334 | IAASTD Global Report

Box 5-2. Trade policy and gender, case of India In the reference world the overall growth in agriculture would be slightly lower than the current long-term trend in Indian ag­ricultural growth (i.e., 3%) in 2025 and would be slightly higher in 2050. Overall growth in manufacturing sector in the reference period is 10% through the first 25 years and by about 8% in the next 25 years till 2050. With such growth rates projections taken from the IMPACT model and trend growth (for non-agricultural sectors) from Indian macro economic data sets, we find that the growth in resultant investment is healthy (see Table 5-30) and decelerating inflation that reaches the 1.4% by 2050. In brief, for India the macro picture is of robust with stable growth in the economy in the reference world. However, the rural-urban divide continues while urban households continue to improve their real income. In the longer run this gap somewhat declines. Moreo­ver, the wage gap between men and women workers in the first 25 years declines. In the reference world the consumption of the lower deciles of the population improves continuously.

      The impacts of trade policies on agriculture and AKST are studied as a variant to the reference run based on the GEN-CGE model for 2025 and 2050 for the case of India. The alternative run assumes that the peak tariff rate as an average of both agricultural

 

Hence wage rates of male workers rise less than wages of female workers, i.e., the low intensive factors of production.     

      The reference world out to 2050 and related sensitivity exer­cises are less accurate compared to 2025. This is because vari­ous structural factors that undergo changes cannot be captured very well in the economic analysis for a 50-year projection. By 2050 wage rates generally fall as there is a contraction of domes­tic production in manufacturing, mainly because of the way the economy has been driven together with lower protection. Only real wage rates of the male casual workforce would witness a marginal positive growth in 2050 and in 2050-1. Driving growth only through AKST without balanced growth in non-agriculture would lead to skewed growth and adversely affect real wages in general.

     The findings show that the present trend of real wage growth of the female workforce may continue until 2025 narrowing the gender gap. The wage growth of both male and female workforce would then experience a downturn. The AKST measure is sus­tainable till 2025 as regards improvement of wages. In the next 25 years, i.e., by 2050, AKST needs enhanced market penetration to lead to real wage growth. Otherwise low-end manufacturing may be the only expanding sector demanding casual male labor, which would explain their wage gains.

 

 

Table 5-30. Some key economic variables for India in the reference world.

 

2000

2025

2025-1

2050

2050-1

 

 

Level

(%)

Annual

Growth

CPI (Index)

Total Investment (Constant Prices) (Rs. 10 Million)

GDP Real (Rs. 10 Million)

100 429,741

1,962,996

2.44 5.36

5.23

2.2 5.77

5.23

1.42 7.56

4.87

1.4 7.53

4.87

Source: GEN-CGE model simulations.

 

and nonagricultural goods would fall by 88% in the first 25 years with the backdrop of WTO bindings. This alternative simulation for 2025 is noted as 2025-1. In 2050, the tariff would further fall by close to another 7%. Under this simulation, the tariff in 2050 would be around 2%.

     By 2025, there would be positive growth of both casual and regular male and female workers' average real wage rate (Table 5-31). However, the rise would be higher for the female workforce, indicating a greater demand for female workers in 2025 compared to male workers. In India, the underlying production process re­flected by the 2002 structure informs that female workers are less intensive in all sectors except in agro-based sectors. With AKST, there is improvement in agricultural growth, creating a higher growth for the interlinked agro-based sectors. Further, with tariff reduction, the manufacturing sector faces higher competition and experiences lower growth. Therefore, demand for more intensive factors of production in manufacturing experiences comparatively lower growth compared to agricultural and agro-based sectors.

 

     Per capita private income increases more in urban areas (at constant prices) than in rural areas during 2025-2050 (Table 5-32). Interestingly, income in the informal sector is growing faster than wages, causing a declining share of wages in total income. More­over, as tariff rates are rationalized the situations of both rural and urban households improve relative to a situation with a more restrictive tariff regime. Any divergence occurs only in the case of the households earning from informal activities like petty trade and low-end manufacturing both in the rural and urban areas. Moreover, rural households gain gradually through the next 25 years and significantly in the following 25 years to 2050. So by the year 2050, the extent of inequality may not be as wide as one finds today, with further improvement with reduced protection.

 

     Table 5-33 presents population deciles and per capita con­sumption expenditures. For the bottom 30% urban and rural population the per capita consumption level is similar. Moreo­ver, per capita consumption of the lowest 30% of the population