What Has Been Sown Has Not Been Harvested : The Curious Case of Farm Subsidies in India

Subsidies play a vital role in the economy of a country as they ensure equitable utilization of the resources for the people. Subsidies are a part of a comprehensive plan towards the essential goal: feeding more people. At the same time subsidies are not without consequences as they have reported to have led to the deterioration of resources which otherwise would not have been so had the farmers made to use the resources without subsidies. This paper tries to bring out the importance to agricultural subsidies by the world nations and India in particular over the years. Apart from showing whether subsidies have resulted in the deterioration or over exploitation of resources, the paper also lists out the cross border effects of subsidies. It also shows that the subsidies have led the governments to compromise on the need of public investments. The paper recommends that there is an urgent need to put into effect an expenditure switch from subsidies to investment to lift Indian agriculture from its current stagnation. The most alarming aspect of the surging subsidies is not the size, but the manner and purpose of spending on them. Subsidies provided in India suffer from both inclusion error (wrong kind of people benefiting) and exclusion error (deserving people left out of subsidies). It recommends that three Ts are important to make subsidies efficient: transparent, targeted and temporary. It also recommends that subsidies need to be differential for rain-fed and perennially-irrigated farms. The amount of subsidy must also be inversely propositional to increase in the size of land holding