Doha deal gains would be modest for India: Carnegie Endowment study

Mumbai: Gross domestic product in India may grow by just half a percentage point with a deal under the Doha Round of world trade negotiations, a study by the Carnegie Endowment for International Peace said.

India's exports would increase by $2.4 billion or 3.8 per cent, with the strongest gains in apparel, textiles, leather and footwear while imports would rise by $2.2 billion or 2.9 per cent, the study said.

But, with almost two thirds of its 1.1 billion people living in rural areas and over half working in agriculture, India is vulnerable to fluctuations in food prices, the study pointed out.

Potential gains in the manufacturing and services sectors could also be wiped out by price falls in the agriculture sector, it said, adding that binding its agricultural tariffs under very low levels would prevent India from offsetting global price shocks.

A 50 per cent fall in the world rice prices would have a negative impact on India's real income, with the poorest suffering the most, the study pointed out.

"These results suggest that the Indian government's concern over the potential negative effects of a Doha agreement on poverty and rural development is well founded," it said.

A trade deal would boost domestic production in India by only $4.5 billion, or 0.52 per cent, the study said.

However, this would be better than the potential gains from the most favourable bilateral trade agreements under consideration, it added.

"A Doha agreement along the lines of the study's simulation would be positive, albeit quite modest, for India," it said.

India, the study said, was right to try to designate certain foods as "special products" protected from full tariff cuts, and push for a special safeguard mechanism that would shield local farmers from price shocks.

Trade ministers would meet in Geneva in March or April to decide on the contours of a Doha deal, including the size of tariff and subsidy cuts.

India's economy, Asia's third largest, is expected to grow by 8.75 per cent in the year ending March, according to IMF estimates.