A.6. Indirect Subsidies
It is indirect as there are no direct transfers or payments involved. They can be in the form of lower prices, welfare mechanisms, more affordable credit, insurance options, waivers of agricultural loan payments, etc. These payments are mostly made to farmers in conjunction with the use of inputs, and as a result, they are closely tied to the volume of those payments.
The cost of the product is set at a lower price than the market price in cases of indirect subsidies. Indirect subsidies account for about 2% of India’s GDP. An indirect subsidy is any non-cash advantage that a recipient receives to support its operations or competitiveness. Modifications to the tax code are a common form of indirect subsidy.
Examples include MSP (Minimum Support Price), fertiliser, credit, and irrigation subsidies.
Some Positive Impacts and the Issues related to Indirect Subsidies:
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Positive aspects of Indirect subsidies
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- These are crucial in fostering agricultural technology and infrastructure development. Ex: Subsidies for infrastructure.
- Farmers are guaranteed high-quality inputs through subsidies for seeds and fertiliser, which helps to raise farm output.
- Encourages farmers to adopt sustainable practises like crop diversification by helping to alter their behaviour.
- The indirect subsidies that provide farmers knowledge also include farmer training.
- Ensures the nation’s food security.
- Contribute to limiting the outflow from the agricultural industry to other sectors
- These aid in the development of underdeveloped priority areas.
- In the 1960s, when the nation was experiencing severe food scarcity, the goal was to attain food security. The green revolution gave farmers access to high-quality crops and fertilisers.
- These are designed to offer farmers technical and training support to increase productivity.
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Issues of Indirect farm subsidies
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- Agriculture has become dominated by cereals and has altered production patterns as a result of subsidies like MSP.
- Desertification is a result of the overuse of natural resources caused by subsidies for power, irrigation, and fertiliser.
- Due to intermediaries, indirect subsidies are tainted by corruption and leaks. Ex: PDS where leakages and the presence of ghost beneficiaries are noted.
- The WTO’s Amber box refers to market-distorting subsidies that are under pressure from the international community to be reduced.
- The current administration can offer incentives for minimal political gain in “vote bank politics.”
- These have resulted in agriculture centred on cereal and skewed crop patterns. Groundwater supplies, for example, are being depleted rapidly. They don’t see any benefit to conserving resources.
- Another drawback is the prejudice towards large farm owners and regional differences. Due to flaws like corruption, identification, lobbying by wealthy farmers, etc., they frequently fail to reach the intended beneficiaries.
- Typically, it is utilised improperly during elections to advance political goals, such as the remission of farm loans.
- It doesn’t result in the development
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