Supporting Indian Farms the Smart Way

Abstract

The main policy instruments of supporting Indian farms remain that of subsidising key farm inputs (such as fertilisers, power for irrigation, canal waters, agri-credit and crop insurance) on one hand, and minimum support prices (MSP) for major (23) crops, on the other. But the way MSP regime has worked, and the way trade policy has intervened through myriad controls ranging from minimum export prices to outright bans on exports, the combined effect of input subsidies and output pricing regime, captured through PSEs (producer support estimates) has been negative, a sort of implicit tax on farmers. PSE was to the tune of (-)14.4 percent of the value of gross farm receipts for the period 2000-01 to 2016-17, and minus (-) 6.4 percent for more recent triennium average of 2014-15 to 2016-17 (OECDICRIER 2018).