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

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

Samarendu Mohanty

Cheng Fang

Jagadanand Chaudhary


Objectives

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

Indian Cotton Policy

  • Minimum Support Price

  • Production Subsidies

    • Fertilizer

    • Power

    • Irrigation

  • Export Quota

  • No Import Tariffs


Subsidy surge

Subsidy Surge

Source: FAS Attáche Report


Indian share of world cotton area and production

Indian Share of World Cotton Area and Production


Indian cotton net trade

Indian Cotton Net Trade

000 MT


Indian cotton producing states area and production share in 98 99

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 Yields by State


Cotton yield

Cotton Yield


Policy analysis matrix pam

Policy Analysis Matrix(PAM)


Pam indicators

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

Data Requirements

Input Prices

Output Prices

Private

Social

Private

Social


World reference prices

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 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

Private and Social Input Prices

  • Maharashtra Cotton(Tradable Inputs)


Maharashtra non tradable inputs

Maharashtra (Non-Tradable Inputs)


Protection coefficients

Protection Coefficients


Comparative ranking by crop

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

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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