Doha Round Impacts on India: A study in a sequential dynamic CGE framework

The Doha Development Round (DDR) of trade negotiations began in November 2001, committing all member countries in the WTO to negotiations for opening their agricultural and manufacturing markets and services sectors. As the negotiations unfold, and indeed in recent times not with the desired pace and with frequent interruptions, it is crucial for all the participating members to quantitatively evaluate the impact of the possible outcomes on their economies. Ideally, insights gained from such prior evaluations must serve as inputs for framing the negotiating position of each member country so that outcomes correspond to a win-win situation for all sides. Over time, the use of such detailed and accurate inputs by all countries will ensure that negotiations would be conducted with more faith in their ability to benefit all affected parties.

Recognising the lack of extensive studies in the context of India and with the objective of providing Indian negotiators with pointers on the domestic welfare and poverty impact of possible multilateral agreements reached through the Doha Round through rigorous quantitative analysis, CUTS International, Jaipur conducted a research project entitled ‘Doha Round Impacts on India: A Study in a Sequential Dynamic CGE Framework’. The research involved use of a dynamic computable general equilibrium (CGE) model, which has several distinctive features, making it an ideal tool for analysing the mentioned impacts.

The model is used to deduce the quantitative effects of various scenarios in regard to multilateral liberalisation emerging from the DDR on incomes and incidence of poverty across occupational categories and sectors comprising the Indian economy. The various possible scenarios that are envisaged in this study are as follows:

Multilateral liberalisation of agriculture with developing and developed countries reducing their tariffs to different extents, removal of export subsidies and reduction of domestic subsidies

Similar tariff liberalisation in manufacturing

Simultaneous liberalisation of both sectors in the manner mentioned above

Liberalisation of service sector trade

The study yields certain nuanced results which throw light on the benefits of participation in the DDR for India. It shows that agricultural trade liberalisation is superior in the Indian context to the liberalisation of trade in industrial goods with the former scenario leading to rise in GDP and welfare accompanied by a fall in headcount index of poverty in both long and short runs. While services trade liberalisation would also generate positive outcomes for the Indian economy in general, certain sectors may suffer from short term contraction as small and medium firms in these sectors try to adjust to competition from foreign producers.

The study is not only useful for guiding India’s participation in the DDR negotiations but would encourage other developing countries to also undertake similar studies so that participation of the developing world in the DDR becomes more productive and promotes their self interest better.