Trade liberalization and Indian dairy industry

The study addresses the issues of efficiency and global competitiveness of the Indian dairy sector in an open economy environment. It relates to the dramatic increase in competition in the dairy sector under the influence of India's liberalization programmes since 1991, the signing of the Uruguay Round Agreements in 1994, and the implementation of the World Trade Organization (WTO) agreements. It provides an overview of the WTO Agreement on Agriculture and its effects on the dairy sector. The Policy Analysis Matrix approach was used to measure the international competitiveness and indicators like the domestic resource cost ratio were computed. The findings of the study indicate that the Indian dairy industry (both production and processing sector) is technically highly efficient and the Indian dairy industry has achieved remarkable progress during the last three decades despite the restrictions on the imports and exports of dairy products. The major policy implication of the study is that the Indian dairy industry is globally competitive but must be protected from distorted and unfair trade competition from developed countries in a liberalized environment. The study shows that the effects of commitments by developed countries to reduce tariffs, domestic support and export subsidies have been minimal and unless these countries significantly reduce the trade distorting supports to their dairy sector it will be difficult for India to compete in the world market.