Imports of Food Products: Need for High Tariffs

The agricultural sectors in the European Union countries and the US are provided with large amounts of subsidies by governments. The subsidies causes excess supply of food products in these countries, which makes producers to dump it into developing economies by cutting prices below long-run marginal costs. This note shows that high tariffs can be used to convert the additional revenues realised by the foreign producers through dumping into tariff revenue of the Indian government. The tariff revenue can be utilised to increase investment in Indian agricultural sector to improve productivity.