Impact of Trade Liberalization on Returns from Land: A Regional Study of Indian Agriculture

The international economic order envisaged in the WTO agreement is one of fair competition among nations bringing out efficient production patterns. The beneficial effect of this order on a large developing country like India, however, hinges on the ability of free trade to generate rapid growth in output along with rising income for large numbers (Becker, Mitra and Balseca, 2002) of people. The largest section of India’s population still depends on agriculture for a livelihood and a most desirable possibility expected from the new regime would be the commercial success of this sector, drawing on the natural advantages of the immobile and internationally non-tradable factors devoted to it and also the ability to access certain tradable factors such as fertilizer that confer a qualitative change on the immobile factors. Agriculture in India, however, remains shrouded in a mesh of internal controls and distortions and this chapter attempts to unravel the underlying market reality by raising the query: would farmers in the country gain by exporting grains when free-market forces are allowed to operate? The question is addressed within a limited coverage only. First, the chapter considers only non-basmati rice, 1 which holds a special place in Indian agriculture. Second, the reference time point, 1998–99, pertains to the most recent year for which information could be collected and during which rice apparently enjoyed competitive advantage and exports proved successful.