October 25, 2000

After years of isolation, India has slowly begun opening its doors to the world market, according to a report by USDA. "In a major policy shift, the second largest country in the world has been removing many licensing and quota restrictions on agricultural imports since 1997," according to the report.

Although India is replacing quotas with high tariffs, by dismantling many trade barriers the country is moving incrementally toward open trade and greater integration with the global market. As the government liberalizes trade policies, India emerges as a potentially large market for agricultural and consumer products.

Its population, which has surpassed a billion, is growing by 1.9% a year, and its gross domestic product of more than $370 billion, Asia's third largest, is increasing at an average 6.5%. Rising population, higher incomes, and changing tastes and preferences are creating a greater demand for food that in the past has been supplied by India's own agriculture.

The country's agricultural sector has both expanded and diversified in the past few decades, the report says. For example, during the post- green revolution period, India's cereal production grew faster than the country's population, although other crops grew less rapidly.

However, despite growth of the farm sector, domestic production alone cannot support the country's total food needs. Restrictive trade policies have until recently kept India's agriculture under tight rein and insulated it from outside competition.

Now, to meet domestic demand and to adhere to trade agreements, the country must join the world market--thus the recent agricultural trade policy changes. The government's goal is a self-sufficient agriculture.

The full report is part of USDA's latest Agricultural Outlook and is available on the Internet at http://usda.mannlib.cornell.edu/reports/erssor/economics/ao-bb/2000/ao276f.asc.