Direct and Indirect Subsidies to Farm Sector in India
- Direct Subsidies
- Minimum Support Price (MSP): The government guarantees a fixed price for certain crops, ensuring farmers a stable income.
- Direct Benefit Transfer (DBT): Cash transfers directly to farmers’ bank accounts, like the PM-KISAN scheme, providing ₹6,000 annually to small and marginal farmers.
- Loan Waivers: Periodic debt relief measures where the government waives off outstanding loans of farmers.
- Subsidized Credit: Farmers receive loans at reduced interest rates, lowering the cost of borrowing.
- Indirect Subsidies
- Fertilizer Subsidies: Government reduces the cost of fertilizers by compensating manufacturers for selling below market prices.
- Power Subsidies: Farmers receive electricity at lower rates for irrigation, often leading to over-extraction of groundwater.
- Water Subsidies: Canal water provided at nominal rates, sometimes leading to inefficient use.
- Seed Subsidies: High-quality seeds provided at subsidized rates to boost agricultural productivity.
Issues Raised by the WTO in Relation to Agricultural Subsidies
- Trade-Distorting Support: WTO’s Agreement on Agriculture classifies subsidies that distort trade, and India’s MSP has been under scrutiny for potentially exceeding limits.
- Amber Box Subsidies: These are considered distorting and are subject to reduction commitments. India’s MSP might fall into this category.
- Export Subsidies: WTO opposes subsidies contingent on export performance. India’s export incentives for agricultural products have been challenged. copyright©iasexpress.net
- Public Stockholding: India’s food stockpiling for food security purposes has been a contentious issue, as it involves procuring food at MSP and might distort trade.
- Special Safeguard Mechanisms: India seeks provisions to raise tariffs temporarily to deal with import surges or price drops, but it’s a debated topic in WTO negotiations.
Agriculture is the backbone of India, with subsidies playing a crucial role in ensuring food security and farmer welfare. However, global trade rules necessitate a balance between domestic priorities and international commitments. It’s imperative for India to navigate these complexities, ensuring both farmer welfare and adherence to global norms.