Assessing competitiveness of indian cotton production a policy analysis matrix approach
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Assessing Competitiveness of Indian Cotton Production: A Policy Analysis Matrix Approach. Samarendu Mohanty Cheng Fang Jagadanand Chaudhary. Objectives. To assess the comparative advantages and protection of Indian cotton production. Using a Policy Analysis Matrix Approach

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Assessing Competitiveness of Indian Cotton Production: A Policy Analysis Matrix Approach

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Assessing Competitiveness of Indian Cotton Production: A Policy Analysis Matrix Approach

Samarendu Mohanty

Cheng Fang

Jagadanand Chaudhary


Objectives

  • To assess the comparative advantages and protection of Indian cotton production.

    • Using a Policy Analysis Matrix Approach

      • Measures input use efficiency in production using a set of profit and loss identities.

      • Estimates private and social prices for output and inputs and construct various indicators.


Indian Cotton Policy

  • Minimum Support Price

  • Production Subsidies

    • Fertilizer

    • Power

    • Irrigation

  • Export Quota

  • No Import Tariffs


Subsidy Surge

Source: FAS Attáche Report


Indian Share of World Cotton Area and Production


Indian Cotton Net Trade

000 MT


Indian Cotton Producing States (Area and Production Share in 98/99)

Haryana

6.2%; 7%

Punjab

6%; 7%

Rajashthan

Madhya Pradesh

5.4%; 3.5%

Gujarat

17%; 32%

Maharashtra

35%; 21.5%

Andhra Pradesh

13.8%; 12.2%

Karnataka

Tamilnadu


Cotton Yields by State


Cotton Yield


Policy Analysis Matrix(PAM)


PAM Indicators

  • Protection Coefficients

    • Nominal Protection Coefficients (NPC)

      • Output (NPCO)

      • Input (NPCI)

    • Effective Protection Coefficients (EPC)

  • Comparative Advantage Indicators

    • Domestic Resource Costs (DRC)

    • Social Cost-Benefit Ratio (SCB)

    • SCB without Land-Cost (LSB)


Data Requirements

Input Prices

Output Prices

Private

Social

Private

Social


World Reference Prices

  • US FOB Gulf Price for wheat, corn, sorghum

  • Canola cash price,Vancouver for rapeseed

  • Cotton A-index CIF Northern Europe for cotton

  • Raw sugar price FOB Caribbean

  • 40 to 50% shelled basis CIF Rotterdam for groundnut


Private and Social Output Prices

  • Private output prices: Domestic wholesale prices

  • Social output prices:

    • Imported Commodities: World reference price+Freight charge+Marketing & transportation costs.

    • Exported Commodities: World reference price


Private and Social Input Prices

  • Maharashtra Cotton(Tradable Inputs)


Maharashtra (Non-Tradable Inputs)


Protection Coefficients


Table 3. Comparative Advantage Ranking By Crop

State

Commodity

DRC

SCB

LSB

Punjab

Wheat

1

1

1

Cotton

2

2

2

Rice

3

3

3

Haryana

Wheat

1

1

1

Rapeseed

2

2

2

Cotton

3

3

3

Rice

4

4

4

Maharashtra

Sugarcane

1

1

1

Groundnut

2

2

2

Cotton

3

3

3

Gujarat

Groundnut

1

1

1

Cotton

2

2

2

Rapeseed

3

3

3

Wheat

4

4

4

Andhra Pradesh

Groundnut

1

1

3

Corn

2

2

4

Sugarcane

3

3

1

Cotton

4

4

2

Rice

5

5

3

Comparative Ranking By Crop


Concluding Remarks

  • In case of liberalizations, it is likely that Indian cotton area, particularly in Maharashtra, will shift to cash crops such as sugarcane and groundnut.

  • In the other cotton growing states, area from least efficient crops may not go to cotton.

  • Indian cotton imports may increase significantly due to liberalizations.

  • U.S. trade negotiators should push for more liberalizations in Indian cotton sector.


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