Prospects of Wheat and Sugar Trade between India and Pakistan : A Simple Welfare Analysis
AbstractThis paper asks how opening up of wheat and sugar trade between two nuclear neighbours, India and Pakistan, would affect welfare in the two countries. We conduct a partial equilibrium analysis to simulate welfare implications of trade between the two countries under three alternative trade regimes : a) under an FTA between India and Pakistan, b) under SAFTA, and c) under a grant of mostfavoured nation (MFN) to India by Pakistan. We conduct simple welfare analysis for wheat, on the basis of real world data of FY2005, and for sugar, based on data for FY 2000-01. In both these years, India had a net surplus and Pakistan had a net deficit for both wheat and sugar. We show that among other things, favourable weather conditions play a critical role in generating these surpluses, which are most likely to get reversed in years when weather conditions become more favourable to Pakistan. While we find there would be net gains to both countries, in case trade happens, the highest welfare gains accrue to both countries under free trade agreement. Further analysis reveals that if subsidies to Indian wheat farmers are removed, their competitive edge disappears in favour of wheat farmers in Pakistan.
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Bibliographic InfoPaper provided by East Asian Bureau of Economic Research in its series Trade Working Papers with number 22249.
Date of creation: Jan 2006
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wheat; sugar; trade; weather conditions; Pakistan; India; subsidies;
Find related papers by JEL classification:
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
- Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mullen, Kathleen & Orden, David & Gulati, Ashok, 2005. "Agricultural policies in India," MTID discussion papers, International Food Policy Research Institute (IFPRI) 82, International Food Policy Research Institute (IFPRI).
- Gulati, Ashok & Narayanan, Sudha, 2003. "The Subsidy Syndrome in Indian Agriculture," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780195662061, October.
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