The situation appears to be deteriorating rapidly. According to the Solvent Extractors' Association of India, the import of vegetable oils during the oil year 1998-99 stood at 4.39 million tonnes, which was more than double the figure of 2.08 million tonnes in the previous year. Quoting Oil World weekly, they argue that imports during 1999-2000 could be as high as 4.7 to 4.9 million tonnes. Refined palmolein reportedly accounts for around 60 per cent of these exports.
 
Overall India's weakening competitive edge in recent times is essentially the result of a sharp decline in international prices. The international prices of agricultural commodities, which registered a sharp rise during 1992-96, have recorded an even sharper fall since then, taking them to a decadal low. According to the food and agricultural raw materials price indices of the International Monetary Fund, prices fell by 13 and 16 per cent in 1998, after similar declines in the previous year. Prices are projected to fall further in 1999.
 
It is not just the fall in prices that is a matter of concern, but the inter-commodity variations in impact of imports on domestic prices. With pulses and edible oil imports being placed under OGL as part of liberalisation, the real prices of these commodities have either declined or remained stagnant. On the other hand, there are crops which have seen increase in prices in real terms during these years. This obviously results in a shift of acreage away from certain crops to others, making India increasingly import dependent in some areas. At one level, this is a matter of concern from the point of view of food security, since it is likely that prices would remain high for various commercial crops that have a large international demand while remaining low for a range of food crops. But that is not all. Trade liberalisation could lead to substantial instability. Since India's large demand for particular commodities is likely to affect international prices substantially, a shift out of one crop in domestic production and in its favour in imports could trigger prices increases that induce acreage shift reversals. Such price and output instability is hardly the recipe for building competitive capabilities, which is the ostensible aim of liberalisation.
 
These possibilities that trade liberalisation could adversely affect agriculture need to be viewed in the light of evidence which suggests that the overall benefits to agriculture from liberalisation have thus far been limited. One fall out of overall trade liberalisation was to be a shift in the terms of trade between agriculture and manufacturing in favour of agriculture, as a result of a fall in manufactured goods prices and a rise in agricultural prices. However, as Chart 12 shows, while the terms of trade have been in favour of agriculture during the 1990s, the gains in those terms were registered during the 1980s and not the 1990s. During the 1990s, the terms have trade have fluctuated around a more or less stagnant trend, and have equalled the 1991-92 level only in one other year. And if our analysis of the likely price consequences of liberalisation materialise, there is a possibility of a decline in those terms in the years to come.
Chart 12 >>
 
In sum, liberalisation of trade, even to the extent that it had proceeded before the Exim policy announced in April this year, has not delivered the promise of benefits to agriculture that it held out. On the other hand, there are signs that the consequences for agriculture could prove adverse in future. The case for caution while advocating further liberalisation of agricultural trade either at home or at the WTO is therefore obvious.