considered would reasonably represent the overall protection situation of the particular industry, but we recognize that the relatively few and fairly arbitrarily chosen price comparisons that it was feasible to undertake mean that there is a considerably margin of error in the estimates. For example, we compared the Indian and world prices of one short staple, one medium staple and one long staple cotton, but there are many varieties of cotton, and there can be significant quality differences between regions for varieties which apparently have the same technical characteristics. Again, we compared the prices of Indian "common rice" with the prices of exported Thai 15% broken rice, but the broken grain percentages in the Indian rice vary to unknown and unreported extents from less to considerably more than 15 percent. These problems of representativeness and accuracy are inherent in all price-comparison based estimates of incentives, and should be recognized and allowed for at the outset.

# _Reference prices_

Having estimated average domestic prices of representative product varieties during the principal harvest periods, the next step is to estimate corresponding average _reference prices._ We define reference prices as what the prices of the domestic varieties would have been during the same period under conditions of free trade at the same exchange rate. Estimating reference prices would be straightforward if there were substantial imports or exports of the same or a similar variety. In that case, provided there were no non-tariff controls, the tariff (or the export tax or subsidy in the case of exportables) after adjustment for domestic port, transport and marketing costs, would provide a reasonable first approximation of nominal protection. Even if there were non-tariff controls, a reference price could be derived from recorded cif import prices or fob export prices. But in India during most of the period studied, every one of the crops was subject to some form of non-tariff control over imports or exports or both. Largely but not entirely for this reason, for most crops included in the study, there were no imports or exports in most years. Consequently, with only a few exceptions, scheduled tariffs or export taxes and subsidies had no relation whatever to the actual differences between domestic and international prices. This also meant that direct observations of relevant international prices from Indian sources was not possible. Moreover, for products of which there were significant exports or imports during certain periods, the trade was frequently in varieties or grades that were not representative of domestic production. For example, during the 1 980s and after there were regular exports of high quality basmati rice, but these prices were far above the international prices of the common rice varieties which constitute the vast bulk of Indian rice production. Another problem was that even when there were regular imports or exports, the actual prices of these transactions could be obtained with great difficulty, or more often not at all, notably for periods more than a few years in the past. The only easily available data in such cases were unit values calculated from the official trade statistics, but because these usually aggregate different grades and varieties in unknown proportions, which moreover change in unknown ways from year to year, they are notoriously unreliable as indicators of either the level or trends in international prices.

For these reasons, the principal starting point for the estimation of reference prices was published data on international commodity prices. In doing this, we generally followed the choices in the original detailed studies, but these comparisons sometimes had to be modified in going back to earlier years. In doing so we tried as far as possible to find international prices for the same or a similar specification, variety and quality as the domestic product. By the same token, we used averages of the international prices during the same periods as the average xiii