allies argue that reducing these entitlements would create a fairer global agricultural trading system.

Conclusion

India's substantial farm input subsidies have become a focal point of contention within the WTO, with developed nations questioning their scale and transparency. While India defends its right to support its farmers under WTO exemptions for developing nations, the pressure for reform and greater scrutiny of agricultural subsidies continues to mount. This ongoing debate underscores the complex dynamics of international trade and the challenges of balancing national interests with global trade regulations.