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Day 49 – Q 5.Structural reforms not doles and subsidies are needed to address the vulnerabilities of distressed farmers. Elucidate.

5. Structural reforms not doles and subsidies are needed to address the vulnerabilities of distressed farmers. Elucidate. 

संकटग्रस्त किसानों की कमजोरियों को दूर करने के लिए संरचनात्मक सुधारों और ना की सब्सिडी की आवश्यकता है। स्पष्ट करें।


A subsidy (also recognized as a subvention) is a system of financial assistance paid to an individual, a business or an economic sector in order to accomplish certain policy objectives.


An agricultural subsidy is a government incentive paid to agribusiness, agricultural organizations and farms to supplement their income manage the supply of agricultural commodities and influence the cost and supply of such commodities.

Farm subsidies could be – 

  • Direct farm subsidies rendering cash to the recipient farmers like food subsidy, MSP-based procurement, providing cash directly to the farmers to buy fertilizers etc.
  • Indirect farm subsidies are not provided in the form of cash but supporting farmers in an indirect manner. For example- subsidizing fertilizer companies to provide cheap urea to farmers.

To enhance the agricultural production, the Government of India is providing some other subsidies to the farmers, through the Farmers’ Co-operative Societies in the form of seeds, development of oil seeds, pulses, cotton, rice, maize, crop insurance schemes and price support schemes.

Subsidies ultimately hurt the farmers 

  • Fertilizers subsidy, especially urea when made available cheaply has resulted in overuse, which degraded soil quality, and in return affected the output productivity. Low productivity of Punjab in wheat can be attributed to above cause.
  • Most benefits of subsidies are allotted to big farmers while in India, 2/3rd farmers are marginal farmers which can’t utilize the benefit of subsidy properly. Thus the value of produce of such farmer’s decrease.
  • It leads to overproduction of one crop over other like fruit, pulses. Thus sometimes grains are piled up for rotting in warehouse.

Structural Reforms

  • Enhanced Agricultural productivity, competitiveness and rural growth: The contribution of Agri sector in India’s GDP (16%) is greater than the world’s average (6.4%), thus policy intervention in the right direction can fuel the sector as a key space in the economy.
  • Liberalize constraints to marketing, transport, export and processing: Improve access to domestic and international markets.
  • Increase investment in research: Cover new seeds, disseminate new farming techniques widely etc.
  • Improve water resources and Irrigation/Drainage Management: Piped conveyance, better on-farm management etc. and increasing productivity over land usage.
  • Eschew loan waivers: As it only diverts resources from needed investment, focus should be on allocation for capacity building.
  • Implement successful policies and rationalize public expenditure with priority to scheme with high returns: Move to a fixed cash subsidy per acre cultivated based on digitizing and identifying plots as demonstrated successfully by Rythu Bandhu Scheme of Govt. of Telangana.
  • Employ rural youth and promote entrepreneurship: Successfully demonstrated by the Custom Hiring Centre model implemented by Madhya Pradesh to hasten the pace of farm mechanization.
  • Facilitate conversion of agricultural waste: Provides a further fillip to farmers’ income. 
  • Encourage village level procurement systems to create a robust value chain, providing employment to rural youth.
  • Convergence of schemes: Integrate MGNREGA with Blue revolution to promote aquaculture, creation of potential clusters etc.
  • Agriculture and private sector: Facilitates transition from Agriculture to robust Agri-business systems.
  • Skill development: Skill development centers providing essential required skills and techniques and helping in capacity building of the young population preparing them for efficient employment.
  • Creation of Agricultural Universities in every state: enhancing the outreach of Agriculture as an important sector, attracting, and retaining youth in this sector.


According to IMF, India’s economy is predicted to be soon the fastest growing economy in the world. Thus, Agriculture sector in India could become a solid foundation for a robust economy and a central pillar of rural development (approx. 67%), if driven with a more productive, internationally competitive, diversified and sustainable agricultural policy and reforms.

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