While it remains true that India gives huge subsidies to its farmers, the reason why its AMS is negative is that there are also a huge number of restrictions which prevent farmers from realising the best, or highest, price for their output. Restrictions on exports of certain produce, for example, means that farmers have to be content with prices which may be lower than international prices.

The figure, as notified to the WTO, has changed from Rs. 14,000 crore at the time of the sealing of the Uruguay Round trade agreement in 1994.The AMS signifies the overall support or subsidy given by a country's government to its agriculture. The Uruguay Round agreementobliges developed countries to lower their subsidies to agriculture, but it lets developing countries' maintain overall agricultural subsidies up to 10 per cent.

Since in India's case support was already negative agriculture was being taxed rather than subsidised to the tune of Rs. 14,000 crore at the time of the Uruguay Round, India was allowed to sharply increase agricultural subsidies. But the negative subsidy has in fact become more pronounced since then. However this does not by itself imply increased real taxation of agriculture. The reason for the negative support becoming more pronounced is the increased differential between international prices and India's administered prices, the reference period for which is 1986-88.

The sharp fall in the rupee's value has helped balloon India's negative figure. Both the AMS figures -- the one at the time of the Uruguay Round agreement and the present one submitted in June -- would have to be defended by India as legitimate when they are reviewed in the WTO.The government has commissioned studies from agencies such as the National Council for Applied Economic Research to help it sustain the validity of the figures.