Introduction

The Indian economic liberalisation was initiated in the 1990s, but the opening up of the agriculture sector started in 1994. Reforms such as the abolition of minimum export prices on basmati rice, the removal of import controls on sugar, cotton and common rice and the reforms in the edible oil sector, among others, led to this agricultural liberalisation (Gulati and Kelly, 1999). In the liberalised era, due to the devaluation of the rupee in 1991, the terms of trade moved in favour of agriculture, giving a boost to agricultural exports. The 1990s movement was in contrast to the one in the 1980s when the terms of trade were not in favour of agriculture and yet crop production was higher than in the 1990s. The agricultural trade surplus was expected to uplift the agriculture sector with a positive impact on the economic conditions of the farmers dependent on this sector. But this could not happen because the price situation changed after the implementation of the Uruguay Round Agreement between 1986–1994, and the formation of the WTO in 1995 (Chand, 2002). International prices declined and domestic prices became higher than international prices in the post-WTO period. The export competitiveness of India eroded and the country became an important market for imports of agricultural commodities. With changing terms of trade the relative prices of important crops, rice and wheat, increased as compared to a decreasing trend in the pre-WTO period (Mishra, 2004).

Due to various controls, subsidies, domestic price policies and a weak integration with the world economy, the full benefits of liberalisation could not be availed by the Indian agriculture sector.