Why in news?
In 2023, the US had only 1.82 million family farms, far fewer than India’s 93.09 million agricultural households (2019 data). Despite their smaller numbers, US farmers, with a median household income of $97,984 (higher than the national median), receive substantial government support.
This is a key issue in US-India trade negotiations, as Washington pushes for greater market access for American agricultural products, arguing that India’s farm sector must open up.
What’s in today’s article?
- Form of Assistance in the US
- Magnitude of Assistance
- Lessons for India
Form of Assistance in the US
- Unlike India, the US does not subsidize farm inputs like fertilizer, electricity, or water, nor does it intervene through large-scale procurement and stocking.
- Instead, government support is primarily provided through direct payments to farmers.
- Key Financial Assistance Programs
- Price Loss Coverage (PLC)
- Farmers receive payments when the market price of a covered crop falls below the Effective Reference Price (ERP), similar to India’s Minimum Support Price (MSP).
- Unlike India’s MSP, which requires government procurement, US farmers are compensated directly for the price difference.
- Agriculture Risk Coverage (ARC)
- This provides financial assistance when actual revenue from a crop falls below a guaranteed level based on county-specific yields and a five-year price average.
- Dairy Margin Coverage (DMC)
- This program offers financial aid when the margin between farmgate milk prices and feed costs drops below a set threshold, ensuring stable farmer incomes.
- These mechanisms help US farmers manage price fluctuations and revenue shortfalls, providing a more predictable income without direct market interventions.
Magnitude of Assistance
- The US farm sector receives substantial direct payments from the government, ranging from $9.3 billion to $45.6 billion in recent years.
- These payments help farmers manage risks and income fluctuations.
- Key Financial Assistance Figures
- Peak Assistance in 2020 – Farmers received $45.6 billion, including $31.4 billion in pandemic and disaster relief, making up 38% of their net cash income.
- Projected Payments for 2025 – Estimated at $42.4 billion, largely driven by disaster assistance under the American Relief Act of 2025.
- Total Aid (2019-2023) – The US Government Accountability Office reported that $161 billion was disbursed through 27 programs, with major allocations:
- Crop insurance: $53.6 billion
- COVID-19 aid: $30.9 billion
- Trade relief: $22.6 billion
- PLC/ARC/DMC payments: $16.8 billion
- Environmental conservation: $16.2 billion
Lessons for India
- India provides substantial support to its farmers through multiple subsidy programs, but the distribution and impact differ significantly from the US model.
- Scale of Agricultural Support
- Total Annual Assistance – Estimated at ₹5 lakh crore ($57.5 billion), covering:
- PM-Kisan: ₹63,500 crore (₹6,000 per farmer annually)
- Fertilizer subsidy: ₹1,71,300 crore
- Crop loan subsidy: ₹22,600 crore
- Crop insurance subsidy: ₹15,864 crore
- MSP procurement and state-level subsidies
- Comparison with US Assistance
- India’s support is spread across 111 million farmers, while the US aids just 1.04 million.
- Average annual federal payment:
- India (PM-Kisan): ₹6,000 ($69) per farmer
- US: ₹26.8 lakh ($30,782) per producer
- Unequal Competition in Trade Negotiations
- US farmers, despite fewer in number, receive far greater direct financial assistance.
- Opening India’s agricultural market to US produce could lead to unfair competition due to the disparity in government support.
- World Trade Organization (WTO) rules allow “special and differential treatment” for developing nations, ensuring they are not forced into reciprocal trade concessions.
- Key Question for US-India Trade Talks
- Whether the US will respect this WTO principle of non-reciprocity—allowing India to safeguard its farmers without equivalent market access for American produce—remains uncertain.
