This is the Cato Daily Podcast for Thursday, September 11, 2014. I'm Caleb Brown.

India's internal politics may be doing far more to damage its people's fortunes

than the trade agreements India's politicians complain about.

Dan Pearson is a trade policy analyst at the Cato Institute. He comments.

When you tell people that a country like India is paying well above market rates for a great deal of agricultural output and then

storing vast amounts and then letting a great deal of that simply go to waste in a country that is developing and trying to

have a decent standard of living for the average person there.

It's just really, it's just very saddening.

Well, it is unfortunate because in economics we know that all resources are scarce and so we have a responsibility

to allow each one to go to its best and highest use.

And the way India is running its agricultural policy, it's creating huge resource misallocations.

They are subsidizing the production of certain basic crops, wheat and rice among them, and encouraging farmers to produce more of those and a lot of that goes into

storage and then is wasted and as a consequence of farmers producing more of the subsidize

crops they produce less of other things, perhaps fruits and vegetables that people also

want to consume.

And so you get the government intervention just creating market imbalances that are very unfortunate from India's standpoint.

What's unfortunate for the rest of the world is that India has been taking its large

surpluses and subsidizing the export of some of them onto world markets

thus generating lower prices for others. So it's it's running a bad set of agricultural policies at home and it's shifting the adjustment costs, some of the

adjustment costs onto the world markets. Trade people here at Cato like to say

and I assume elsewhere like to say that trade restrictions, it's like putting a gun to your own people's heads.

And then the response from other countries is to do the same.

...