What do you understand by the so called trade distorting subsidies? What is India's stance on such subsidies? Discuss while highlighting India's recent activities in WTO regarding these.

Trade distorting subsidies as per World Trade Organisation are those subsidies given by state that distort the trade severely. For instance agricultural subsidies in the form of Minimum support price which are provided for food security and securing livelihood of farmers may affect the prices of agricultural commodities.
Under Agreement on agriculture the subsidies provided by state to its farmers are classified as Green Box (Least trade distorting),Blue Box( tied to production) and Amber box (most trade distorting).
The minimum amount of subsidy that has been for developing countries is 10% of their agricultural production as part of trade distorting subsidy. The price for the calculation of subsidy is based on 1986-87 prices. India opposes this limit as the cost of production has since then risen exponentially and rupee has depreciated since then. India demands resetting of prices and expansion of limit
India has obtained a peace clause which allows it to continue its subsidies but no permanent solution has been reached.
India and China have submitted a proposal calling for the develelimination — by developed countries — of the most trade-distorting form of farm subsidies, as a prerequisite for consideration of other reforms in domestic support negotiations.

Question for UPSC Mains:
What do you understand by the so called trade distorting subsidies? What is India's stance on such subsidies? Discuss while highlighting India's recent activities in WTO regarding these.

Published: September 25, 2017 | Modified:June 27, 2019

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