The Indian Policy Response

The Indian Policy Response

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The Indian Policy Response

Socio-economic implications of Globalization in India - What India wants from WTO - What is required of India by WTO - Analysis of policy response in two crucial areas Agriculture and Pharmaceuticals. An ethical framework covering the issues that are discussed and a common policy response is suggested.

In the early nineties, India embarked full speed on a path of liberalization and globalization by reducing trade barriers and non-trade barriers alike, demolishing the existing quota-licensing regime. As a logical step in that process, it joined the WTO in 1994 at the end of Uruguay round of talks. Major changes in existing laws and enacting new laws had become imperative to comply with the WTO agreement. But substantial resistance to the acceptance of the WTO regime have erupted in areas of Agriculture, Pharmaceuticals. India as a founder of the ITA (Information technology Agreement) under the aegis of WTO has significant advantages as well as some critical obligations. This paper analyses the moral arguments of the policy response to these critical issues and attempts to synthesize a common position based on ethical perspectives.


Before we discuss the policy imperatives of the WTO response, a brief background on the nature and state Indian agriculture is necessary. Indian economy is agrarian in nature where nearly 70% of the population is dependent upon agricultural income. At the lower end of this strata are the vast majority of poor farm labourers who do not own the land but work in the fields and farms to earn their livelihood. In the middle layer, we have a large number of marginal land owners and small farmers who labour as well as employ other labourers to produce. In the higher end there a small number of large farmers and farm corporations who employ mechanised as well as very labour intensive farming. The politically powerful lobby of big farmers utilize power, irrigation and fertilizer subsidies of the government at the same level as the small farmers. The number of crops produced by this huge agricultural base is limited comparative to the other developed countries, because of various historical and climatic conditions.

Since the agriculture is labour intensive and most of the farming is done by small farmers owning small land tracts, the productivity is low and costs are high. While some states subsidize power and irrigation, the central government provides fertilizer subsidies and procures the farm products at minimum support prices to supply poor urban consumers to ensure food security through a Public Distribution System.

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While budgetary support for export subsidies and overseas market development is practically zero, domestic support is reverse in the sense that agriculture subsidizes other segments like PDS. This condition is so entirely different from developed countries in the way food security is achieved at both ends of the market, by procuring the farm products at minimum support prices which sustains the income levels of the huge 70% population and distributing the procurement at controlled prices in the market which benefits the poor urban consumers.

The Indian negotiating proposal for the Qatar round of talks on AoA (Agreement on Agriculture) puts this position succinctly as " The food needs and supply gaps in developing countries are developmental problems and thus all their policies for agricultural development aim at harnessing the potential for increasing productivity and production in the agricultural sector. Given these characteristics of agriculture in developing countries with very meagre domestic support and the virtual absence of export subsidies, by no stretch of imagination can these policies be considered trade distorting1

The introduction of TRIPS into the arena of agriculture brings up an altogether cultural and economic clash in India. Even in the US , the plant breeder rights and patent protection for plant varieties has been granted only as late since 1950s, where as the patent regime in general has been in vogue for a longer period of time. The extensive farming techniques and the development of knowledge as a key component in agricultural production is a relatively new idea even in developed world. It is understandable that the notion of annual purchase of seeds for sowing is foreign and prohibitive in terms of cost , where the general practice has been re-use,share, exchange and informal sale of seeds developed from the current crop. At present it is estimated that the reuse and informal sale constitute 87% of the seed market in India where as the rest is provided bythe state owned seed companies which store and sell seeds. None o fthem are protected under any IP protection Regime. To comply with the AoA under WTO, India had to enact a Plant Breeder Rights (PBR) bill. Due to sustained focus by NGOs and public pressure, a Farmers bill of rights was passed as well to protect the rights of the farmers to sell, reuse seeds and to provide immunity against PBR violations for ignorant infringements2 . Though it is necessary to offer complete IP protection, India cannot be forced to leap frog its way to the TRIPS dictated regimes from its current structure. By offering protection, it cannot be provably stated that the major Life Science Corporations would start significant investments in agricultural research in areas of Indian agricultural interests. Currently the lion share of research is done in India by public enterprises with heavy budgetary support. The Commission on IPR constituted by the UK Government has suggested a gradual approach for developing countries in building a IP Protection regime.

"Developing countries might consider raising the threshold, in particular so that protection is only given for significant or important innovations with particular characteristics that are deemed socially beneficial (for example, yield increases, or traits of nutritional value). Thus the criteria for distinctness may be strengthened, and also criteria formulated defining utility in terms of the objectives of agricultural policy. Alternatively, countries may decide to retain lower standards for certain categories of plant in order to facilitate access by nascent domestic breeding industries to PVP protection from which may flow commercial and export benefits."3

The main challenge that faces Indian agriculture thus is to transform from a large subsistence based farming to industrialized agriculture where knowledge is the key component of production. This transition should be gradually effected in the following way. The unskilled agricultural laborers should be given state subsidized vocational training in skilled and semi-skilled agro based industries. This will ensure that the vast labor force could be employed all through the year instead of just the farming season. Preservation of rain water and effective utilization and sharing of water resources are vital. The component of industrialization should be increased in agriculture. After the removal of quantitative restrictions, foreign crops have flooded the Indian market. There may be a trace of opportunity in this difficulty. By procuring cheaper crops through imports, the subsidies for the PDS could drop significantly. But the problem of internal glut in the state owned warehouses will become a nightmare. Crop diversification, crop specialization and crop quality should be given more emphasis than just the quantum of production, and the revenues of exporting high quality crops would more than offset the loss in sales to state owned enterprises. Already a strong reformist current is underway in India to cut these power and fertilizer subsidies for large farmers and target them towards the small farmers and utilize the scarce funds in primary health, education and rural infrastructure.This is where the nation’s farmers should be goaded and guided.


The nature of Pharmaceutial Industry in India is very different from their counterparts in the developed world. Though India boasts of a very large technological base in this area, most of the players are mass producers of generic drugs which are "pirated" from major companies in the developed world. To cater to the needs of huge population with drugs at a lower cost, the state has been very reluctant to offer strong patent production. Therefore the emphasis has been on cost effectiveness and quantum of production rather than on innovation and original R & D. The introduction of product patent mandated by the TRIPS agreement introduces a severe constraint on the generic drug producers. If product patent is given, the larger overseas companies from the developed world would rather eliminate or acquire the major players from the local market . In a drug market, where the people are currently benefited by the availability of affordable drugs, this would result in creating powerful monopolies that will raise the cost of drugs to exorbitant levels and take away these benefits. The results are perfectly imaginable - A disaster on a monstrous scale. Though India has no choice but to offer product patents by 2006, this process could be calibrated to suit local conditions. For instance the sphere of public health should be kept outside the purview of patent protection. In a country where still the fight against communicable diseases like Malaria, Tuberculosis and Polio is still on going, the drugs that provide immunisation against these type of diseases for vast majority of poor people should be exempted. The drugs supplied at Primary Health centers to poor populations throughout the country and drugs that treat killer pandemics like AIDS should be exempted as well. Since the relatively well off communities are not affected as much by these diseases whose buying power of these groups which matters greatly to the big pharmaceutical industry, the very poor should be immunised from the effects of this drastic change.

Before trying to work our way to a suggested approach to this complex issue, let us look at the history of pharmaceutical industry in certain developed countires. US, Canada, France and Switzerland. When product patents were first tried in the early part of last century in France, all the chemical industries in France moved to Switzerland.It is precisely the reason why in such a small country such as Switzerland there is a vast and advanced chemical industry. The comparison of US-Canada is plain and obvious. United States opted for a stronger patent protection. Because of stronger patent laws, the profits made by pharmaceutical industries have been growing phenomenally. With the increased bargaining power, the industry has acquired significant clout in public policy decisions. This phenomenal growth has not lowered the cost of drugs a wee bit as all the profits are shown to be spent by a growing R & D( but rather towards buying and enforcing more protection ?) . It is public knowledge that the major research of these big companies has been profit oriented in diseases like Alzheimer and breast cancer, that are of cursory interest to the vast majority of people who have more pressing health concerns than that. Inspite of popular needs, numerous attempts to pass a patient bill of rights in the US have been futile. Rising health care costs are a major concern and this high protection has not benefited the consumers at all. The Canadian experience is totally different. By offering limited protection through various mechanisms like compulsory licensing, parallel importing and grant of royalties rather than absolute monopoly, the cost of drugs have been kept at affordable levels. Because of this, Canada has been able to achieve Universal Health Care for all its citizens. Arguably it is a better situation to be in than the US where the rising number of uninsured citizens are cooking a major health care crisis.

These experiences offer India very valuable lessons. India can guide the gradual transformation of its pharmaceutical industry to a knowledge based one while keeping the cost of drugs at affordable costs, by adapting a variety of techniques such as compulsory licensing , curbing anti-competitive practices , parallel importing of drugs from markets where the patent rights have been exhausted. It however should be conceded that due to the very extensive experience in producing generic drugs in mass scale, Indian pharmaceutical industry is one of its very few kind in the developing countries that are in the capability threshold of transforming into a knowledge and research oriented industry. If such transformation is effected, it must be noted that this will be one of the industries where the cost differential could ultimately work to India's advantage like its software industry.

A common sense approach

Before we suggest a common approach to the issues, let us sketch out the various actors and stakes. As we observed, we have a very large number of land less laborers and poor urban workers at the lower end of the strata, whose income levels have to be sustained to ensure equitable economic growth, a fairly large number of small farmers whose produce have to be procured at minimum support prices to ensure rural prosperity and a numerically significant, growing urban middle class market. As India makes this massive transition from an agrarian subsistence economy towards a knowledge oriented modern economy where individual rights are inviolate, the country faces some tough choices. In Utilitarian perspective, being a democracy when the very livelihood of majority of people is at stake, the individual rights of minority should not dictate the policy for all .

D.W.Haslett writes in his book "Capitalism with Morality" that

[So] which system is the most justified depends in part simply upon which is capable of turning out the most goods and services. But which is most justified * depends much more than merely this. .....Even though a system turns out a greater quantity of goods and services than any other, it may not be the one that is most justified if it does not distribute these goods and services fairly... We must take into account not only technical, quantitative matters, but matters of morality and values as well, matters such as justice, freedom and equal oppurtunity.* (emphasis mine)

When there are difficult choices to make, India should aim to protect the vast majority of people who need the protection and not the powerful farm lobby or the industrial lobby who can compete equally in the global market. The validity of these arguments are still accepted in very large measure even by the emerging bourgeoisie, since the 1990s, the fundamental imperative for enlarging the pie rather than sharing the shrinking pie with more people, by seeking more and more wider markets to drive the growth of the country as a large is gaining credence as well. Pressed as it may be, to concede strong intellectual property rights to join the global market, the basic human rights of the vast majority of people’s right to life, right to food, shelter and health should never be overridden in any calculation. Unless certain moral principles that have served the country since its struggle against colonialism are held inviolate, the foundations of future generation will become shaky.

However the transition towards a modern market economy integrated with the global market could neither be avoided nor be postponed. But the choice of pace and contents of this change is firmly in India’s sovereign hands. India should adopt a sectored approach in this transition period. There must be a strong and effective “safety net” for the people living under the poverty line. The basic rights of people under this net should be protected under all costs. The Public Distribution system needs to be restructured and targeted so that the majority of the benefits go to the people living under the poverty line. For the next band of the spectrum limited and conditional protection of property rights should be provided so that the domestic industry can compete equably with the multi-national giant corporations. For the higher band maximum protection of IP rights should be provided where the consumers can withstand the power of big market forces. Since it is the higher end of upper middle class market the global trade forces are targeting and since it is plain obvious that the poor of India cannot buy any service or goods from the developed world markets, the market economy rules should be applied only above the "safety net". On the other hand, the boundary should be clearly drawn with strong enforcement, by not allowing well off people to exploit this safety net for profitability. The role of the state should be limited in facilitating smooth transition of people from one net to another and preventing foul play. Ultimately more and more people would be moved out of the "safety" net to the competitive arena as more and more globalization occurs.


There is a wider consensus in India for free trading and globalization (depending upon what "globalization" means to everybody). But when it comes to patents and copyrights there is always a clamour for protection on issues that (seemingly) affect Indian agriculture and industry adversely. A harmonised common approach in all issues that accomodates the nuances, enhances the credibility of India's voice in the global village and thus maximises its bargaining power in the global market.


1 Public Information Bureau. Union Ministry of Commerce and Industry

2. Dr. Suman Sahai "India: Plant Variety Protection, Farmers' Rights Bill adopted" , Third World Network.

3 Commission on Intellectual Property Rights Report:


D.W.Haslett "Capitalism With Morality" Clarendon Press - Oxford 1994.

Prof. Michael Blakeney "Trade Related Aspects of Intellectual Property Rights: A concise guide to the TRIPS agreement" , Sweet & Maxwell 1996.
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