Issues Related to Direct and Indirect Farm Subsidies and Minimum Support Prices (MSP)

Issues Related to Direct and Indirect Farm Subsidies and Minimum Support Prices (MSP)

1. DEFINITION AND CONCEPT

What are Farm Subsidies?

Farm subsidies are financial assistance or support provided by the government to farmers, agri-businesses, and agricultural organizations to:

• Supplement farmer income

• Reduce input costs

• Stabilize prices

• Ensure food security

• Protect farmers from unpredictable market and weather conditions

Scale in India: Farm subsidies constitute approximately 2% of India’s GDP, with total subsidy to farmers amounting to 21% of their farm income (Ministry of Agriculture and Farmer Welfare).

2. TYPES OF FARM SUBSIDIES

2.1 Direct Subsidies

Definition: Subsidies that involve direct cash payments or income transfers to farmers without any intermediaries.

Characteristics:

• Financial assistance directly transferred to beneficiaries

• Direct cash payments to farmers

• Clear and transparent transfer mechanism

Examples in India:

• Pradhan Mantri Kisan Samman Nidhi (PM-KISAN): Income support of ₹6,000 per year to eligible farmer families in three equal installments

• Agricultural input grants

• Crop loan waivers

• Cash transfers for agricultural development

2.2 Indirect Subsidies

Definition: Subsidies that reduce the cost of farming inputs or services, or influence output prices, without direct cash payments to farmers. The government bears a portion of the cost, making inputs/services cheaper.

Characteristics:

• Support provided indirectly via tax exemptions, reduced duties, price supports

• Reduce costs of inputs like fertilizers, seeds, electricity, and irrigation

• Price support mechanisms

• Tax breaks and duty exemptions

Examples in India:

2.3 Output Subsidies / Price Support Mechanisms

Minimum Support Price (MSP)

• Government announces a guaranteed minimum price for certain crops

• If market prices fall below MSP, government agencies (FCI, NAFED) procure at MSP

• Provides price floor and income assurance to farmers

• Covered crops: wheat, rice, pulses, oilseeds, cotton, sugarcane, etc.

3. RATIONALE FOR FARM SUBSIDIES

3.1 Food Security

• Primary driver of subsidy policy in India

• Ensures stable, adequate, and affordable supply of essential food items

• Addresses India’s large population food requirements

• Reduces reliance on imports and protects against global price volatility

• Critical during crises: Subsidized grains under Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY) benefited 810 million people during COVID-19

• FY25 food subsidy expenditure: ₹2.25 lakh crore

3.2 Supporting Farmers’ Income and Livelihoods

• Agriculture inherently risky: unpredictable weather, pests, diseases, market price fluctuations

• Safety net function: stabilizes farmer incomes, protects from severe financial distress

• Rural employment: 70% of Indian rural households rely mostly on agriculture

• Prevents distress migration to urban centers

• Bridges income gap between small/marginal farmers and large farmers

3.3 Addressing Input Costs

• Reduces overall cultivation costs for farmers

• Makes farming financially viable, especially for small and marginal farmers

• Enables farmers to invest in modernization

• Critical for agricultural competitiveness

3.4 Promoting Agricultural Productivity and Modernization

• Incentivizes adoption of modern agricultural practices

• Encourages use of high-yielding seed varieties (HYVs)

• Promotes mechanization (tractors, tillers, harvesters)

• Facilitates efficient irrigation techniques (drip, sprinkler systems)

• Increases overall agricultural productivity and efficiency

• Supports on-farm infrastructure development

3.5 Price Stabilization and Consumer Welfare

• Helps keep consumer food prices stable and affordable

• Particularly benefits low-income households

• Linked to Public Distribution System (PDS)

• Provides subsidized food grains to vulnerable populations

3.6 Sustainable Agricultural Practices

• Can be designed to encourage environmental-friendly farming

• Promotes organic farming and precision agriculture

• Encourages water conservation and soil health management

• Soil Health Card Scheme: promotes scientific nutrient usage

• PM-KUSUM: subsidizes solar pumps for farmers, reducing diesel consumption and groundwater depletion

3.7 Achieving National Policy Objectives

• Path to US$ 5 trillion economy status

• Alignment with Sustainable Development Goals (SDGs)

• Mission for Integrated Development of Horticulture (MIDH)

• Support for crop diversification

4. BENEFITS OF FARM SUBSIDIES

4.1 Income Support and Purchasing Power

• Provides assured income to farmers

• Increases purchasing power of agricultural population

• Improves rural consumption and economic activity

• Supports allied agricultural sectors

4.2 Food Security and Nutrition

• Ensures adequate food supply

• Reduces chances of food shortage and food inflation

• Addresses malnutrition and hunger

• PMGKAY: Free grains to 810 million beneficiaries

• Supports nutritional security across income groups

4.3 Bridge Income Divide

• Particularly supports small and marginal farmers

• Addresses agricultural inequality

• Reduces rural-urban income disparity

• According to FAO: 70% of Indian rural households rely mostly on agriculture

4.4 Improvement in Human Development Index (HDI)

• Better farm incomes lead to improved living standards

• Reduces poverty and food insecurity

• Improves health and nutrition indicators

• Enhances educational outcomes

4.5 Technology Adoption and Modernization

• Increased usage of technology and infrastructure in agriculture

• Leads to increased efficiency and profitability

• Reduces distressed migration

• Encourages investment in modern farming techniques

4.6 Crop Diversification

• Incentivizes production of nutritionally important crops

• Promotion of millet production as alternative to rice/wheat

• Encourages cultivation of pulses and oilseeds

• Reduces over-reliance on water-intensive crops

4.7 Export Competitiveness

• Makes Indian agricultural products competitive in global markets

• Supports agricultural export growth

• Contributes to GDP growth

5. CONCERNS AND ISSUES RELATED TO FARM SUBSIDIES

5.1 Fiscal Burden

Scale of Burden:

• Farm subsidies: approximately 2% of India’s GDP

• Explicit subsidies: 9.3% of total budget in FY24 (down from 12.7% in FY23)

• Total government subsidy expenditure: ₹4.1-4.2 lakh crore in FY25

• Food subsidy alone: ₹2.25 lakh crore in FY25

Impact:

• Diverts resources from critical sectors like health, education, and infrastructure

• Public health spending remains stagnant at 1.84% of GDP (global average: 6%)

• Reduces capital expenditure for development projects

• Accumulation of fiscal liabilities

• FCI debt: ₹1.18 lakh crore accrued with NSSF for food subsidy payments (though cleared in 2021)

5.2 Poor Targeting and Inclusion/Exclusion Errors

Major Issues:

• Subsidies often fail to reach intended beneficiaries due to inefficiencies

• Failure of Universal Public Distribution System (PDS) and NFSA targeting

NFSA (2013) Coverage:

• Targets up to 75% of rural population

• Targets up to 50% of urban population

• Concerns regarding inclusion of undeserving beneficiaries

Specific Leakages:

• More than 40% of subsidized rice and wheat meant for PDS distribution gets diverted to open markets

• LPG subsidies under Ujjwala Yojana: Poor last-mile delivery and diversion

• Former PM Rajiv Gandhi observation: Out of every rupee spent on welfare, only 15 paise effectively reaches intended beneficiaries

FDS Diversion: Fertilizer meant for farms diverted to industrial usage or smuggled to neighboring countries

5.3 Resource Wastage and Environmental Degradation

Groundwater Depletion

• Free/subsidized electricity for irrigation leads to over-extraction of groundwater

• Central Ground Water Board (CGWB): Approximately 230 billion cubic meters of groundwater drawn annually for agricultural irrigation

• Rapid depletion in many regions of India

• Unsustainable irrigation practices exacerbated by electricity subsidies

Fertilizer Overuse

• Subsidies on fertilizers encourage excessive and irrational use

• Overuse of Urea and DAP leads to:

  • Imbalanced soil nutrients

  • Eutrophication and water pollution

  • Soil erosion and degradation

  • Indian agricultural sector: Contributes 18% of greenhouse gas emissions

• Reduction in soil health and long-term productivity

Other Environmental Issues

• Reduced incentive for organic and biofertilizer adoption

• Hindrance to market diversification for sustainable alternatives

• Contributes to agricultural pollution and climate change

5.4 Market Distortions and Private Sector Disincentives

Price Distortion Effects:

• Subsidies artificially lower input costs, creating market distortions

• Discourages private sector competition and innovation

• Creates unfair advantage for subsidized sectors

• Reduces economic viability of alternatives

Specific Examples:

• Fertilizer subsidy (₹1.75 lakh crore): Disincentivizes organic and biofertilizer adoption

• LPG subsidy under Ujjwala: Reduces economic viability of biogas alternatives

• Electricity subsidy: Discourages solar pump adoption and efficient water management technologies

• Nano urea remains underutilized despite environmental benefits; traditional urea heavily subsidized

5.5 Distorted Cropping Pattern

Pattern Distortion:

• MSP-driven subsidies have led to predominance of certain crops at expense of others

• Punjab/Haryana: Excessive wheat and paddy cultivation at cost of:

  • Pulses

  • Maize

  • Vegetables

  • Other nutritionally important crops

Buffer Stock Issues:

• Rice stocks: 4 times above required buffer norms, leading to wastage and fiscal strain

• Excessive procurement creates storage and distribution challenges

• Resource waste in storage and management

Water Stress:

• Focus on water-intensive rice and wheat in water-scarce regions

• Misalignment with regional agro-climatic conditions

5.6 Corruption and Leakages

Governance Challenges:

• High susceptibility to corruption

• Diversion of subsidized goods for non-agricultural purposes

• Urea diversion: Significant quantities diverted to industrial usage or smuggled

• Poor last-mile delivery mechanisms

• Ghost beneficiaries in subsidy distribution

Welfare Loss:

• Leakages result in significant welfare loss

• Additional fiscal burden due to inefficient spending

• Lack of transparent accounting

5.7 “Freebie Culture” and Populism

Political Dimension:

• Subsidies frequently used as populist tools for electoral gains

• Political compulsions override fiscal discipline

• Rising trend of unsustainable promises (free electricity, etc.)

• Short-term gains at expense of long-term fiscal sustainability

Governance Credibility:

• Undermines long-term fiscal sustainability

• Reduces governance credibility

• Delays necessary reforms

• Encourages political competition in subsidy expansion

5.8 Weak Incentive for Innovation and Modernization

Innovation Gaps:

• Subsidies fail to incentivize innovation and modern technology adoption

• Entrench inefficiencies and outdated practices

• Nano urea introduction: Despite sustainability benefits, traditional urea remains heavily subsidized, reducing farmer incentive to adopt newer options

• Fertilizer DBT rollout: Delays in implementation

• Lack of awareness about advanced irrigation techniques

• Prevents technology-led improvements in agriculture

5.9 Fostering Dependence Rather Than Empowerment

Behavioral Issues:

• Subsidies create long-term dependence on government support

• Reduce beneficiary incentive for self-improvement

• Undermine farmer autonomy and entrepreneurship

• Prevent achievement of self-sufficiency and productivity improvements

• Create expectation of continuous government support

5.10 WTO and International Trade Concerns

WTO Disputes:

• India’s $48 billion farm input subsidies (2022-23) drew criticism from WTO members

• Criticized by: US, EU, Canada for allegedly distorting trade

WTO Framework Issues:

International Context:

• Conflict between India’s development objectives and international trade disciplines

• Challenge in balancing domestic food security with global trade commitments

6. MINIMUM SUPPORT PRICE (MSP)

6.1 What is MSP?

Definition: Government-announced guaranteed minimum price for certain agricultural commodities. If market prices fall below MSP, government agencies procure at MSP.

Purpose:

• Provides price floor to farmers

• Ensures income assurance to farmers

• Incentivizes production of target crops

• Helps stabilize agricultural markets

6.2 Scope and Coverage

MSP Crops (Major):

• Cereals: Wheat, rice

• Pulses: Tur/Arhar, Moong, Masur, Urad, Gram, etc.

• Oilseeds: Groundnut, Sunflower, Soyabean, Mustard, Safflower

• Others: Cotton, Sugarcane, Jute, Tobacco

Implementation Agencies:

• Food Corporation of India (FCI) – for wheat and rice

• National Agricultural Cooperative Marketing Federation (NAFED)

• State procurement agencies

6.3 Benefits of MSP

For Farmers:

• Income certainty and protection

• Reduces risk of price crashes

• Encourages production of target crops

• Provides livelihood security

For Consumers:

• Ensures steady food supply

• Contributes to price stability

• Supports public distribution system

For National Economy:

• Supports food security objectives

• Ensures agricultural sector viability

• Encourages agricultural investment

6.4 Issues and Concerns Related to MSP

Distortion of Cropping Pattern

• Encourages overproduction of wheat and rice

• Discourages cultivation of other nutritionally important crops (pulses, vegetables)

• Creates regional crop concentration (Punjab/Haryana – wheat and rice)

• Leads to buffer stock surpluses

Fiscal Burden

• Massive government procurement costs

• FCI debt accumulation for MSP procurements

• Rising buffer stocks increase storage and handling costs

• Diversion of resources from other agricultural development

Environmental Stress

• Encourages water-intensive crop production

• Contributes to groundwater depletion

• MSP-driven wheat/rice cultivation in water-scarce regions

• Soil degradation from continuous monoculture

Market Distortion

• Artificial price support disrupts market signals

• Reduces role of private sector trade

• Creates inefficiencies in agricultural trade

• Discourages farmer responsiveness to market demand

WTO Compliance

• MSP considered trade-distortionary

• Breaches international trade norms

• Subject to WTO disputes

• Limits India’s flexibility in trade negotiations

Implementation Issues

• Unequal benefits distribution (benefits larger farmers more)

• Limited crop coverage (many crops not included)

• Procurement challenges in remote areas

• Quality assessment issues

• Storage and wastage problems

Procurement Asymmetry

• Strong procurement for wheat and rice

• Weak implementation for other MSP crops (pulses, oilseeds)

• Regional variation in procurement

• Farmer awareness and access issues

7. CURRENT SUBSIDY LANDSCAPE IN INDIA

7.1 Scale and Composition

Explicit Subsidies:

• FY24: 9.3% of total budget (₹2.71 lakh crore)

• FY23: 12.7% of total budget

• Target: Reduce below 1% of GDP

Major Subsidy Categories (FY25):

7.2 Major Subsidy Schemes

Income Support:

• Pradhan Mantri Kisan Samman Nidhi (PM-KISAN)

• Direct income support to farmers

Food Security:

• Pradhan Mantri Garib Kalyan Anna Yojana (PMGKAY): 810 million beneficiaries

• Public Distribution System (PDS)

• National Food Security Act (NFSA)

Input Subsidies:

• Fertilizer subsidies (Nutrient Based Subsidy)

• Electricity subsidies

• Irrigation infrastructure support

• Seed subsidies

Agricultural Technology:

• Pradhan Mantri Krishi Sinchayei Yojana (PMKSY)

• PM-KUSUM (solar pumps)

• Soil Health Card Scheme

Allied Activities:

• Pradhan Mantri Ujjwala Yojana (LPG for rural households)

• Agricultural mechanization support

• Horticulture promotion (MIDH)

8. REFORMS AND WAY FORWARD

8.1 Direct Benefit Transfer (DBT) Implementation

Concept: Shift from commodity/price subsidies to direct cash transfers to beneficiaries

Advantages:

• Reduces leakages: Ensures subsidies reach intended beneficiaries

• Improves transparency: Clear audit trail of fund transfers

• Enhances targeting: Can be linked to actual beneficiary data

• Reduces inclusion/exclusion errors: Better identification of beneficiaries

Successful Models:

• PAHAL scheme: Successful DBT implementation for LPG subsidies

• PM-KISAN: Direct income support to farmers

Implementation Strategies:

• Aadhaar linking: For unique identification and verification

• Real-time digital monitoring: To track transfers

• Fertilizer DBT expansion: Can curtail misuse of fertilizer subsidies

• Cash transfers: Can replace grain-based distribution (Shanta Kumar Committee recommendation)

8.2 Dynamic and Evidence-Based Targeting

Approach:

• Use dynamic poverty data instead of static beneficiary lists

• Periodic revision based on changing circumstances

• Scientific identification of deserving beneficiaries

Data Sources:

• Socio-Economic and Caste Census (SECC)

• Household consumption surveys

• Income data verification

Technology:

• AI-based data verification: Refine subsidy pool

• Advanced analytics: Better targeting of support

• Alignment with Expenditure Management Commission (2014) recommendations

8.3 Promoting Sustainable Agricultural Alternatives

Nano Urea Initiative:

• Benefits: Save government ₹10,000-₹15,000 crore annually

• Reduces environmental harm

• Improves soil health

• Reduces subsidy burden

Organic Farming:

• Incentivize organic and biofertilizers

• Reduce dependence on subsidized chemical fertilizers

Precision Agriculture:

• Promote drone-based precision agriculture

• Biological pest control technologies

• Micro-irrigation systems

PM-KUSUM Integration:

• Link solar-powered irrigation with fertilizer DBT schemes

• Reduce electricity subsidies while promoting clean energy

8.4 Crop Diversification

Strategy:

• Link agricultural subsidies to sustainable farming practices

• Incentivize production of:

  • Pulses instead of water-intensive rice/wheat

  • Oilseeds

  • Vegetables and horticulture

  • Nutritionally important crops (millets)

Mechanisms:

• Adjust MSP support toward diversification

• MIDH (Mission for Integrated Development of Horticulture): Promote horticulture

• Reduce buffer stock surpluses through diversification

8.5 Technology Integration for Better Governance

GIS Mapping:

• Ensure subsidies granted only to actual cultivators

• Prevent diversion to non-agricultural uses

• Geographic targeting of support

Blockchain Technology:

• Enhance transparency in Public Distribution System

• Create immutable record of subsidy transfers

• Improve accountability

Digital Monitoring:

• Real-time tracking of subsidy distribution

• Early warning systems for diversion

• Data analytics for better decision-making

8.6 Environmental Alignment of Subsidies

Metered Electricity:

• Replace free electricity for irrigation with time-bound, metered electricity

• Reduce groundwater depletion

• Incentivize water conservation

Renewable Energy Transition:

• Redirect fossil fuel subsidies to renewable energy initiatives

• Support transition to cleaner energy future

• Integrate with PM-KUSUM objectives

8.7 Behavioral Change Campaigns

Integration with Awareness Programs:

• Soil Health Card Scheme: Link with fertilizer DBT to promote scientific nutrient usage

• Link Ujjwala program with health awareness about clean cooking

• PM Poshan (Midday Meal Scheme): Integration with broader nutrition objectives

• Promote sustainable practices through education

8.8 Public-Private Partnerships (PPP)

Rationale:

• Leverage private sector expertise and funding

• Improve efficiency of subsidy delivery

• Drive innovation

Application Areas:

• Fertilizer distribution: Companies collaborate with government for nano fertilizer promotion

• e-PoS systems: Private sector support for rural POS infrastructure

• Infrastructure development: PPP for storage, cold chains

• Extension services: Private sector involvement in farmer training

8.9 Subsidy “Credit Points” System

Concept:

• Beneficiaries earn subsidies based on responsible usage and sustainable practices

• Performance-linked incentives

• Aadhaar-linked unified subsidy wallet

Implementation Examples:

• Farmers: Earn additional fertilizer subsidies for:

  • Adopting micro-irrigation (verified by satellite)

  • Reducing fertilizer overuse (verified by soil health data)

  • Sustainable farming practices

• LPG: Subsidy eligibility depends on consistent refill usage

• Creates incentives for sustainable behavior while reducing waste

8.10 Graduated Exit Plans for Beneficiaries

Rationale: Subsidies as temporary support, not permanent dependence

Strategy:

• Phase out subsidies as beneficiaries achieve self-sufficiency

• Income-linked subsidy reduction

• Gradual transition to market prices

Examples:

• Farmers: Shift from free to metered electricity as incomes increase

• LPG (Ujjwala): Transition from full to partial subsidy over 3-5 years

• Verification mechanism: Aadhaar-linked income data

8.11 Agri-Startups and Innovation-Based Solutions

Concept: Shift from direct subsidies to funding innovation

Approach:

• Support startups providing sustainable farming solutions

• Reduce reliance on blanket subsidies

• Foster entrepreneurship and innovation

Examples:

• Drone-based precision agriculture: Replace traditional fertilizer subsidies

• AI-based soil testing solutions: Reduce fertilizer overuse

• Biological pest control: Alternative to chemical pesticide subsidies

• Water-efficient irrigation: Under Agriculture Infrastructure Fund (AIF)

Benefits:

• Fosters entrepreneurship and employment

• Encourages innovation

• Reduces long-term government dependence

• Improves agricultural efficiency

8.12 Rationalization Through Committee Recommendations

Kelkar Committee (2012):

• Recommended phased elimination of subsidies

• Suggested reduction in fuel, food, and fertilizer subsidies

• Proposed conversion to capital investments

Shanta Kumar Committee:

• Emphasized importance of shifting toward cash transfers

• Recommended replacement of grain-based distribution

• Focused on improving efficiency and reducing leakages

Expenditure Management Commission (2014):

• Called for rationalizing subsidies based on targeted needs

• Recommended dynamic benefit targeting

NITI Aayog Recommendations:

• Targeted subsidies for liquid fertilizers

• Support for fertigation in micro-irrigation systems

• Focus on efficiency improvements

9. INTERNATIONAL CONTEXT AND WTO FRAMEWORK

9.1 WTO’s Aggregate Measurement of Support (AMS)

Concept:

• Measures trade-distorting support to agriculture

• Caps on allowable agricultural support

• Developed countries: 5% of agricultural production value

• Developing countries: 10% of agricultural production value

India’s Position:

• Farm input subsidies: $48 billion (2022-23)

• Criticized as breaching AMS norms

• US, EU, Canada raise disputes

• MSP questioned as trade-distortionary

9.2 WTO Nairobi Package

Key Commitments:

• Developed and developing nations committed to phase-off export subsidies

• Focus on reducing trade distortions

• Allows differentiation based on development status

• Recognition of food security needs

10. KEY TAKEAWAYS

Critical Points to Remember:

1. Dual Role of Subsidies: Necessary for food security and farmer support, but create fiscal burden and distortions

2. Targeting Inefficiency: Despite good intent, 40%+ leakages indicate governance challenges that need technological and institutional reforms

3. Environmental Trade-off: Subsidies address immediate food security but create long-term environmental degradation through resource overuse

4. WTO Compatibility: India’s subsidies conflict with international trade norms; need balance between development rights and trade disciplines

5. MSP Double-edged: Ensures farmer income but distorts cropping patterns and creates buffer stock surpluses

6. Fiscal Sustainability: At 9.3% of budget, subsidies constrain development expenditure; rationalization essential

7. Solutions Multifaceted: No single solution; requires combination of DBT, technology, crop diversification, and behavioral change

8. Innovation Over Handouts: Shift from direct subsidies to supporting agricultural innovation and entrepreneurship

9. Equity and Efficiency Trade-off: Cannot achieve perfect targeting; need practical balance

10. Political Reality: Subsidies deeply entrenched; reforms require political will and compensatory mechanisms for displaced beneficiaries

11. TYPICAL UPSC MAINS QUESTIONS AND APPROACH

Question Pattern 1: “Analyze agricultural subsidies in India”

Approach:

• Define direct and indirect subsidies with examples

• Discuss objectives and benefits

• Analyze concerns (fiscal, environmental, WTO)

• Suggest rationalization measures

• Mention international obligations

Question Pattern 2: “MSP and its implications”

Approach:

• Define MSP and its scope

• Discuss benefits for farmers and food security

• Explain cropping pattern distortions

• Analyze environmental implications

• Discuss WTO concerns

• Suggest reforms (crop diversification, income support alternatives)

Question Pattern 3: “DBT as solution to subsidy problems”

Approach:

• Explain DBT concept and advantages

• Compare with existing subsidy systems

• Discuss successful implementation (PAHAL, PM-KISAN)

• Address technological requirements

• Discuss limitations and challenges

• Provide implementation roadmap

Question Pattern 4: “Balance between food security and fiscal sustainability”

Approach:

• Present government’s perspective on food security

• Discuss fiscal constraints and opportunity costs

• Analyze targeting efficiency issues

• Suggest targeted, efficient subsidy models

• Link to SDGs and development objectives

12. RELEVANT UPSC PYQs

Prelims: Q. With reference to chemical fertilizers in India, consider the following statements (2020)

• At present, the retail price of chemical fertilizers is market-driven and not administered by the Government.

• Ammonia is an input of urea, produced from natural gas.

• Sulphur, a raw material for phosphoric acid fertilizer, is a by-product of oil refineries.
  Answer: (b) 2 and 3 only

Mains Questions:

1. How do subsidies affect the cropping pattern, crop diversity and the economy of farmers? What is the significance of crop insurance, minimum support price and food processing for small and marginal farmers? (2017)

2. In what way could replacement of price subsidy with direct benefit Transfer (DBT) change the scenario of subsidies in India? Discuss. (2015)

3. What are the different types of agriculture subsidies given to farmers at the national and at state levels? Critically, analyse the agricultural subsidy regime with reference to the distortions created by it. (2013)

India’s agricultural subsidy system represents a complex balancing act between achieving developmental objectives (food security, farmer support, income stability) and maintaining fiscal discipline, environmental sustainability, and international trade compliance. While subsidies have been instrumental in ensuring food security for 810 million people and supporting the livelihoods of millions of farmers, their inefficient implementation, fiscal burden (₹4.1-4.2 lakh crore annually), and environmental consequences necessitate comprehensive reforms. The way forward lies in strategic rationalization through technology-enabled Direct Benefit Transfers, dynamic targeting based on actual need, promotion of sustainable agricultural alternatives, crop diversification, and a gradual shift from direct subsidies to supporting agricultural innovation and entrepreneurship. These reforms must balance the legitimate claims of developing nations for agricultural support with WTO obligations, while maintaining India’s food security and social equity objectives.

AGRICULTURE AND FOOD PROCESSING

Source: Ministry Major Schemes 

Notes on Economy