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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

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 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

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)
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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