Indian Economy

Farm subsidy is a financial support provided by the government to farmers and agricultural producers in order to enhance farm productivity, incentivise adoption of sustainable agricultural techniques, thus supplementing their income, ensuring food security and agricultural development in the country. It was introduced back in 1964 in India and at present, the total subsidy offered to farmers is 2% of our GDP.  

Farm subsidies can be broadly divided in two categories:

1. Direct subsidy – As the name suggests, it is directly given to the farmers in cash, for example PM KISAN scheme.
2. Indirect Subsidy – It is not directly paid to farmers but aid them by lowering farm input prices, providing affordable credit and crop insurance, waiving loan and assuring a floor price for their farm produce (MSP). It is a non monetary benefit.

Impact of Farm Subsidies on Farmers:

Farm subsidies have both the positive and negative impact on farmer’s lives. Let’s have a look into each of these one by one:

Positive Impact:

• Enhanced earnings: Farm subsidies provide assured income to small farmers by direct monetary transfers and fixing the floor price for agricultural produce. It also augments their profit margins by lowering farm input costs, thus overall raising farmers income.
• Upgrade in living standards: Increased earning of farmers and food security give them better purchasing power which help them in tackling problems like malnutrition, illiteracy that eventually improves the general level of living of their family.
• High Yield: Lower prices of farm input like HYV seeds, fertilizers, electricity, irrigation facilities and easy credit availability helps the farmer in mechanizing their production process which increases crop yield per hectare of land.
• Risk coverage: Marginalized farmers are the most vulnerable to crop failure, but indirect subsidy like PMFBY provide them the benefits of crop insurance in adverse situations and make them feel safer in practicing agriculture.
• Bridging the income gap: Small and marginal farmers get benefited with subsidies like direct monetary benefit and lowered farm input prices which helps them in better investment in their farm lands, thus surging their farm productivity and raised income. This eventually bridges their income gap and fosters inclusivity in the agriculture sector.
• Technological and skill development: These subsidies also include various welfare schemes and training programs which equips farmers with better skills and technological know-how.

Negative Impact:

• Poor targeting and Corruption: The marginalized and landless farmers do not reap the benefits of subsidy due to corruption in the government system and ill targeting of these subsidies.
• Widened inequalities: Mostly the rich farmers enjoy the benefits of indirect subsidies and infrastructural development in agriculture as they are not uniformly dispersed in all regions of the country and small and marginalized farmers lack proper awareness about them. This further escalates regional and income inequality.

In India, more than 60% of the population is involved in agricultural and allied activities which contributes to a staggering 18 – 19% of total GDP which reflects our systemic failure in providing farmers with better income opportunities. Farm subsidies are definitely a good tool to assist them in escalating their earning curve with higher production, easy availability of credit for new investments and proper training and skill development programs. Proper targeting of direct subsidies, reduced corruption and uniform infrastructural development in all regions will raise the earning bars for marginalized farmers and improve their living standards. It is only with the proper employment of available human and physical resources we can achieve our target for an equitable development and growth of the nation.