Question.
What are the direct and indirect subsidies provided to the farm sector in India? Discuss the issues raised by the World Trade Organisation ( WTO) in relation to agriculture subsidies.
(UPSC 2023 General Studies Paper 3 (Main) Exam, Answer in 150 words)
Answer.
In India, the farm sector receives both direct and indirect subsidies to support agricultural activities. These subsidies aim to enhance farmers's income, ensure food security, and promote overall agricultural development. The subsidy of the farm sector constitutes about 2 % of the GDP, and it plays a critical role in establishing prices in India.
Direct subsidies to the farm sector:
PM-KISAN:
PM KISAN scheme provides direct cash transfers to farmers, about 6000 rupees per annum to each farmer.
Minimum Support Price ( MSP):
The government provides a minimum support price to ensure farmers receive a minimum price for their crops.
PM KUSUM:
The government provides the subsidies for installation of solar pump sets to farmers.
Pradhanmantri Fasal Bima Yojana:
The government provides crop insurance at a subsidized rate under PM Fasal Bima Yojana.
Credit subsidy:
Kisan Credit Card (KCC) offers loans at subsidized rates. It enables farmers to invest in the quality of farm input.
Indirect Subsidies:
The following are indirect subsidies:
- Subsidies on fertilizers
- Subsidies on electricity
- Seed subsidies
- Warehousing construction subsidies
- Transportation subsidies for export
The following are issues raised by the World Trade Organisation ( WTO) to agriculture subsidies:
The World Trade Organization ( WTO) has raised concerns about agricultural subsidies, citing potential distortions in global trade.
Fertilizer subsidies:
Fertilizer subsidies fall under Amber Box subsidies as per WTO norms as they can lead to overproduction, lowering global prices and affecting farmers in countries without such subsidies.
Buffer stock of Food grains:
Food Corporation of India ( FCI) buys large quantities of wheat and rice. Maintaining a buffer stock of food grains is crucial for food security in India, however, WTO considers it a trade-distorting action.
MSP ( Minimum Support Price):
WTO considers the Minimum support prices as trade trade-distorting action as it leads to incentivizing crop production.
In summary, India as a member of WTO, has engaged in negotiations to address these concerns while safeguarding the interests of its farmers. There is a need to negotiate to make the balance between supporting agricultural sustainability and complying with international trade agreements.
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