Agricultural Subsidies

1 March 2019

Bharat Ramaswami

(i) Structural transformation by which shares of agriculture in income and employment decline is the outcome of a development process that raises incomes and living standards.

(ii) However, the process is uneven as a result of which the decline in agriculture’s income share is faster than its decline in employment share. This results in a substantial disparity in worker productivity across sectors.

(iii) Farm subsidies cushion the pain of structural transformation. But can they completely offset it and can such subsidies adversely affect structural transformation itself? These are the questions addressed in this paper. (iv) Drawing on the most recent estimates (not always for the same years), annual central government subsidies to farmers would be of the order of Rs. 120,500 crores as the sum of fertilizer subsidies (Rs. 70,000 crores, 2017/18), credit subsidies (Rs. 20,000 crores, 2017/18), crop insurance subsidies (Rs. 6500 crores, 2018/19) and expenditures towards price support (Rs. 24,000 crores estimated for 2016/17).

Sustainable Development Goals

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Publication | 1 May 2020