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22th January 2021 – Editorials/Opinions Analyses

Content:

  1. Getting it wrong on India’s level of agricultural support
  2. Privacy and surveillance

Editorial: Getting it wrong on India’s level of agricultural support

Context:

  • The OECD has estimated that Indian farmers received negative support to the extent of minus ₹2.36-lakh crore and minus ₹1.62-lakh crore in 2010 and 2019, respectively.

Relevance:

  • GS Paper 3: Farm subsidies and MSP and issues therein (direct and indirect);

Mains Questions:

  1. What are the different types of agriculture subsidies given to farmers at the national and state levels? Critically analyze the agriculture subsidy regime with the reference to the distortions created by it. 15 Marks
  2. How do subsidies affect the cropping pattern, crop diversity and economy of farmers? What is the significance of crop insurance, minimum support price and food processing for small and marginal farmers? 15 Marks

Dimensions of the Article:

  • What is farm subsidy?
  • Types of Agriculture Subsidies in India:
  • Estimation of farm subsidy at International level:
  • Direct Subsidies
  • Indirect Subsidies
  • Issues with agriculture subsidy:
  • Way forward:

What is farm subsidy?

An agriculture subsidy is a governmental financial support paid to farmers and agribusinesses to supplement their income, manage the supply of agricultural commodities, and influence the cost and supply of such commodities.

  • Agriculture subsidies act as an incentive to promote agricultural development and as an instrument of stimulating agricultural production and attaining self-sufficiency.
  • In order to attain the goal of self-sufficiency in food, government adopts short term policies such as support prices of products and input subsidy to stimulate the products to increase the food production.
  • It is expected that subsidies contribute to better cropping pattern, employment and income of the beneficiaries. But in most development programmes, subsidies are one among the many developmental inputs being provided.
  • Thus the observable changes in cropping pattern, employment level and overall incomes are because of the joint effect of all the efforts going on. Therefore, these changes cannot be attributed solely to subsidies.

Types of Agriculture Subsidies in India:

  • Explicit Input Subsidies: Explicit input subsidies are payments made to the farmers to meet a part of the cost of an input. These are explicit payments made to the farmer. For example, subsidy on improved or high yielding variety seeds, plant protection chemicals and equipment, improved agricultural implements and supply of mini-kits containing seeds, fertilizers and plant protection chemicals for certain crops are the explicit subsidies.
  • Implicit Input Subsidies: While there is transparency in explicit input subsidies, implicit input subsidies are hidden in nature. Implicit input subsidies emerge from the mechanics of pricing of inputs themselves. If inputs whose prices are administratively determined are priced low as compared to their economic cost, it becomes a case of implicit subsidization. As far as the farmer is concerned, he does not receive any direct payment but somebody in the economy accounts for the difference.
  • Output Subsidies: If by employing a restrictive trade policy, product prices in the domestic market are maintained at levels higher than those that would have prevailed in the absence of restrictions on trade, it becomes a case of subsidization of agricultural sector through output pricing.
  • Food Subsidies: The Indian government follows a twin policy of “providing market support to the food grain producers and supplying at least a part of the requirement to consumers at reasonable prices”, and a policy of “maintaining a buffer- stock of required quantity for national food security”.

Estimation of farm subsidy at International level:

As per the OECD methodology, the market price support of a commodity is calculated by multiplying its total production with the gap between the domestic price and international prices in a relevant year. Total market support for India is calculated by adding the market price support of the agricultural commodities (of about 20 individuals) such as wheat, rice, cotton, milk, etc.

What are the consequences of the OECD methodology?

  1. First, if the domestic price for a product is less than its international price, then support for that product would be negative. To illustrate this, in respect of rice and milk, the domestic price was less than the international price, which led to negative support of minus ₹46,605 crore and minus ₹2.17-lakh crore in 2019. For the same year, the support for wheat and cotton was ₹4,034 crore and ₹4,414 crore, respectively.
  2. Second, a negative market price support for a product in one year can turn into huge positive support in another year on account of the relative movement of domestic and international prices. For instance, in 2018, the domestic price of cotton was lower than the international price, resulting in negative support of minus ₹5,102 crore. However, in the subsequent year, the domestic price exceeded the international price, and the support turned positive to the extent of ₹4,414 crore.
  3. Third, even if in a particular year, the government does not provide any additional support compared to a previous year, the level of support calculated by the OECD can change. This will arise if there is a change in either the gap between the domestic price and international price for a commodity, or its production, in the two years.

Direct Subsidies

Direct subsidies are money transfers by the government that reach the ultimate beneficiary through a formal predetermined route. In agriculture and allied sectors, subsidies are given for crop husbandry, agricultural implements, minor irrigation, soil conservation, horticulture, animal husbandry, pisciculture, sericulture and also for loss in agriculture during natural calamities like droughts or floods. The various subsidy schemes in agriculture and allied sectors are routed through the departments of Agriculture, Horticulture, Animal Husbandry and Fisheries.

Advantages of deploying Direct Subsidies:

  • Direct subsidies provide purchasing capacity to the farmer and have a multiplier effect in terms of farmers investing in agriculture and raising their standard of living.
  • These subsidies help in proper identification of beneficiaries thereby reducing pilferage and corruption etc.
  • These increase efficiency, as well as promote regional balance, and crop diversification.
  • These schemes impart a sense of agency to the beneficiaries which was otherwise absent from Indian policymaking. People can decide for themselves which crop they would want to grow, according to the profits and their local requirements. They can also use the amount in value addition, mixed farming and other beneficial activities for their farms/lands.
  • Direct subsidies are more likely to control inflation and decrease prices of fertiliser, and other agricultural produce as well. It is because direct subsidies like cash transfer bring in greater transparency and efficiency. This leads to both demand and supply responding Student Notes: more quickly to price signals, diminishing the distortions that keep inflation high.
  • These induce behavioural changes, as farmers will stop using excessive water or fertiliser in their fields.
  • These also ensure better nutrition as cereal centric food policy (Calorie based intervention) ignores micro-nutrients requirement of human body.

Disadvantages of Direct Subsidies:

  • There is a good chance that the cash may get used in some non-priority activities or for some non-productive works e.g. on marriage of girls, alcohol, etc. rather than being used for the right purposes.
  • The country may not be able to reach its desired goals such as food grain production may not be enough to support the huge population and create the problem of food security instead.
  • This will also open the country to volatility of market mechanisms.
  • Widespread illiteracy and lack of awareness may also hamper the prospect of Agriculture in the country.

Indirect Subsidies

Indirect subsidies are provided through price reduction, welfare and other ways but do not include a direct cash payment. They reach the farmers alongside the use of inputs. Therefore, these are highly correlated with the amount of use of inputs by farmers. Generally, those farmers who use more inputs would naturally enjoy higher subsidies. Example cheaper credit, farm loan waivers, reduced tariffs for electricity and irrigation etc.

Advantages of Indirect Subsidies

  • In developing economies such subsidies can be deployed to address development concerns of priority sectors.
  • Generally, indirect subsidies are better tools at the Government’s disposal to fulfill some targets fixed by it or to guide people to move towards required goal.

Disadvantages of Indirect Subsidies:

  • It takes away incentives from other areas, such as Indian agriculture has become cereal centric, regionally biased, and input intensive. Indirect subsidies are one of the main reason towards such a state.
  • Farmers do not feel the incentive to save resources such as over exploitation of ground water, indiscriminate use of fertilizers, etc. are resulting due to it.
  • Indirect subsidies are not successful in reaching the target beneficiaries because of several lacunae in identification, corruption, lobbying by rich farmers etc.
  • It is liable for misuse for gaining political mileage especially during time of elections.

Issues with agriculture subsidy:

  • Heavy Fiscal Burden: In 2017-18, the annual central government subsidies to farmers was of the order of Rs. 120,500 crores. In the same period, the annual State government subsidies are almost of an equal amount of Rs. 115,500 crores.
  • Excessive use of natural resources: The policy design and implementation is such that it is skewed towards the excessive use of subsidized resources. For instance, power subsidy has led to overuse of ground water which has further resulted into dramatic fall in ground water levels.
  • Environmental Effects and decline in Soil Fertility: The Parliamentary Standing Committee on Agriculture in their 29th Report (16th Lok Sabha) observed that there is an imbalance in fertilizer use in terms of NPK. This harms the soil fertility, biodiversity, and also leads to eutrophication.
  • No benefits to the targeted groups: Fertilizer subsidies are generally cornered by the manufacturers and the rich farmers of Punjab, Haryana and Western UP.

Way forward:

  • A better targeting of subsidies with the usage of JAM (JanDhan – AADHAAR- Mobile Number) trinity can reduce the fiscal burden.
  • Separate agriculture feeder network (under Deen Dayal Upadhyay Gram Jyoti Yojna). This separate agriculture feeder will supply electricity only for a few hours a day. The process has shown positive results in arresting decline of ground water levels in Gujarat.
  • Creating awareness among farmers, increasing penetration of soil Student Notes: health card scheme, promoting organic farming and innovative products like neem coated urea will go a long way to check the issue.
  • Nutrient based subsidy and Neem-Coated Urea has been introduced by Government. There should be Direct Benefit Transfer of fertilizer subsidy through Aadhaar authentication, organic farming should be encouraged and there should be phased increase in the price of urea.

Editorial: Privacy and surveillance

Context:

  • Following an exodus of its users from its messaging service, WhatsApp, to apps such as Signal and Telegram, which promise more privacy options, the Facebook-owned service might have been forced to postpone the date for users to accept its new privacy policy terms to May 15.

Relevance:

  • GS Paper 2: Article 21, Right to privacy

Mains Questions:

  1. Data localization is not the only approach towards protecting data privacy. Discuss. 15 Marks

Dimensions of the Article:

  • What is data localization?
  • Why Data Localization is needed?
  • Challenges in Data Localization
  • Data localization in other countries:
  • Way Forward:

What is data localization?

Data localization is the practice of storing data on any device that is physically present within the borders of the country where the data is generated. As of now, most of these data are stored, in a cloud, outside India. Localization mandates that companies collecting critical data about consumers must store and process them within the borders of the country.

Why Data Localization is needed?

  • Digital data in India was around 40,000 petabytes in 2010; it is likely to shoot up to 2.3 million petabytes by 2020 — twice as fast as the global rate. If India houses all this data, it will become the second largest investor in the data centre market and the fifth largest data centre market by 2050.
  • “Data is the new oil” provides a backbone to much of the localisation drive. In the home of the largest open Internet market in the world, companies like PhonePe claim that national wealth creation relies on in-house data storage.
  • The e-commerce policy took on a similar stance, championing domestic innovation, and the data protection report also mentioned harnessing India’s digital economy through data localisation.
  • India has the second-highest fintech adoption rate in the world, creating multiple opportunities for payments companies — both national and international. This also translates into a growing volume of user and transaction data, coupled with the challenges of data breach and fraud.
  • The Indian government is of the view that if data is stored outside the sovereign boundaries of the country, the RBI’s ability to “monitor payments activity” is curtailed.
  • India’s law enforcement agencies security agencies are backing the RBI’s push for data localisation owing to difficulties in carrying out cross-border probes.

Challenges in Data Localisation

  • Misuse of Data: Critics not only caution against state misuse and surveillance of personal data, but also argue that security and government access is not achieved by localisation. Even if the data is stored in the country, the encryption keys may still remain out of the reach of national agencies.
  • Cyber Security: Businesses in India were most at risk to cyber security attacks. This can put data of citizens in danger.
  • Increase of conflicts: This may be perceived as a protectionist policy which may lead to other countries following suit and increased conflict over data sharing.
  • Access to data: Technology experts argues that the physical location of data is irrelevant. Data can be accessed from a server in Bengaluru or Boston just as easily. In fact, having a mirror of data in India may actually increase the cost of operation and compliance.
  • Cloud Computing Softwares: Cloud computing softwares have taken advantage of the economies of scale and an infrastructural architecture across the world. Thus, when there is a threat presumed in one part of the world, the algorithm would move the data to another location or even in multiple locations. However, this flexibility may be hampered due to data localization.

Data localization in other countries:

  • Russia: It has the most restrictive regulation for data flow with strict localisation and high penalties.
  • China: It mandates localisation for all “important data” held by “critical information infrastructure” and any cross border personal data transfer must undergo a security assessment.
  • US: It leaves regulation up to the state and sector. Earlier this year, it signed the Clarifying Lawful Overseas Use of Data Act (CLOUD Act) which established data sharing with certain countries.
  • EU: The European Union’s General Data Protection Regulation doesn’t have a specific data regulation rule, only stressing that cross-border data movement can happen if the other country has stringent rules to secure information.

Way Forward:

  • Data localisation rules are not motivated by a single national or private interest. Various simultaneous factors contribute to national strategies on restricting cross-border data flows or establishing controls for transfer of information.
  • Technological sovereignty goes beyond the idea of economic competition and builds on the idea that advancements in the technological capacity of one nation threaten the national sovereignty of another. This stems from the growing perception that nations that are able to localise technological development and control data flows will fare better in the Internet governance order.
  • Data localisation or restrictions on movement of data are primarily understood in terms of their economic value or as a geopolitical strategy that helps nations consolidating information security and sovereignty online. However, it is equally important to think about the consequences of such policies on democracy and human rights particularly in this time of growing public debate about the use and commercialisation of individual data.
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