Topic 1 : Crown jewel that was
Introduction: On the negotiating agenda for the member countries of the World Trade Organisation (WTO), when they meet in Abu Dhabi for the 13th ministerial meeting, is the ongoing crisis in the dispute settlement mechanism (DSM). WTO’s DSM — its crown jewel — comprises a binding two-tiered process with a panel and an appellate body (AB).
The Dispute Settlement Body (DSB):
- The General Council convenes as the DSB to deal with disputes between WTO members.
- Such disputes may arise with respect to any agreement contained in the Final Act of the Uruguay Round.
- The DSB has the authority to establish dispute settlement panels and decides the outcome of a trade dispute on the recommendation of such panels and possibly on a report from the Appellate Body (hear appeals from reports issued by panels).
Issues with Dispute Settlement Body
- This body, which heard appeals from the decisions rendered by WTO panels, is a permanent judicial body of seven independent members with compulsory jurisdiction over all WTO members.
- However, since the end of 2019, it stands crippled because the US, which lost several critical disputes before it, has single-handedly blocked the appointment of new members.
- Consequently, countries have found an easy way to avoid complying with the WTO panel rulings. They appeal into the void, thereby rendering the WTO toothless.
Efforts to restore the DSM
- At the 12th WTO ministerial meeting, countries resolved to create a fully functioning DSM by 2024.
- As part of this decision, India and several developing countries have rightly demanded the body’s restoration.
- As it existed from 1995 till 2019, a fully functional dispute settlement, with the checks and balances that the appellate body provides, is the best bet for the developing world.
- However, given the US’s keenness to de-judicialise its international trade relations, it looks unlikely that the body, as we know, will spring back to life.
Various alternatives to the DSM of WTO
As the DSM as available from 1995 to 2019 cannot be revived back in its original form, developing countries have three options to maintain a two-tiered DSM at the WTO.
1. European Union-led multi-party Interim Appeal Arbitration Arrangement (MPIA)
- The first option is to join the European Union-led multi-party Interim Appeal Arbitration Arrangement (MPIA), which formalises the mechanism for arbitration already available under the WTO to provide the appellate review for panel reports.
- The MPIA’s procedure is quite like the one that the AB followed.
- However, there are two downsides.
- First, its voluntary nature means that each MPIA tribunal would be an ad hoc one.
- Second, though MPIA awards are binding on the parties to the dispute, unlike the AB ruling, they are not required to be adopted by all WTO members.
- This means that all MPIA rulings would remain ad hoc, unlike the AB, whose rulings set a body of jurisprudence that subsequent panels have frequently relied on to ensure certainty and predictability in dispute settlement.
2. A dilutes Appellant Body
- The second option is a diluted AB.
- While the US has so far opposed the AB in principle, it may consider an AB with limited powers.
- The powers of the AB can be truncated in various ways, such as requiring it to be largely deferential to the parties to the dispute, stating that AB rulings will not have a persuasive value, etc.
- But a diluted AB will be antithetical to the role that WTO law expects the DSM to play: To provide security and predictability to the multilateral trading regime.
- It will also be inimical to the interests of countries like India.
- Even if the US does not like AB’s jurisprudence, the fact remains that the AB, over the years, has clarified the meaning of WTO law.
3. AB with an option of opting out from its compulsory jurisdiction
- There is a third interim option, as argued by scholars Robert Howse and Wenhua Ji, which is to resurrect AB in the same form as it existed till 2019, but with one important change — countries will have the option to opt out of AB’s compulsory jurisdiction.
- A country opting out cannot participate in an appellate process either as a complainant or as a respondent.
- Thus, if the US opts out of the appellate mechanism, any country with a dispute against the US would have to settle for only a single-tier panel jurisdiction over such disputes.
- But there would be a functional AB for all other disputes.
- Critics might argue that this will change the intrinsic nature of a two-tier binding DSM and, more importantly, keep the US — one of the WTO’s most frequent litigators — outside the appellate mechanism’s purview.
- But this is a price that one might have to pay to safeguard the AB in its current form.
- The US not joining the AB will not undermine its prominence.
- The non-compulsory jurisdiction of the International Court of Justice (ICJ), for example, hasn’t diminished its legitimacy and stature.
Conclusion: India and other developing countries should continue striving for the ideal solution: The restoration of the AB in the form it existed till 2019. However, if India is pushed to the wall to choose between the status quo and an AB for only willing countries, the latter, not the former, will be preferable.
Topic 2 : Changing gears to grow
Introduction: As India gears up for parliamentary elections in April-May, Prime Minister Narendra Modi’s major development plank is the Viksit Bharat Sankalp by 2047 (developed India by 2047). Whether the promise of growth has given inclusive growth or not needs to be analyzed further.
The impressive growth rate of the Indian economy
- There is no doubt that the Modi government has done quite well in the post-Covid recovery period.
- The Economic Review by the Department of Economic Affairs points out that India will register a more than 7 per cent growth in GDP for three consecutive years — from FY22 to FY24, perhaps even in FY25.
- This is much higher than the global average as well as the growth in most G20 countries.
- But for inclusive growth, we need to dive a little deeper and see what has happened in the agriculture sector, which engages the largest segment of the working population (45.8 per cent in 2022-23, as per PLFS).
- In this context, let us compare the 10 years of the Modi government with the 10 years of the UPA government on certain key parameters.
Comparison of macroeconomics of NDA and UPA governments
- On the macro-economic front, India’s real GDP grew by 5.9 per cent per annum between FY15-FY24 vis-à-vis 6.8 per cent achieved during FY05-FY14.
- On CPI inflation, the Modi government wins hands down with 5.1 per cent versus 8.1 per cent in the UPA period.
- Multidimensional poverty fell from 29.2 per cent in FY14 to 11.3 per cent in FY23 as per the NITI Aayog.
- Further, the Economic Review states that the unemployment rate has declined drastically from 6 per cent in FY18 to 3.2 per cent in FY23 (PLFS, MoSPI), although ILO data still shows unemployment is at more than 7 per cent. The two differ due to differences in definition.
- The agri sector, contributing about 18 per cent of India’s gross value added (GVA) in FY24, is likely to register a growth rate of just 1.8 per cent in FY24 as per first advance estimates, a major drop from 4 per cent in FY23.
- If we count this, the decadal growth in agri-GDP under the Modi government is likely to be roughly the same (3.5 per cent) as under the UPA government.
Employment and real wage growth in NDA government
- The reverse migration during Covid-19 has increased the share of agriculture in the labour force, up from 42.5 per cent in 2018-19 to 45.8 per cent in 2022-23 (PLFS data).
- This is not a good sign. No wonder, during the Modi 2.0 period, real wages in farming as well as in non-farm rural operations have come down marginally.
- This raises questions about the efficacy of the inclusive growth model, as well as the promise of doubling farmers’ real incomes by FY23.
The NDA’s record on fiscal consolidation for sustainable growth
- In the interim Union budget for FY25, the Finance Minister has provisioned an expenditure of Rs 47.6 trillion for FY25, and bringing down the fiscal deficit from 5.8 per cent of GDP in FY24 (RE) to 5.1 per cent of GDP in FY24.
- This is a good move, although the FRBM Act asks for the fiscal deficit to be 3 per cent of GDP.
- So, there is still a long way to achieve optimal fiscal consolidation.
- In the agri-food-rural space, the government has pruned the fertiliser subsidy to Rs 1.64 trillion for FY25 against revised estimates (RE) of Rs 1.88 trillion (FY24).
- The other three major welfare subsidies/doles are food subsidy of Rs 2.05 trillion, MGNREGA at Rs 860 billion, and PM-KISAN at Rs 600 billion in the FY25 budget.
- All these subsidies need major rationalisation and targeting to divert more resources towards development expenditures and environmental sustainability, including agri-R&D, micro-irrigation, rural roads, agri-marketing infrastructure, and investments in building efficient value chains for high-value perishable commodities.
- India also needs to tackle the humongous problem of child malnutrition.
- It is time to change gears from a sole emphasis on food security to nutritional security, and having an agriculture system that is not only resilient to climate change but also protects its soil, water, air, and biodiversity.
- These goals cannot be achieved in a business-as-usual scenario.
Growth of agriculture and allied sectors in NDA government
- Within agriculture, the budget of FY25 provisions a 27 per cent increase in the allocation for the Department of Fisheries, Animal Husbandry and Dairying, Rs 71 billion, up from Rs 56.15 billion in RE (FY24).
- This is certainly a good step as fisheries and animal husbandry have been growing fastest within the agri-sector, and were not getting their due in proportion to their contribution to agri-GDP.
Creation of houses for the poor and MGNREGA
- One observes a massive jump of 70 per cent in PM Awas Yojana (Gramin), from Rs 320 billion (RE) in FY24 to Rs 545 billion (BE) in FY25.
- But this increased figure is actually the same that was budgeted in FY24, but could not be utilised.
- It is also interesting to note that more than 70 per cent of houses under the scheme have been allotted to women as sole or joint owners.
- This not only ensures permanent asset creation for rural households but also provides dignity of life while creating more jobs in rural India.
- This is a commendable step and the FM deserves compliments.
- It would be even more innovative if MGNREGA in rural areas is synchronised with the PM Awas Yojana so that the dream of every household having a reasonably good shelter is realised as soon as possible.
Conclusion: Combining MGNREGA with PM Awas Yojana could ensure every household a reasonably good shelter. That will be the real beginning of Ram Rajya in rural areas, and will also reward BJP with votes in the coming elections.