PRATIBHA: INTERNATIONAL JOURNAL OF SCIENCE, SPIRITUALITY, BUSINESS AND TECHNOLOGY (IJSSBT), Vol. 1, No.2, FEBRUARY 2013 ISSN (Print) 2277—7261

An Overview of Government Agriculture Subsidies in

1Harshal A Salunkhe, 2Dr.B.B.Deshmush 1Lecturer, SSBT‘s College of Engg. &Tech.Bambhori, Jalgaon (Corresponding Author) 2Principal, R.R. Senior College, Jalgaon Email- [email protected]

Abstract viewed as the converse of a tax, is an instrument of The agriculture subsidies are integral part of fiscal policy. Derived from the Latin word the farmers in India. The agriculture subsidies ‗subsidium‘, a subsidy literally implies coming to play vital role in agriculture sector in every assistance from behind. county. The every year’s In India, as also elsewhere, subsidies now account spends lot of money in various agriculture for a significant part of government‘s expenditures subsidies fro growth of agriculture sector. The although, like that of an iceberg, only their tip may total arable & permanent cropland is 169,700 be visible. thousand hectors in India. The objective of subsidies, by means of creating a This paper basically focuses on overview of wedge between consumer prices and producer agriculture subsidies in India with help of costs, lead to changes in demand/ supply decisions provisions of funds for agriculture in five years The forms of subsidies are a cash payment to plans and annual budget. Study types of producers/consumers is an easily recognizable agriculture subsidies and distribution criteria in form of a subsidy. However, it also has many India. invisible forms. Thus, it may be hidden in reduced tax-liability, low interest government loans or Keyword- Subsidies, five years plan & annual government equity participation. If the government budget procures goods, such as food grains, at higher than market prices or if it sells as lower than market Introduction: prices, subsidies are implied.

Indian Government play vital role in agriculture Review of literature: sector development. The government role is diverse and varied. Some of the cited reasons for The subsidy is very important for growth of vital role are self-sufficiency, employment farmers in India. Many persons have presented creation, support to small-scale producers for their views on agriculture subsidies in national & adopting modern technologies and inputs, internal national level through research papers & reduction of price instability and improvement of articles the income of farm households. This vital role can Mr.Gajendra Pratap presented his view in article take a number of forms such as import-export Domestic subsidies, The agriculture subsidies can policies and domestic policies like price support be broadly discussed under two categories one is programmes, direct payments, and input subsidies export subsidy & another is domestic subsidy, he to influence the cost and availability of farm inputs also focused on following issues -Subsidies pro- like credit, fertilizers, seeds, irrigation water, etc. poor in the developed country and subsidy impact Of all the domestic support instruments in on the Indian economy. The growing volume of agriculture, input subsidies and product price subsidies particularly the ―Green Box‖ subsidies support are the most common. Various benefits are are the new excuse instruments of the developed cited in justifying input subsidies: economic, countries for projecting a pro-poor image. environmental and social (World Bank 2008). The Weilong Zhang presents his views in Case Input subsidies can bring economic benefits to Study: Agricultural Subsidies and Development- society. Inputs like fertilizers, irrigation water and The paradox of agricultural subsidies, MGMT electricity have a significant share in agricultural 6350, International Business February 11, 2005 subsidies in India and fertilizer subsidy has The subsidies are not only detrimental to the poor attracted much attention of policymakers, and farmers in developing countries, but are also, researchers in the recent past. according to the theories of Smith, Ricardo, and An agricultural subsidy is a governmental financial Heckscher-Ohlin (Chapter 4 of International support paid to farmers and agribusinesses to Business), a burden to the tax payers of the supplement their income, manage the supply of developed nations and global trade as a whole. It is agricultural commodities, and influence the cost widely expected that the whole world would be and supply of such commodities. A subsidy, often [62]

PRATIBHA: INTERNATIONAL JOURNAL OF SCIENCE, SPIRITUALITY, BUSINESS AND TECHNOLOGY (IJSSBT), Vol. 1, No.2, FEBRUARY 2013 ISSN (Print) 2277—7261 better off today if agricultural subsidies were eliminated completely. The study is based on secondary data which is The Steve Wiggins said, Input subsidies collected from the published reports, Census need to be contemplated with caution, with a clear Surveys, newspapers, journals, websites etc consideration of the costs and benefits compared with conventional best practice of addressing  Review of Indian Agriculture Sector market failures directly and using social policies to address social objectives with respect to poverty Indian agriculture has an extensive background and food insecurity. In order to achieve these which goes back to 10 thousand years. At present, benefits, there will be a need for complementary in terms of agricultural production, the country spending on public goods. For agriculture, these holds the second position all over the world. In usually consist of rural roads, agricultural research 2009, agriculture and it contributed 16 % of the and extension, education, primary health care, and Gross Domestic Product of the country. In clean water. The working paper ―The Use of Input addition, the sector recruited about 52% of the Subsidies in Developing Countries‖ publishedin entire manpower. Global Forum on agriculture 29-30 November 2010 Policies for Agricultural Development, In spite of the fact that there has been a gradual fall Poverty Reduction and Food Security OECD in its contribution to the gross domestic product of Headquarters, Paris the country, agriculture is currently the biggest industry in India. Antonio vina, Lindsey Fransen, Paul Faeth& Yuko In terms of agricultural contribution, the following Kurauchi in their paper REFORMING states in India are the most developed states: AGRICULTURAL SUBSIDIES:―NO REGRETS‖ Punjab, Uttar Pradesh, Madhya Pradesh, Haryana, POLICIES FOR LIVELIHOODS AND THE Bihar, Andhra Pradesh, Maharashtra, West Bengal ENVIRONMENT stated that, Agricultural All these states play a key role in the agriculture subsidies and their impacts on the poor and the development of India. The total arable territory in environment are part of a complex web that 1,269,219 km2, which represents about determines whether agriculture can serve as an 56.78% of the overall land zone of the country. effective vehicle for poverty alleviation and Arable land in India is diminishing because of sustainability in all countries. Even if meaningful continuous strain from an ever-increasing number reductions were agreed to in the Doha negotiations of inhabitants and growing urbanization. of the WTO, there is no certainty that the purported development goals of this trade round The overall water surface area of the country is will be achieved. Poor farmers in developing 31440 km2 and the country experiences a mean countries may not receive benefits unless these yearly precipitation of 1,100 mm. Irrigation international decisions are accompanied by represents 92% of the consumption of water and in domestic policy reforms directed at making 1974, it was 380 km2. agriculture pro-poor and pro-environment. India holds the second position in production of wheat, rice, cotton, sugarcane, and groundnuts. It The objective is also the second biggest harvester of vegetables 1) To study agriculture sector in India. and fruit, representing 8.6% and 10.9% of the 2) To know the types of government overall vegetable and fruit production in the world agriculture subsidies & criteria for correspondingly. distribution in India. 3) To find out allocation of fund for TheInvestment in Agriculture Sector in India agriculture sector in last Five years plans & annual budget of India. Capital investment in agriculture and allied sectors has witnessed a steadily increasing trend in recent Hypothesis years. It has risen from 13.5% in 2004-05 to 20.1% H1.The agriculture subsidies is global in 2010-11. This growth has been possible because phenomenon, where its percent is more in of initiatives taken by the Government to make developed countries & less in developing agriculture a sustainable vocation. Investment in countries. public sector includes irrigation works, command area development, land reclamation, a forestation H2.The investment in agriculture sector is and development of state farms. Private sector constantly increasing from last years. investment includes construction activities including improvement/reclamation of land, RESEARCH METHODOLOGY construction of non-residential buildings, farm

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PRATIBHA: INTERNATIONAL JOURNAL OF SCIENCE, SPIRITUALITY, BUSINESS AND TECHNOLOGY (IJSSBT), Vol. 1, No.2, FEBRUARY 2013 ISSN (Print) 2277—7261 houses, wells and other irrigation works. The period of 2009-10, farming and associated capital investment is measured in terms of Gross industries such as lumbering, forestry, and fishing Capital Formation (GCF) relative to the country‘s represented approximately 16 % of the Gross Gross Domestic Product (GDP). As per Annual Domestic Product of the country. Outputs on a Report of the Department of Agriculture and unitary basis for every type of harvest have Cooperation for the year 2011-12, GCF in increased from 1950. This has been possible since agriculture and allied sectors in 2010-11 was Rs. the government has put particular focus on farming 142254 operations in the five-year plans crore. It was Rs. 76,096 crore in 2004-05 (PanchabarshikiParikalpana) and stable developments in the domains of engineering GCF in agriculture and allied sectors from 2004- science, irrigation, implementation of 05 to 2010-11 is represented in the following graph contemporary farming operations, and supply of (Graph No.-1) cultivation loans and grants after the Green Revolution took place in the country.

The major types of agricultural subsidies& distribution criteria in India

There are two major types of subsidies which are fertilizer subsidies and food subsidy. They two account for almost 90 percent of agricultural subsidy. In addition to this one more form which is intangible and uncountable is that, agricultural income is not taxed in India. These days the issue revolves around fertilizer subsidies more.

The following is data on amount of subsidies in Sources-India Infoline News Service / 08:37, Apr year 1990 to 2009 11, 2012 (Table No.1) These all thing shows that agriculture is one of biggest business in India. Every years Government 1990 2009 Percentage of India provides lot of financial support in form of change subsidies, finance and other support in direct & Total 12158 129243 10.6 time indirect forms. subsidy crore crore increase The initiatives taken by Government of India Fertilizer 4389 75849 17 times for Agriculture sector subsidy crore crore increase The Government of India has been sincerely trying to put into operation different plans to increase Food 2450 43627 18 times investment or outlay in merchandizing and subsidy crore crore increase commercializing. The some of the known plans Source- Fertilizer authority of India Report (2010) and strategies of the Indian Government include Market Research and Information Network, The subsidies can be distributed among Construction of Rural Godowns, Grading and individuals according to a set of selected criteria Standardization, Development/ Strengthening of 1) Merit, Agricultural Marketing Infrastructure. 2) Income-level The Indian Agricultural Research Institute (IARI) 3) Social group etc. was set up in the year 1905. The institute had a key The study brings to the fore the massive magnitude role in the studies and explorations that resulted in of subsidies in the provision of economic and the Green Revolution in the decade of the 1970s. social services by the government. Even if merit The Indian Agricultural Statistics Research subsidies are set aside, the remaining subsidies Institute formulates new methods for the planning alone amount to 10.7% of GDP, comprising 3.8% of agricultural testing. The Government of India and 6.9% of GDP, pertaining to Centre and State has established Farmers Commission to fully subsidies respectively. The average all-India assess the cultivation plan and state wise recovery rate for these non-merit goods/services is agriculture departments in every state just 10.3%, implying a subsidy rate of almost 90%. India stands the second position all over the world in terms of agricultural production. During the

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PRATIBHA: INTERNATIONAL JOURNAL OF SCIENCE, SPIRITUALITY, BUSINESS AND TECHNOLOGY (IJSSBT), Vol. 1, No.2, FEBRUARY 2013 ISSN (Print) 2277—7261

Agriculture under the Five-year Plans: decreases that‘s why need of separate agriculture budget for India Before the planning period, agriculture The Allocation of funds for agriculture sector was in a deplorable condition. The farmers were in Annual budget Year 2010-11 to 2012-13 in generally in heavy debt to the village money- India lenders. They were having small and scattered holdings. They had neither the money nor the Agriculture retained its high priority in the budget knowledge to use proper equipment, good quality with a planned allocation for agriculture and allied seeds and chemical fertilizers. Except in certain sectors raised by 19 percent to INR 176.9 billion areas, they were dependent upon rainfall. ($3.5 billion). The budget provides additional Productivity of land as well as of labour had been funds to several ongoing programs for enhancing declining and was lowest in the world. In spite of agricultural production, irrigation the fact that nearly 60% of our working population management, higher farm credit and improving was engaged in cultivation, the country was not post-harvest storage and processing infrastructure. self- sufficient in food grains but had to depend on food imports. Table 1 gives the total outlay for each plan and correspondingly the outlay on Table 2. India: Selected Agricultural and Food- agriculture and irrigation had also increased with Related Budget Items every plan. Ministry of Agriculture, billion Indian rupees (Table No.3) Table 1:Plan Expenditure on Agriculture and allied Sectors, Irrigation (Rs. crore) 2010- 2011- 2011- 2012- (Table No.2) 2011 2012 2012 2013 Actual Budge Revis Budge 5 Total Agri. Irrigation % of t ed t Years plan & total Crop 98.13 78.91 74.31 90.34 Plan Expend. allied outlay Husbandr sectors y 1st 1960 289.9 441.8 37.3 Soil and 0.14 0.15 0.16 0.16 plan Water 2ndplan 4671.8 549 541.6 23.3 Conservat ion 3rd 8576.5 1088.9 1019.1 24.6 Animal 7.15 9.50 7.50 10.63 plan Husbandr 4th 15778.8 2120.4 2415.7 28.7 y plan Dairy 0.85 2.23 1.84 3.53 5th 39426.2 4864.9 3925.8 22.3 Developm plan ent 6th 109291.7 6623.5 10929.9 16.1 Fisheries 2.91 2.70 2.83 3.00 plan Forestry 9.29 7.85 7.82 9.07 7th 218729.6 12792.6 16589.9 13.4 and plan Wildlife 8th 485457.2 24895.7 31398.9 11.6 Plantation 4.74 4.15 4.39 4.46 plan s 9th 941041 37239 67875 11.2 Food, 5.02 6.44 6.34 7.87 plan Storage 10th 152563.9 58933 103315 10.6 and plan Warehous Source-Indian Agriculture under the Five-Year ing Plans, Booklet No. 539, Agricultural Situation in Agricultur 25.22 24.92 25.70 28.98 India: ASIS-10 al The above figures show that percent of fund Research allocation in five years plans for agriculture sector and is decreases and fund allocation for industry & Education other sector increases. The growth agriculture

sector only 4% from last few years and

contribution of agriculture sector in GDP is Co- 1.03 2.22 1.17 1.25 operation

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PRATIBHA: INTERNATIONAL JOURNAL OF SCIENCE, SPIRITUALITY, BUSINESS AND TECHNOLOGY (IJSSBT), Vol. 1, No.2, FEBRUARY 2013 ISSN (Print) 2277—7261

Other 2.68 8.36 16.48 17.64 [3] GOI Budget 2012-13 - Agricultural Highlights, USDA Agricultur Foreign agriculture services, Global Agriculture Information Network. Date-12/03/2012 GAIN Report al No.-IN2042 (Voluntary- Public) Programs Total 157.16 147.77 148.5 176.92 [4] Harshal A.Salunkhe, VOLUME NO. 2 (2012), ISSUE 5 NO. 7 (JULY). ―A Separate Agriculture Budget for India- Need of the hour‖ Referred International journal of Commerce, Economic & Management (ISSN No. 2231- Source-GOI Budget 2012-13 - Agricultural 4245) (online journal) Highlights [5] Steve Wiggins, 29-30 November 2010 ―The Use of Input Subsidies in Developing Countries‖ published in Global The above figures show that agriculture Forum on agriculture Policies for Agricultural expenditure in annual budget is decreased year by Development, Poverty Reduction and Food Security year. This thing is responsible for slow growth rate OECD Headquarters, Paris page 10 for agriculture sector & less contribution in GDP [6] Report- Dope sheet page no.-4 www.ndtvmi.com/b4/dopesheets/rahul.pdf of India. [7] Review of Five Year Plans Page no.-2 Comparison of country regarding Subsidies to www.planning.rajasthan.gov.in/Eleventh%20Plan Agriculture (Table No.4) [8] Weilong Zhang, February 11, 2005 Case Study: Agricultural Subsidies and Development-The paradox of agricultural subsidies, MGMT 6350, International Subsidy Population %subs Business, Page no. 12 Country per dependent on idies hectare agriculture EEC $82 37% 8% USA $32 26% 5% Japan $35 72% 4% China $30 34% 24% South 60.67 $24 18% Africa % India $14 2.33% 60%

Compilations from WTO reports The above table shows agriculture subsidies is global phenomenon and it percent is more in developed country and less in developing country

Conclusion

India has very huge arable area and lot of investment in agriculture in last few years. But there is large number of decrement is shows in provision of fund towards agriculture sector in five years plan and annual budgets in term of agriculture subsidies. This thing is responsible for slow growth of and less contribution in GDP of country.

The agriculture subsidies are distributed by every country but it percent if very low and numbers of dependent is very large in India. The government of India takes serious measure for development of agriculture sector and agriculture subsidies are one of tool to help for growth of agriculture sector in India.

References [1] Capital investment in agriculture rises to 20% in India Infoline News Service / 08:37 , Apr 11, 2012 [2] Dr.K.T.Chandy--Indian Agriculture Under the Five-Year Plans, Booklet No. 539, Agricultural Situation in India: ASIS-10

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