Que. What are the direct and indirect subsidies provided to farm sector in India? Discuss the issues raised by the World Trade Organization (WTO) in relation to agricultural subsidies.
भारत में कृषि क्षेत्र को प्रदान की जाने वाली प्रत्यक्ष एवं अप्रत्यक्ष सब्सिडी क्या है? विश्व व्यापार संगठन (डब्ल्यू.टी.ओ.) द्वारा उठाए गए कृषि सब्सिडी संबंधित मुद्दों की विवेचना कीजिए।
Structure of the Answer
(i) Introduction: Briefly introduce the types of subsidies provided in India’s “farm sector” and outline the WTO’s issues with these subsidies.
(ii) Main Body: Detail the “direct” and “indirect” subsidies provided to Indian agriculture and analyze the “WTO’s concerns” regarding their compliance.
(iii) Conclusion: Conclude with the need for balancing “farmer welfare” and “global trade norms” to ensure sustainable agricultural support.
Introduction
India’s “farm sector” receives extensive “direct” and “indirect subsidies” to bolster food security and rural incomes. However, the WTO raises significant concerns about the compliance of these subsidies with “international trade standards” due to trade distortion risks.
Types of Direct Subsidies in India
Direct subsidies provide financial assistance directly to farmers, aiding in cost reduction and income stability. Key examples include:
(i) Minimum Support Price (MSP): MSP guarantees a base price for key crops, ensuring “farmers’ income security” and buffering them from market fluctuations, though viewed as potentially trade-distorting.
(ii) Fertilizer Subsidy: The government offers subsidies on fertilizers, reducing costs for farmers and encouraging “higher productivity,” but this leads to “imbalanced use” and environmental concerns.
(iii) Irrigation Subsidy: Subsidies in irrigation improve water access in dry regions, promoting “crop yield,” though they may encourage water-intensive crops in arid areas, stressing resources.
(iv) Electricity Subsidy: Many states offer subsidized electricity for agricultural use, lowering irrigation costs; however, this often results in “over-extraction of groundwater,” impacting long-term water security.
(v) Direct Cash Transfers (PM-KISAN): Through PM-KISAN, income support is provided to small and marginal farmers, which helps in bridging “income gaps” but requires effective targeting for impact.
Types of Indirect Subsidies in India
Indirect subsidies support the broader agricultural ecosystem by enhancing productivity, stability, and market reach. Key examples include:
(i) Subsidized Credit: Programs like the “Kisan Credit Card” (KCC) provide loans at lower rates, improving farmers’ access to working capital and encouraging “investment in agriculture.”
(ii) Insurance Subsidies: Schemes like “PMFBY” make crop insurance more affordable, aiding in “risk management” from natural disasters and price volatility, though awareness remains limited.
(iii) Public Distribution System (PDS): The PDS supports demand for grains, stabilizing farm incomes indirectly. However, inefficiencies and leakage in PDS remain substantial challenges.
(iv) Agricultural Research and Development (R&D): Investment in R&D supports advancements in crop varieties and techniques, increasing “crop resilience” but requires extensive adoption for broad benefits.
(v) Infrastructure Subsidies: Support for storage and logistics reduces post-harvest losses, helping “farmers retain produce quality,” yet rural infrastructure development remains uneven.
WTO’s Issues with India’s Agricultural Subsidies
The WTO has raised issues around the “trade-distorting effects” of India’s subsidy programs, arguing that they may disrupt global market balance.
(i) Amber Box and MSP Policies: WTO categorizes MSP under the “Amber Box,” as it distorts trade by setting artificially high prices, affecting “global price competitiveness.”
(ii) De Minimis Limits: India has breached the “de minimis” limit of 10% of agricultural production value in certain crops, leading to “non-compliance” with WTO commitments.
(iii) Transparency and Reporting: WTO requires transparent reporting of subsidy details. India has faced criticism for insufficient reporting, creating gaps in “subsidy transparency.”
(iv) Excessive Price Support: High MSPs, especially for crops like rice and wheat, can lead to overproduction, impacting “global markets” and raising environmental sustainability concerns.
(v) Food Security Exemption Debate: India argues subsidies ensure “food security,” but WTO members counter that such exemptions can excessively shield domestic sectors, affecting “fair competition.”
Conclusion
India’s challenge lies in balancing “supportive subsidies” to its farm sector while meeting “global trade rules.” Sustainable, WTO-compliant reform can align subsidies with the interests of both “farmer welfare” and global economic parity.
