Using the data below, evaluate how trade liberalization since 1991 has affected India's agricultural export earnings. In 1990-91, agricultural exports were ₹1,200 crore, and by 2015-16 they grew to ₹7,800 crore. Discuss the role of reduced import duties, export subsidies, and market access in this change.
Answer
Agricultural export earnings rose by 550% from ₹1,200 crore to ₹7,800 crore, reflecting the impact of trade liberalisation: lowered import duties reduced competition for domestic producers, export subsidies improved price competitiveness, and expanded market access through WTO accession and bilateral agreements facilitated higher volumes and diversification of export products.
Step-by-step solution
- Step 1: Calculate the absolute increase: ₹7,800 crore – ₹1,200 crore = ₹6,600 crore.
- Step 2: Compute the percentage growth: (₹6,600 / ₹1,200) × 100 = 550% growth over 25 years.
- Step 3: Attribute growth to policy changes: reduced import duties removed barriers to domestic production, allowing farmers to produce more competitive goods. Step 4: Note export subsidies: the government provided financial incentives that lowered export costs, making Indian produce more attractive abroad. Step 5: Recognise expanded market access: WTO membership and various trade agreements opened new markets and reduced tariffs for Indian agricultural goods. Step 6: Summarise the combined effect: the three policy levers—duty reduction, subsidies, and market access—synergistically increased export earnings by 550%.
- Step 7: Present the conclusion in a concise paragraph.
Common mistake: Ignoring the percentage growth or attributing gains solely to one policy factor
Concept tested: Impact of trade liberalisation on agriculture exports
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