AGRI Grovestudies
Section C
3a. The comparative advantage theory suggests that countries benefit from international trade by specializing in the production of goods and services in which they have a lower opportunity cost, and then trading with other countries for goods and services in which they have a higher opportunity cost. This allows countries to achieve a more efficient allocation of resources and to increase their overall level of output and welfare.
For example, let's consider two countries: Country A and Country B. Country A has a comparative advantage in producing wheat, and Country B has a comparative advantage in producing cars. However, Country A can also produce cars and Country B can also produce wheat. If both countries were to produce both goods, Country A would need to allocate more resources to produce cars, which would increase the opportunity cost of producing wheat. Similarly, Country B would need to allocate more resources to produce wheat, which would increase the opportunity cost of producing cars.
Under these conditions, it is more efficient for Country A to specialize in the production of wheat and export it to Country B in exchange for cars. Similarly, Country B should specialize in the production of cars and export them to Country A in exchange for wheat. This allows both countries to take advantage of their comparative advantages and to increase their overall levels of output and welfare.
By engaging in international trade, countries can also benefit from economies of scale, access to larger markets, and increased competition, which can lead to lower prices and higher quality goods and services. Additionally, international trade can help to promote economic growth and development by facilitating the transfer of technology, knowledge, and expertise between countries.
3b. The marketed surplus is the surplus of agricultural production that is sold in the market, while the marketable surplus is the total surplus of agricultural production that is available for sale in the market. The marketed surplus may be more, less, or equal to the marketable surplus, depending on several factors such as the level of production, transportation costs, market prices, and market conditions.
For example, suppose a farmer produces 1000 kg of wheat and has a marketable surplus of 900 kg of wheat after retaining 100 kg for personal consumption, seed, and animal feed. If the farmer is located in a remote area with poor transportation facilities and high transportation costs, they may only be able to market 800 kg of wheat due to the high cost of transporting the remaining 100 kg to the market. In this case, the marketed surplus is less than the marketable surplus.
On the other hand, if the farmer is located near a well-established market with low transportation costs and favorable market conditions, they may be able to sell more than the marketable surplus. For example, if the market demand for wheat is high and the price is attractive, the farmer may be motivated to sell an additional 100 kg of wheat from their personal consumption or seed stock to take advantage of the favorable market conditions. In this case, the marketed surplus is more than the marketable surplus.
In some cases, the marketed surplus may be equal to the marketable surplus, where all the surplus production is sold in the market without any loss or additional gain. This situation may occur when the transportation costs, market prices, and market conditions are favorable and there are no constraints on the production or marketing of agricultural produce.
4a. The Uruguay Round of trade talks, which concluded in 1994, was a major milestone in the evolution of international trade. Its major contribution was the establishment of the World Trade Organization (WTO) as a permanent international body responsible for promoting and regulating international trade. The WTO replaced the General Agreement on Tariffs and Trade (GATT) that was in place since 1948.
The primary functions of the WTO are:
Promoting free trade: The WTO works to promote free and fair trade among member countries. It encourages countries to reduce trade barriers such as tariffs, quotas, and subsidies, and to adopt more open trade policies.
Administering trade agreements: The WTO administers the rules and regulations of various international trade agreements, including the General Agreement on Tariffs and Trade (GATT) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
Providing a forum for trade negotiations: The WTO provides a platform for member countries to negotiate new trade agreements and resolve trade disputes. It conducts regular meetings and negotiations to promote further trade liberalization.
Assisting developing countries: The WTO provides technical assistance and training to developing countries to help them participate more effectively in the global trading system.
The Uruguay Round of trade talks also resulted in the establishment of several new agreements that govern international trade in goods, services, and intellectual property. These agreements include the Agreement on Agriculture, the Agreement on the Application of Sanitary and Phytosanitary Measures, the Agreement on Textiles and Clothing, and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).
The Uruguay Round was significant because it represented a major step towards a more open, transparent, and predictable international trading system. It helped to reduce trade barriers, promote economic growth and development, and establish a framework for resolving trade disputes. The establishment of the WTO has been a key factor in the growth of global trade over the past few decades, and it continues to play a vital role in the promotion of international trade and economic development.
4b. Here are two examples of public sector institutions:
Reserve Bank of India (RBI):
The Reserve Bank of India is India's central bank, established in 1935 under the Reserve Bank of India Act. Its primary objective is to regulate the monetary policy of the country, while also ensuring the stability and growth of the Indian economy. The functions of the RBI include:
Regulating the money supply and credit in the economy through various monetary policy tools such as interest rates, reserve requirements, and open market operations.
Regulating and supervising the banking system to ensure financial stability, promote transparency, and protect the interests of depositors.
Managing India's foreign exchange reserves and regulating foreign exchange transactions.
Promoting the development of financial markets, including money, bond, and foreign exchange markets.
Advising the government on matters related to monetary policy, banking, and economic development.
Food Corporation of India (FCI):
The Food Corporation of India is a public sector undertaking established in 1965 under the Food Corporations Act. Its primary objective is to ensure food security in the country by procuring, storing, and distributing food grains to different parts of the country. The functions of the FCI include:
Procuring food grains from farmers at a minimum support price (MSP) announced by the government.
Storing food grains in various warehouses across the country to ensure their safety and prevent spoilage.
Distributing food grains to different states and regions based on their requirements and maintaining buffer stocks to meet emergencies.
Regulating the prices of essential food items in the market to ensure that they are affordable for the common people.
Conducting research and development activities related to food grains, their storage, and distribution.
