A reconfiguration of public policy is needed to replace agricultural subsidies with investment

• A recent proposal published in the print media is presented also as a solution to the current agrarian impasse.
• It argues for the removal of all agricultural subsidies, which range from fertilizer subsidies to those on interest, water and power, and distributing the saving among most of the rural population.
• At its core the agrarian crisis is a case of agricultural activity not yielding enough returns for a section of the farming population.
• This group is facing a declining farm size due to partitioning across generations.
• As this population grows the process of fragmentation of the family farm will continue, with succeeding generations staring at a shrinking pie.
• There are two solutions to this problem.
• One is the obvious one of enabling some members of each household to shift out of farming.
• The other is to reconfigure public expenditure on agriculture to raise the yield of land.
• Actually, the latter would serve both objectives.
• A reconfiguration of public policy is needed to replace agricultural subsidies by capital formation or ‘investment’.
• For three and a half decades now subsidies have progressively replaced public investment for agriculture.
• Having once been less than half that of investment it is now five times as large.
• The impact of public investment on both the yield of land and rural poverty, encompassing a cohort wider than farmers, is far greater than that of fertilizer, electricity, irrigation and interest rate subsidy.
• The agricultural subsidies that are now found wasteful were designed with a purpose.
• The plan was to place agricultural production on a sound footing.
• It envisioned raising the yield of land, which works to generate rising output without inflation and with reasonable profit.
• However, eliminating them merely to implement a universal basic income would be unwise.

The Hindu