Question

”Farm subsidies put a huge burden on the government finances, but are necessary for poor and marginal farmers.”
Justify the given statement with valid explanation.

Answer 1

Farm Subsidies: A Necessary Support with Financial Challenges

Farm subsidies are an important part of agricultural policy, particularly for poor and marginal farmers, but they do come with significant financial costs. The statement is valid for the following reasons:

1. Need for Farm Subsidies:

• Support for Marginal Farmers:
  Farm subsidies provide essential financial support to poor farmers to help them purchase inputs like seeds, fertilizers, and irrigation. Without subsidies, maintaining productivity would be difficult for these farmers.
• Stabilizing Prices:
  Subsidies help stabilize food prices, keeping basic food affordable, especially in rural areas. They also protect farmers from the adverse effects of market price fluctuations.
• Encouraging Agricultural Growth:
  Subsidies motivate farmers to increase productivity, adopt modern technology, and invest in improved farming methods, contributing to food security and sectoral growth.

2. Burden on Government Finances:

• High Fiscal Costs:
  Subsidies place a heavy financial burden on the government. In countries like India, significant public funds are required to maintain subsidies, diverting resources from critical areas like education, healthcare, or infrastructure.
• Inefficiencies and Misallocation:
  Subsidies may lead to the overuse of water, fertilizers, and electricity, creating environmental problems and promoting unsustainable farming practices.
• Fiscal Deficits:
  Excessive subsidy spending can result in fiscal deficits, reducing the government’s capacity to fund other services and potentially increasing public debt.

Conclusion: While farm subsidies are essential for supporting poor farmers and ensuring food security, they carry significant financial implications. Careful planning and targeting are needed to balance their benefits with fiscal sustainability.