India’s proposed subsidies on public procurement of grains and stockholding for distribution to the poor following the passage of the National Food Security Act by the former UPA government would stay unchallenged for the time being. This pro-poor welfare policy has also been embraced by the successor NDA government led by the BJP’s tallest leader Narendra Modi. India has apparently drawn accolades for its ability to stick to its stance even when it led to the suspension of a well-meaning Trade Facilitation Agreement (TFA) piloted by the World Trade Organization (WTO). TFA is designed to simplify complex customs procedures and enable the expeditious dispatch of goods from ports to bring down the transaction costs to trade. Such a step, analysts assess, has the potential of adding one thousand billion ($1 trillion) dollars to the world economy.

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The TFA and the decision respecting food security programmes were among a package of crucial trade agreements agreed at the WTO’s ninth Ministerial Conference held in Bali, Indonesia in December 2013. The WTO, which could not boast of any landmark agreement in close to two decades — with its ambitious Doha Development Round of multilateral trade talks stuck in a series of controversies since it was launched in the Qatari capital in 2001 — was euphoric about this mini package being wrapped up last year. 

But that momentum was disrupted in July this year as a key deadline for the implementation of the TFA was missed. The party pooper was India, which, along with a few countries, insisted on an indefinite peace clause permitting developing countries to maintain their food security programmes until a permanent solution is found. This thwarted the WTO’s bid to put the TFA in place by July 31. The peace clause accords legal security to member nations by safeguarding them from being dragged by trading partners to the WTO dispute settlement body. In order to give its nod to the TFA, India fiercely contended that food procurement subsidies be exempt from the category of trade-distorting subsidies. Developing countries stoutly contested a WTO rule that sets subsidies to farmers at 10 per cent of the total value of agricultural production based on 1986-88 prices. Hence, altering the formula by updating the base year for calculation of subsidies or indexing them to inflation was sought. But not only was this overture spurned, but Modi was also censured for his anti-trade posture, though India was one of the founder members of the General Agreement on Tariffs & Trade (GATT), the post-war institution for trade and predecessor to the WTO.

However, following Modi’s visit to the US in September and in the run-up to the Brisbane G-20 summit that was held in November 15-16, both India and the US have sorted out the sticky issues over public stockholding of grains with the US agreeing on to an indefinite peace clause pending a permanent solution. In a simultaneous announcement by the US trade representatives in Washington and India’s Minister of Commerce & Industry on November 13, it was stated that differences on the issue have been overcome, ending the impasse at the WTO. Though no precise details were disclosed by either, the WTO Director General Roberto Azevedo said the India-US pact and the breakthrough signify “a significant step in efforts to get the Bali package and the multilateral trading system back on track”.

Unobtrusively and alongside these developments, the Modi government has made a modest start in keeping a tab on food subsidies by going in for a calibrated minimum support price (MSP) hike and dissuading the states from declaring ‘bonus” on top of MSPs. In the end, Modi has transformed himself smartly from a deal-breaker to dealmaker in less than four months, deftly negotiating the global economic cross-currents.

The author is a freelance journalist based in New Delhi