INDIA’S BITTER SUGAR POLICY: PRODUCTION, EXPORT, SUBSIDY, AND OTHER DISTORTIONS

Abstract

While sugar is widely and progressively highly consumed worldwide, sugar production and exports are highly concentrated among a few countries. This invites many market distortions and demand-supply gaps. India, being the largest producer and the third-largest exporter, creates a lot more distortions than other major producers. Two main sources of volatility are India’s production subsidies and export subsidies. These subsidies violate WTO principles of fair trade and increase volatility for other
countries too. In addition, sugar is a disaster crop for India as it gets a high premium of subsidies and therefore crowds out other crops, causes resource diversion and immense groundwater depletion, and harbingers a public health crisis in the form of obesity and life-style diseases. We explore the dynamics of the world sugar market, the sources of all the above distortions and adverse effects of the sugar industry, and explore remedial courses, while keeping in mind the political realities.
Keywords: Sugar, Subsidies, Exports, Trade Distortion, Agricultural Policy.