While there are several solutions that can be proposed to fix such distortions, the most viable one is cash support to farmers and to individual families, all of which are permissible under even current WTO rules. To the extent the WTO revises its two-decade old external reference price, India gets more room on food subsidies, but the current regime isnt hurting India either. Given the four-year peace clause agreed to at Bali, India had plenty of time to either get the WTO rules changed or to get its direct benefits transfer scheme in place. Once this is done, and the poor are given food subsidies in cash, the outgo falls to a third or a fourth of what it is today. And given that all farmers could be provided a cash subsidy, this is infinitely superior to the current system where only richer farmers who sell their produce to FCI get any form of income support, and this is restricted to the few states that FCI operates in.
That the US/Europe have abused their dominant position is a fact of life, what India needs to worry about is what its options are in a world where WTO rules dont apply. In a situation where the TPP takes off, a large chunk of global trade in goods and services will take place on preferred terms and India may not get to be a part of thiscertainly, the obligations under a TPP cannot be less onerous than those under WTO. Given how global trade is slowing, it is in Indias interests to do whatever it takes to keep WTO going, not to prevent even routine trade dealswhile the TFA had to be ratified by July 31, India had a 4-year window for settling the food subsidies issue. What is ironical is that while, like the US and others, India also goes about working on bilateral trade deals to get preferential trading terms in case the WTO process gets stuck, two wings of the same ministry are fighting it out on whether free trade pacts are hurting or benefiting the country.