Mains Daily Question
Feb. 8, 2024
Q3. ” The various farm subsidies provided by the Government of India though has benefited the farmers, have become a major cause of concern for India at International Forums like WTO” In light of this statement, suggest some solutions to the Agriculture subsidy issues raised by various countries against India.(10M, 150W)
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Approach to the Answer: The question raises the important issue of challenges being faced by “Farm subsidies” provided by the Government of India (GOI) by various countries claiming it to be violative of WTO rules. Thus one shall show the issues revolving around India's farm subsidies and also the counter-arguments given by the GOI. At the end, suggestive measures shall be provided for solving the issue. Introduction: In the Introduction, one can write about the various direct & indirect farm subsidies provided by the GOI and connect it with recent updates with respect to Budget 2024-25. Body: As the directive is to “discuss in light of the statement” about the issues revolving around Subsidies, the answer can ideally be divided into 3 sections: Section 1: Two approaches can be taken in the first section: Type 1: In this section, one can incorporate the “Statement” given in the question by providing brief & succinct information about benefits occurred to farmers through subsidies OR Type 2: One can also provide the “Categorisation” of Subsidies under WTO rules Section 2: In this section, one shall showcase the issues raised by various countries at WTO against Indian subsidies and also highlight the counter arguments given by the GOI as defense of subsidies provided Section 3: In this section, one needs to suggest various measures that shall be taken to resolve the issues at WTO level and ideal way forward Conclusion: In Epilogue, one can conclude by taking a balanced approach for the need of subsidy in a socialist economy like India and reforms that shall be undertaken. |
ANSWER - The Union Budget 2024-25 has allocated ₹ 1.25 Lakh crore to Agriculture & Family welfare with major share going to direct & indirect farm subsidies such as PM KISAN Samman Nidhi, Minimum Support Prices (MSP), fertilizer subsidies etc
“Subsidies has benefited the farmers”:
- Supplement meager farmers income: Eg- Direct Benefit transfer (DBT) of ₹6000 annually under PM-KISAN aims to sustain farmer families & achieve doubling farmers income as directed by Dalwai Committee
- MSP: Acts as “Floor price” for farmers & ensure minimum wages as well as act as tool for maintaining “inflation” in the market economy
- Subsidies in irrigation sector: Subsidies for installation of irrigation systems like drip irrigation & canal creation which enhances water efficiency
- Eg- Subsidies provided under PM - Krishi Sinchai Yojana (PM-KSY)
“Categorisation of subsidies at WTO”:
The World Trade Organization (WTO) established an Agreement on Agriculture (AoA) through Uruguay Round to reduce Agricultural subsidies & open trade barriers to promote transparent market economy. Under this subsidies are categorized into:
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GREEN BOX |
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AMBER BOX |
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BLUE BOX |
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PEACE CLAUSE |
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“Issues raised by various countries against Farm Subsidies provided by GOI at WTO”:
- Violation of Amber box subsidies: MSP which aims to provide “minimum price” of 1.5 times of the production value to the farmers as per recommendation of Swaminathan Commission acts as violation of Amber box subsidies
- Eg - Fair & Remunerative Prices (FRP) for Sugar which include both domestic subsidies as well as export subsidies, exceed the limit of 10% imposed by WTO trade rules.
- Market Distortion: WTO argues that subsidies such as MSP leads to “cheaper prices” of Indian agricultural products (eg- Basmati rice) in the International markets creating unfair competition
- Eg - Trade barriers: Countries like USA & Australia have opposed Indian subsidies on the ground of creating “trade barriers” by making it difficult for unsubsidized foreign products to compete in the market
- Nutritional deficiency: Subsidies directed towards certain crops have led farmers adopting risk aversion and overproduction of certain crops (eg- Rice, wheat, sugarcane) thus causing Nutritional deficiency
- Eg - As per National Family Health Survey (NFHS-5), More than 50% of Indian women are Anemic caused by deficiency of Iron, iodine etc
“Counter - arguments raised by GOI”:
- India's total Aggregated measure of support (AMS) is below 10% allowed for developing countries and thus India shall not need to reduce it further by 13%
- Eg - Subsidy given by GOI amounts to $300 per farmer while it stands close to $40,000 per farmer in the US
- Article 18.4 of the AOA clearly states that WTO members are required to give due credit to inflation & its impact on ability of members states to comply with domestic support commitments
- Peace clause also states that “No country shall be barred from Food Security programmes”:
- Eg - GOI provide subsidized food to 75% of the population under National Food Security Act 2013 as “right to food” is basic human right
- Current trading arrangement does not recognize the GI Tags domestically provided to goods which decreases the marketability of the product in the global markets.
“Innovative steps that shall be taken”:
- Amendments in the formula to calculate the food subsidy cap & inclusion of programmes implemented after 2013 under the ambit of “Peace clause”
- Also, revision of base year to calculate the % of subsidies from 1986-87 shall be done
- Further, External reference price shall be revised and adjusted for Inflation based on Consumer Price Index (CPI)
Recently, the Finance Minister of India has urged WTO at Asian Development Bank (ADB) meeting to reconsider issues of farm subsidies to assess its impact on Food security needs of emerging economies like India and bring effective reforms catering to need of the “Global south”.
