Aggregate Public Support to Indian Agriculture

Abstract

Agricultural subsidies, public investment and income transfer are the three main instruments of India’s farm support policy. This paper examines the aggregate level of public policy support to Indian agriculture for the period from 1995-96 to 2020-21, by putting together different support measures extended by central and state governments and classifying those under three different categories, namely, subsidies, public investment and green box support. The findings reveal that despite some moderation from the peak level achieved during 2008-09, the aggregate support to Indian agriculture continues to remain sizeable at 22.4 per cent of agriculture GVA in 2020-21. In the aftermath of the global financial crisis (GFC) in 2008-09, which is also coincident with the global food crisis, input subsidy declined sharply, whereas the decline in investment was more gradual. Furthermore, there is a distinct shift in the composition, away from input subsidies and in favour of green box support, which includes direct transfer to supplement farmers' income. Using multi dimension index method, the effective aggregate support index, constructed after assigning different weights to the three components as per their impact on agricultural growth, highlights that effective public support to agriculture, which was low in the late 1990s improved substantially till 2008-09 and moderated thereafter. The index values suggest that there is scope for further improvement in policy support for Indian agriculture with higher emphasis on public investment.