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What are the direct and indirect subsidies provided to farm sector in India? Discuss the issues raised by the World Trade Organization (WTO) in relation to agricultural subsidies.

Introduction:
Agricultural subsidies have long been a cornerstone of India’s agrarian policy, assisting farmers in increasing productivity, ensuring food security, and stabilizing income levels. These subsidies can be classified into direct and indirect subsidies.

Direct Subsidies:

  1. Pradhan Mantri Kisan Samman Nidhi (PM-KISAN): A cash transfer scheme providing ₹6,000 annually in three equal installments directly to the bank accounts of small and marginal farmers.
  2. Crop Insurance: The Pradhan Mantri Fasal Bima Yojana (PMFBY) provides insurance cover for crops against natural calamities, pests, and diseases at subsidized premiums.
  3. Direct Benefit Transfers (DBT): Subsidies transferred directly to farmers’ bank accounts for fertilizers.

Indirect Subsidies:

  1. Fertilizers: Subsidized rates of fertilizers, such as Urea, DAP, and MOP, provided to farmers.
  2. Irrigation: Government investments in large-scale projects like dams and canals, reducing the water procurement cost for farmers.
  3. Electricity: Highly subsidized or free electricity provided to farmers for irrigation.
  4. MSP (Minimum Support Price): A form of indirect subsidy where the government guarantees a certain price for specific crops, procuring them directly if market prices fall below the MSP.
  5. Credit: Concessional interest rates on agricultural loans provided by banks under priority sector lending.

WTO’s Concerns on Agricultural Subsidies:

  1. Market Distortion: WTO argues that these subsidies can distort international trade, leading to an uneven playing field by giving Indian agricultural exports an unfair advantage.
  2. Aggregate Measurement of Support (AMS): WTO mandates that subsidies should not exceed 10% of the total value of agricultural production. There are concerns that India’s MSP-based procurement might breach this limit.
  3. Public Stockholding: WTO has raised issues regarding India’s procurement for public stockholding, saying it might distort trade and affect food security in other developing nations.
  4. Export Subsidies: India’s incentives to agricultural exports, like exemptions from certain duties and taxes, have been flagged by WTO as potential trade distorters.
  5. Environmental Concerns: There are arguments that certain subsidies, like those for water and electricity, might encourage overuse, leading to environmental issues which can impact global ecological balance.

Conclusion:
While subsidies play an integral role in supporting India’s vast agrarian landscape, aligning them with global trade norms is essential. A balanced approach, considering both the welfare of Indian farmers and international trade commitments, is crucial for sustainable agricultural growth.


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