Consider the following statements:
Statement-I: In recent years, India has been breaching WTO limits of farm subsidies under the Agreement on Agriculture.
Statement-II: The Peace Clause of the WTO allows the breach by developing countries.

Which one of the following is correct in respect of the above statements?
(a) Both Statement-I and Statement-II are correct and Statement II is the correct explanation for Statement-I.
(b) Both Statement-I and Statement-II are correct and Statement II is not the correct explanation for Statement-I.
(c) Statement-I is correct but Statement II is incorrect.
(d) Statement-I is incorrect but Statement-II is correct.

Question

Consider the following statements:
Statement-I: In recent years, India has been breaching WTO limits of farm subsidies under the Agreement on Agriculture.
Statement-II: The Peace Clause of the WTO allows the breach by developing countries.

Which one of the following is correct in respect of the above statements?
(a) Both Statement-I and Statement-II are correct and Statement II is the correct explanation for Statement-I.
(b) Both Statement-I and Statement-II are correct and Statement II is not the correct explanation for Statement-I.
(c) Statement-I is correct but Statement II is incorrect.
(d) Statement-I is incorrect but Statement-II is correct.

ONLiNE UPSC · Accepted Answer

Statement-I is correct: WTO&rsquo;s Agreement on Agriculture provides for a domestic subsidy cap of 10% for developing countries and 5% for developed countries on the total value of production of certain crops. This is called the de-minimis ceiling. India has been providing more than 10% to rice farmers breaching the limit for the past 5 years.

Statement-II is correct: WTO provided for a Peace Clause in the 2013 Bali Ministerial Conference, which allows the developing countries to not attract penalty for breaching the subsidy cap temporarily only for Public Stockholding, i.e., for Food Security purposes.
This Peace Clause is a temporary solution to the breach of subsidy for public stockholding so that developing countries don&rsquo;t face legal challenges. The Peace Clause is rather a relaxation, not the reason why India breaches the subsidy cap. In India, it is the procurement by FCI at MSP for Public stockholding and its distribution through PDS for food security measures, which is the reason for breaching the de-minimis ceiling.
Note: WTO calculates subsidies based on the External Reference Price at the base year 1986-88, while MSP in India is calculated at the base year 2012, incorporating CPI inflation. This widens the gap between MSP and ERP, making MSP seem higher than it is in real terms.

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M Question 1	⏱ 0
Consider the following statements: Statement-I: In recent years, India has been breaching WTO limits of farm subsidies under the Agreement on Agriculture. Statement-II: The Peace Clause of the WTO allows the breach by developing countries. Which one of the following is correct in respect of the above statements? (a) Both Statement-I and Statement-II are correct and Statement II is the correct explanation for Statement-I. (b) Both Statement-I and Statement-II are correct and Statement II is not the correct explanation for Statement-I. (c) Statement-I is correct but Statement II is incorrect. (d) Statement-I is incorrect but Statement-II is correct.