01 February 2025 : Daily Answer Writing
Q1) What are the key challenges with government subsidies on Agriculture? Argue for and against the case. Â (150 Words/10 Marks)
Answer:
Government subsidies are a tool used to support farmers, stabilize food prices, and ensure food security. However, they come with a set of challenges and benefits.
Key challenges with government subsidies on agriculture:
- Market Distortion: the distortion of demand and supply dynamics leads to artificial prices not reflective of the products market value, such as – overproduction of wheat and rice [account for approx. 3/4th of total procurement] and creation of surplus buffer stocks far in excess of norms.
- Fiscal Burden: subsidies create a huge burden on govt finances + divert them for crucial areas, such as capital formation [agricultural subsidies accounted for approx. 12% of expenditure in the Union government’s budget].
- Inefficiency in Allocations: intended beneficiaries often do not receive the benefits, which is cornered by large + prosperous farmers [CACP: large farmers receive disproportionately higher subsidies compared to small and marginal farmers; 70% of fertilizer subsidies benefit only 10% of the farmers, primarily large landholders].
- Ecological Concerns: (a) subsidies for water, fertilizers, and pesticides lead to overuse, thereby resulting in environmental degradation, soil depletion, and water scarcity [agriculture consumes about 80% of India’s total freshwater resources, disproportionately for water-intensive crops; approx. 30% of India’s agricultural land is affected by soil degradation]; (b) subsidies encourage monocropping which harms the biodiversity.
- Distortion of Global Trade: as they create trade distortions, they often lead to trade disputes and affect international relations with major agri-producing countries [India’s agricultural subsidies have been a point of contention at the WTO – U.S. has raised concerns over India’s, arguing that they exceed the permissible limits set under the WTO Agreement on Agriculture].
However, agricultural subsidies are also important due to the following reasons:
- Provide crucial financial support to farmers, particularly small and marginal ones, ensuring a stable income and reducing poverty
- Protect against price volatility + crop failures + erratic nature of monsoons + natural disasters like floods. [e.g., credit linked subsidies and insurance subsidy through PM Fasal Bima Yojana]
- Stimulate rural economies by increasing purchasing power, economic activity, and development
- Can incentivize farmers to adopt new technologies, practices, and crops + encourage farmers to adopt environmentally friendly practices, such as reducing the use of pesticides and fertilizers.
- Help ensure a steady supply of essential food grains, contributing to national food security
For more such UPSC related Mains Answer Writing, Check Out –31 January 2025 : Daily Answer Writing