Emmanuel directs us to an unusual suggestion by TCA Srinivasa-Raghavan, who notes that India will be the world’s largest importer of foodgrains in 2011:

[W]here India’s negotiating stance at the WTO is concerned, it should alter its position. Basically, if it is going to import large amounts of food (grains and other things) it will gain if the others subsidise their agriculture. The same point was made (albeit in respect of Africa) by Joseph Stiglitz at a talk he gave at ICRIER. So I am in good company.

In effect, just as foreign savers with their countries’ huge dollar reserves are subsidising the US consumer, the US taxpayer will subsidise Indian consumers. It is from this perspective that India should alter the analytical framework that determines its food trade policy.

I was initially skeptical of this argument. Africa is different than India. It has preferential access to US and EU markets via AGOA and Everything But Arms, respectively. If the Doha round results in both preference erosion and subsidy reductions, then it would be a terms-of-trade deterioration for the African countries that are net food importers and receive those benefits. This is not the case for India, which does not have preferential access and may not a net food importer.

Moreover, the analysis is very sensitive to which crops make up India’s balance of trade, as some are subsidized by OECD countries much more than others. At first I suspected that the structure of rich country subsidization would mean that India doesn’t substantially benefit from cheaper imports, but a long article by G. Chandrashekhar in the Hindu Business Line says otherwise:

[I]n none of the four major commodities would India stand to benefit substantially if the subsidies were eliminated. It may be politically correct and perhaps expedient for India to make appropriate noises against farm subsidies at global forums such as the WTO. While reduction or elimination of subsidies would impact world commodity prices, consuming and importing nations would be the worst hit. Unlike several countries that are dependent on farm goods export, India is a large consuming country. Subsidy-induced low prices would be in Indian consumers’ interest.

India’s own emerging situation — tardy output growth, rising internal demand, supply tightness, firm prices — warrants that we prepare to remain open to imports.

Is this contrarian conclusion true?

See below the fold for analysis of oilseeds, foodgrains, cotton and sugar. It looks like cotton is a weak argument and wheat is a difficult judgment, while Chandrashekhar may have a strong case in oilseeds and sugar.

Oilseeds:

For India, higher world oilseed prices (and, in turn, vegetable oil prices) as a result of reduction/elimination of subsidies in developed countries may not be desirable. We are a leading importer of edible oils (5 mt valued at over $2 billion a year, accounting for over 40 per cent of domestic consumption) because of chronic domestic shortage…

In addition, under Indian conditions, high open market prices do not automatically translate to augmented output the following season. The supply response to prices is rather limited here because oilseed farmers face severe challenges in cultivation and marketing…

Higher world prices would hurt consumer interest but not exactly promote producers’ interest domestically… [L]ooking at robust growth in the domestic livestock industry, the internal demand for all kinds of animal and poultry feed is expected to expand in the coming years, making surplus oilmeals a thing of the past.

Indeed, low international prices (for whatever reason, including subsidies) are beneficial for India because of its growing import dependence.

Foodgrains:

As a result of a wheat subsidy cut, world wheat prices would rise inexorably. It would benefit other major exporters such as Australia and Canada (whose export as a percentage of domestic output is significantly large) to increase their share of the export market, while hurting large importers…

The wheat output in India has been rising steadily… The demand, on the other hand, has been rising relentlessly… The potential for a sustained increase in output so as to lead to genuine export surplus does not exist, on current reckoning…

Indeed, given the sluggish growth output rate and uncertainties visiting wheat production, there is a possibility of a mismatch between supply and demand emerging sooner, rather than later. India could well turnout to be an importer of wheat. High international wheat prices are, therefore, not desirable from a short-to-medium term perspective.

Cotton:

Since 2003-04, the domestic cotton output has risen markedly and signs are that the trend will continue. Although growing, the domestic consumption trails production, leading to huge inventory overhang and depressed domestic market prices. Cotton exports from India are a possibility if international prices remain high — over 50 cents a pound. However, there are limits to India benefiting from a global price rally given infrastructure, quality and other limitations that would constrict export volumes. No doubt, a strong world market and firm domestic prices would be friendly to cotton growers here; but can potentially hurt India’s textile and garment producers’ interests.

Sugar:

As far as India is concerned, from being a sugar exporter till 2003, the country turned into a net importer from 2004 onwards as indigenous output plunged. Production growth is unlikely to meet demand growth in a sustained manner in the near future. There is nothing to suggest that the domestic production situation would dramatically improve to create genuine large export surplus anytime soon. If anything, raw sugar imports may continue even in 2006.

Sugar is a highly water intensive crop. Given the forecast of serious water shortage in the country over the next 10 years, a serious rethink on sugarcane cultivation may become necessary.

India’s attempt should be to remain a large sugar producer with volumes sufficient to meet the growing internal demand. Exporting sugar would only mean exporting precious water out of the country. For the future, the possibility of India importing sugar is far greater than India remaining a consistent exporter. Therefore, abolition of sugar subsidy by the OECD countries may not be in India’s interest.