Agricultural economics Narrative Essay
Department of Economics, Punjabi University, Patiala (Punjab), India. E-mail: 2Assistant Professor, Department of Distance Education, Punjabi University, Patiala (Punjab), India. E-mail: Abstract: A progressive agriculture serves as a powerful engine of economic growth of any country. It helps in initiating and sustaining the development of other sectors of the economy. In view of this, after independence the Government of India adopted a positive approach and specific programmes like new agriculture technology were introduced. Indian farmers being poor were not in a position to buy these expensive inputs.
Then the Indian Government started the scheme of subsidies on the purchase of various agriculture inputs to facilitate the farmers. Subsidies are often criticized for their financial burden, on the other hand there is a fear that agriculture production and income of farmers would decline if subsidies are curtailed. The findings indicate that the increasing rate of total subsidies (fertilizers, electricity and irrigation) is higher than gross cropped area (GCA) during pre, first as well as second phase of liberalization periods.
There is a lot of variation to find out the relationship between gross cropped area (GCA) and in total subsidies in zones throughout the study period. The present study suggests that Government should keep aside its motive to please voters or strengthen the vote bank, it should frame rational policy in which small size category farmers, who are not actual beneficiaries of subsidies, could get more and subsides, which they do not want should be withdrawn.
Keywords:-agriculture, electricity subsidy, fertilizers subsidies, irrigation subsidy, productivity. I. Introduction The socio – economic structure, which prevailed prior to the British rule in the country, resulted in the organization of self-sufficient villages. It has been maintaining some kind of static equilibrium. The Indian peasant, though not properly educated, has adequate experience of farming systems and he has been dependent on it for the means of living.
The Royal commission of Agriculture in India observed that both the methods of cultivation and social organization exhibit that settled order which is characteristic of all countries in which the cultivating peasant has long lived in and closely adapted himself to the conditions of a particular environment. The Indian agrarian economy on the eve of independence was critical in situation. It could be characterized totally primitive, deteriorative and turbulent.
After partition, the country is left with 82 per cent of the total population of undivided India as well as only with 69 per cent of land under rice, 65 per cent under wheat and 75 per cent under all cereals. The deficiency of food grains is quite alarming and aggravating at that time (Chahal, 1999). In view of this, after independence tremendous efforts are made to boost the economy through agriculture as one of the tools for development.
The Government of India adopted a more positive approach and hence a well definedpolicy of integrated production programmes with defined targets and a proper distribution programme is adopted along with other measures for the overall economic development of the country. Specific programmes like new agriculture technology are introduced to convert agriculture into a successful and prosperous business, to bring more land under cultivation and to raise agriculture production. In India, the adoption of new agricultural technique is costly than that of traditional method of cultivation.
In traditional method, inputs are least expensive, on the other hand, inputs in modern technology like high yielding varieties of seeds, fertilizers, farm mechanization and irrigation are very costly and Indian farmers being poor are not in a position to buy these expensive inputs. Then on the recommendations of food grain price committee (Jha Committee), the Government of India started the scheme of subsidies on purchase of various agriculture inputs to facilitate the farmers (Singh, 1994).
Subsidies have occupied agricultural economists for a long time because they are pervasive in agriculture, even though they are often applied in ways that benefit mostly richer farmers, cause inefficiencies, lead to a heavy fiscal burden, distort trade, and have negative environmental effects. Agricultural subsidies can play an important role in early phases of agricultural development by addressing market failures and promoting new technologies (Fan, 2008).
All of these subsidies by reducing the prices of the inputs, served in the initial stages of green revolution, as incentives to the farmers for adopting the newly introduced seed-cum-fertilizer technology. These helped in raising the agricultural output, after some time, the amount paid on these subsidies began to rise. The input subsidies have often been accused of causing most harmful effect in terms of reduced public investment in agriculture on account of the erosion of investible resources, and wasteful use of scarce resources like water and Agricultural Subsidies In India Boon Or Curse
www. iosrjournals. org 41 | Page power. Further, apart from causing unsustainable fiscal deficits, these subsidies by encouraging the intensive use of inputs in limited pockets have led to lowering the productivity of inputs, reducing employment elasticity of output through the substitution of capital for labour and environmental degradation such as lowering of water tables. (Gulati, 2003).
In India, at present centre as well as state governments are providing subsidies on fertilizers, irrigation (canal water), electricity and other subsidies to marginal farmers and farmers’ cooperative societies in the form of seeds, development of oil seeds, pulses, cotton, rice, maize and crop insurance schemes and price support schemes etc. Out of these subsidies, the Central Government of India provides indirect subsidies to farmers on the purchase of fertilizers from 1977, whereas state governments are providing subsidies on irrigation as well as on electricity (Government of Punjab, Agriculture Department, Chandigarh).
Review of literature of the past theory and practice is necessary when conducting any research work. Sharma, (1982) examined the impact of agricultural subsidies on national income and agricultural production. For this purpose the author used the time period from 1970-71 to 1981-82 and a general equilibrium model. The study revealed that during this period, agricultural subsidies affected the national income and agriculture production positively. Gupta, (1984) tried to analyse the agricultural subsidies in India from 1970-71 to 1982- 83.
The author used linear regression model. The study showed that during this period, the use of agricultural subsidies increased at faster rate but there was a large inter-state disparity. Sharma, (1990) revealed in this study that subsidies have become unsustainable. In order to release resources for higher investments in the agricultural sector, large scale price and institutional reforms are needed to relieve the pressure of subsidies on the exchequer. Gulati, (2007)reviewed the trends in government subsidies and investments in and for Indian agriculture.
The author suggested that to sustain long-term growth in agricultural production and therefore provide a long-term solution to poverty reduction, the government should cut subsidies of fertilizer, irrigation, Power and credit and increase investments in agricultural research and development, rural, infrastructure and education. Promoting non-farm opportunities are also important. From the above studies, it may conclude that agriculture subsidies are a worldwide phenomenon.
Some studies showed the distribution pattern of agriculture subsidies in different countries and in different states of India. Whereas some studies showed the impact of agriculture subsidies on income of farmers of different states of India, on agriculture production, on gross cropped area, on cropping pattern etc. Subsidies are often criticized for their financial burden. Some researchers assert to the extent that these should be withdrawn in a phased manner, such a step will reduce the fiscal deficit, improve the efficiency of resources use, funds for public investment in agriculture.
On the other hand, there is a fear that agriculture production and income of farmers would decline if subsidies are curtailed. These are very important issues, which need serious investigation. Subsidies are often criticized for their financial burden. The objectives of the present study are to study the growth and distribution of agricultural subsidies in India, to study the impact of agricultural subsidies in India, to suggest ways and means for giving agricultural subsidies to farmers of India.
The present study is related to agricultural subsidies in India from 1980-81 to 2008-09. In this study agriculture subsidies of fertilizers, electricity, irrigation (canal water), seeds, machinery etc. are discussed during pre-liberalisation period (1980-81 to 1985-86), first phase of liberalisation period (1990-91 to 1996-97) as well as during second phase of liberalisation period (2000-01 to 2008-09). For analysing the growth and distribution pattern of agriculture subsidies, five zones i. e.
south zone (includes Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, Pondicherry, Andaman and Nicobar Islands and Lakshadweep), west zone (includes Gujarat, Madhya Pradesh, Chhattisgarh, Maharashtra, Rajasthan, Goa, Daman and Diu and Dadra Nagar Haveli), east zone (Bihar, Jharkhand, Orissa and West Bengal), north zone (Haryana, Punjab, Uttar Pradesh, Uttaranchal, Himachal Pradesh, Jammu and Kashmir, Delhi and Chandigarh) and north-east zone (Assam, Tripura, Manipur, Meghalaya, Nagaland, Arunachal Pradesh, Mizoram and Sikkim) have been taken.
II. Gross Cropped Area in India Land is the fundamental basis for the most of the human or natural activities and is one of the major natural resources on earth. Agricultural productivity is entirely dependent on the availability of suitable land (State of Environment Punjab – 2007). In India, there are competing demands of area available for cultivation from increase in rural habitations, forestation, urbanisation and industrialisation.
Consequently, gross cropped area in the country has registered a rapid deceleration in its growth over time (Bhalla, 2009). In this section, an attempt is made to analyse the gross copped area (GCA), total subsidies, fertilizers, electricity and subsidies at India as well as zone levels. The gross cropped area (GCA) in India during 1980-81 to 2006-07 is shown in table 1. This table reveals the west zone got topmost position, followed by north zone, south zone, east zone and north-east zone throughout the study period.
In India, GCA has shown variations i. e. it has increased from 1,73,324 thousand hectares in 1980-81 to 1,85,403 thousand hectares in 1990-91 and further increased to 1,88,601 thousand hectares in 1996-97, it has declined to 1,86,565 thousand hectares in 2000-01 and further declined to 1,75,678 thousand hectares in 2006-07. As zone-wise analysis shows that in west zone, the GCA has Agricultural Subsidies In India Boon Or Curse www. iosrjournals. org 42 | Page increased from 69,882 thousand hectares in 1980-81 to 75,659 thousand hectares in 1990-91 and further increased to 78,097 thousand hectares in 1996-97 and declined to 72,833 thousand hectares in 2006-07.
In north zone, it has increased from 38,806 thousand hectares in 1980-81 to 42,132 thousand hectares in 1996-97 and declined to 39,780 thousand hectares in 2006-07, whereas in south zone, the GCA has increased from 32,363 thousand hectares in 1980-81 to 34,688 thousand hectares in 1990-91 and further increased to 35,333 thousand hectares in 1996-97 and declined to 35,271 thousand hectares in 2000-01 and again increased to 36,368 thousand hectares in 2006-07.
In east zone, the GCA has increased from 27,514 thousand hectares in 1980-81 to 28,741 thousand hectares in 1990-91 and declined to 27,416 thousand hectares in 1996-97 and further declined to 20,246 thousand hectares in 2006-07, on the hand the GCA has increased from 4,759 thousand hectares in 1980-81 to 5,163 thousand hectares in 1985-86 and further increased to 6,451 thousand hectares in 2006-07 in north-east zone.