Separating the wheat from the agri-policy chaff -Biswajit Dhar

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published Published on Dec 31, 2020   modified Modified on Dec 31, 2020

-The Hindu

In the farm laws debate, the focus should be on the exchequer-farm subsidies issue and the spending on farm subsidies

In the on-going debates around the three new pieces of agricultural legislation and the farmers’ demand for continuation of minimum support prices (MSP), questions have often been raised whether the government should be using the taxpayers’ money to provide subsidies to the farming community in this country. However, logically, two further questions must be asked, but none of them has been, in any significant manner. First, why have successive governments used the exchequer to provide farm subsidies. And second, how large is India’s spending on farm subsidies as compared to those of other countries having substantial interests in agriculture?

Adverse terms of trade

It should be obvious to any keen observer of the Indian economy that the country’s agriculture, which also supports the remaining rural workforce, was, forever, living beyond its means. In 1950-51, agriculture’s share in the country’s GDP was 45%, the share of the workforce dependent on the sector was close to 70%. Seven decades later, agriculture’s share in GDP is below 16%, but almost 50% of the country’s workforce depends on this sector. The squeeze on the agricultural sector becomes even more evident from its terms of trade vis-à-vis the non-agricultural sectors. Agriculture has been facing adverse terms of trade over extended periods since the 1980s, and even during the phases when the terms of trade have moved in its favour, for instance in the 1990s and again since 2012-13, there was no distinct upward trend. A more telling commentary in this regard is that since the middle of the 2000s, farming communities have almost consistently faced adverse terms of trade vis-à-vis non-farmers.

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The Hindu, 31 December, 2020, https://www.thehindu.com/opinion/lead/separating-the-wheat-from-the-agri-policy-chaff/article33457074.ece?homepage=true


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