The agreement with the WTO does not seek any changes in India’s Public Distribution System (PDS) or the Food Subsidies.
The WTO was established on January 1,1995. The WTO is the embodiment of the results at the Uruguay Round (UR) and the successor to GATT. 76 governments became members of the WTO on its first day, India one among them. The present membership accounts for more than 90 percent of world trade. Many more countries have requested for membership of the WTO which is based in Geneva, Switzerland. Its essential functions are:-

1. Administering and implementing the multilateral and plurilateral trade agreements which together make up the WTO;
2. Acting as a forum for multi-lateral trade negotiations;
3. Seeking to resolve trade disputes;
4. Overseeing national trade policies; and
5. Cooperating with other international institutions involved in global policy makin

The UR agreement envisages substantial tariff reductions in both industrial and developing countries. The main liberalisation by industrial countries includes the expansion of tariff binding (i.e., commitment not to exceed a particular level of tariff) to cover 99% of imports, the expansion of duty-free access from 20 - 43% of imports, and the reduction of trade weighted average tariff by 40% from 6.2 to 8.7%.
However the gains to developing countries from the tariff cuts by industrial countries is less impressive. The reduction in the average tariffs on their exports to industrial markets is 30%. India has bound tariffs at 40% (where they were above 40% in1993-94) on industrial raw materials, components and capital goods and at 25% in other cases. After the UR agreement comes into force about 68% of India‘s tariff lines will be bound ( compared to 5% earlier). In comparison, many developing countries in Asia and Latin America have bound between 90 and 100% of their tariff lines at levels comparable to, or lower than, India’s bindings.

Tariffication means the replacement of existing non-tariff restrictions on trade such as import quotas by such tariffs as would provide substantially the same level of protection. On agricultural tariffs, developing countries have the flexibility of indicating maximum ceiling binding. India has indicated ceiling bindings of 100% on primary products and 300% on edible oils.

Subsidies are required to be reduced only if their total amount as a proportion of the value of agricultural production exceeds 5% in case of developed countries and 10% in case of developing countries. If the non-exempted subsidies are above these limits, they are required to be reduced by 20% in the case of developed countries and by 13.3% in developing countries by 1999. The GATT provides for reduction of subsidies, which are more in developed countries, and other trade barriers in agriculture for enlarging global market access and better export realisation from agricultural products. At the same time, Indian farmers are not affected as the country is permitted to continue with current subsidies, which are in fact much lower than the maximum permitted under the agreement. Farmers are allowed to return and exchange seeds, only the commercial sale of patented and packaged seeds by farmers is prohibited.
Besides, the public distribution system and food subsidies in the country are also not affected. The agreement does not seek any changes in India’s PDS or the food subsidies. The clubbing of product specific and non-specific subsidies allows flexibility for countries like India to raise subsidies further, if necessary.
The final act provisions will leave current subsidies to Indian farmers untouched. If the subsidies are less than 10% of the total value of output, India is not required to undertake cuts. Subsidies in India fall under two broad heads: input subsidies and product specific subsidies. The latter are received by only three crops - sugar cane, ground nut and tobacco. The bulk of the subsidies are directed through inputs. Electricity is provided at nominal rates or virtually free to farmers, water, seeds and fertilizers are also provided at subsidised rates. Nonetheless, the value of these subsidies is only about 5% of the value of output, substantially below the ceiling stipulated.

Countries whose per capita income is less than $1,000 are not bound to phase out export subsidies. India‘s per capita income in 1995 was only $340. However, even such countries will have to phase out export subsidies on products where the share in world exports is 3.25% or more, in two consecutive years. This is applicable to india with respect to export of diamonds.
By being a part of WTO India enjoys the Most Favoured Nation (MFN) status with all the other members of the WTO.
However, India’s gain will be much less than that of several other developing countries like China and the newly industrialised economies because:

1. India’s share in world trade is very low;
2. The foreign trade GDP ratio of India is low. The gain will also depend on the rate of growth of India’s exports.

References:

1. Francis Cherunilam, International Business, Wheelar Publishing, 1999.
2. R. L. Varshney & Bhattacharya, International marketing management, Sulthan Chand & sons, 1997
3. Vikas Singhal, Indian Agriculture IEDRC, NewDelhi, 1996.
4. Southern Economist - Several issues. DR. A. MOHAMED JAFFAR, S. G. Lecturer in Commerce, HKRH College, Uthamapalayam - 625 533, Tamil Nadu.