Agricultural Economics Research Review
Year : 2021, Volume : 34, Issue : conf
First page : ( 195) Last page : ( 195)
Print ISSN : 0971-3441. Online ISSN : 0974-0279.

Sustainability of agriculture sector and food and farm subsidy in India: Issues and policy implications

Shah Deepak*

Gokhale Institute of Politics and Economics, Pune-411 004

*Corresponding author: deepakshah@gipe.ac.in

Online Published on 16 March, 2022.

Abstract

Along with a steady rise in agricultural subsidy over the last four decades, there has been a substantial rise in production due to higher capacity utilization of existing units or by the creation of new capacities. In the case of inputs, the rise in subsidy outgo is matched with a significant increase in indigenous production of fertilizer and its consumption. However, the increased use of fertilizers in India is accompanied by the disproportionate use of indigenously produced urea since other fertilizers are mainly imported. The major problem with input subsidies is that they lead to reduced public investment in agriculture on account of the erosion of investable resources and wasteful use of scarce resources, apart from causing other harmful effects like intensive use of inputs leading to reduced productivity, reduced employment elasticity of output substitution of capital for labour, and lowering of the water table. Further, though the major beneficiaries of fertilizer subsidy are the large farmers who mainly cultivate water-intensive crops, the issue of concern is the real beneficiary of fertilizer subsidy since the benefit goes to both the fertilizer industry as well as farmers. Another issue is the delivery of fertilizer subsidy, which should be directly given to the farmers and not through priority allocation of natural gas to fertilizer units. The concept of the Direct Benefit Transfer (DBT) system in fertilizers introduced by the Government in October 2016 and the formulation of policy relating to the implementation of Direct Cash Transfer (DCT) of fertilizer subsidy to farmers are yet to fully mature. The final decision on the implementation of DCT has not been taken so far. Apart from input, the Government continues to extend large amounts of food subsidies, which is already well known for administrative inefficiency, corruption and wastage. Moreover, it is found that the outreach of food subsidy in India has been highly inadequate and concentrated more in the relatively developed and fewer poverty states than vice versa.

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