reportbythesecretariat-worldtradeorganization-tradepolicies.docVIP

trade policies by sector Introduction During the past five years, Indias real GDP growth has averaged nearly 7% annually. Growth has been driven largely by the services sector, which accounted for almost 54% of GDP in 2005/06, up from 50% in 2000/01; wholesale and retail trade, hotels, transport, and communications were the leading subsectors. Manufacturing has grown less rapidly, although sufficient to maintain its share of GDP relatively stable at between 15% and 16%. By contrast, growth in agriculture has been very sluggish, and its share of GDP declined from around 24% to 19% during the period. Notwithstanding Indias impressive overall growth rate, lack of infrastructure, particularly in transport and electricity, constitutes a major obstacle to maintaining its current growth rate, let alone achieving substantially higher growth rates that the Government is aiming for. Agriculture is characterized by low labour productivity, which is about one-sixth of the level in the other sectors of the economy, with obvious implications for living standards and poverty in rural areas. The reasons for this low productivity include fragmented landholdings, a low level of mechanization and much of the cropped area dependent on rainfall for irrigation, which has made output in the sector rather variable; crop yields have also been declining, in part due to poor seed quality and overuse of land and inputs. The sector also remains subject to considerable government intervention, notably in the form of price support and input subsidies, which have become a fiscal burden, and restrictive marketing practices. Public investment in infrastructure and research has been inadequate and crowded out by spending on subsidies and, while private investment has grown in recent years, it has not been sufficient. Some efforts have been made in the period under review, especially to reduce marketing restrictions, although the government continues to monitor trade in certain sensitive com