Previous Year Question
Consider the following statements about farm subsidies in India.
The input subsidies in India, such as on fertilizers fall under indirect farm subsidies.
Reduction in power and irrigation bills offered to farmers fall under direct farm subsidies.
The agricultural provisions of the World Trade Organization (WTO) though allow direct farm subsidies, prohibit indirect subsidies.
All subsidies provided by the governments in India fall under the indirect subsidies.
Select the correct statements using the code given below:
1 and 2
3 and 4
2 and 3
1 and 4
Correct Answer: D
Detailed Solution
Statement 1 is correct. Input subsidies, such as fertiliser subsidies in India, generally fall under Indirect Agricultural Subsidies. Under these subsidies, the government reduces the cost of goods and services required for agricultural production. For example, fertiliser subsidies are provided through manufacturers or importers, enabling farmers to purchase fertilisers at prescribed subsidised prices.
Statement 2 is incorrect. Concessions in electricity and irrigation bills offered to farmers are also generally classified as Indirect Subsidies, as they reduce the cost of electricity and water used in agricultural production. In contrast, a Direct Subsidy involves financial assistance provided directly to beneficiaries. For example, under Pradhan Mantri Kisan Samman Nidhi (PM-KISAN), eligible farming families receive ₹6,000 annually through direct transfers into their bank accounts.
Statement 3 is incorrect. The World Trade Organization's Agreement on Agriculture (AoA), 1995, does not impose such an absolute distinction between direct and indirect subsidies. It primarily classifies agricultural support into the Amber Box, Blue Box, and Green Box according to its impact on trade. Support meeting the specified Green Box conditions is not subject to spending limits, whereas trade-distorting Amber Box support is subject to restrictions. Article 6.2 of the Agreement also permits agricultural input subsidies for developing countries under specified conditions.
Statement 4 is factually incorrect, although it is treated as correct in the commonly accepted examination answer. Not all agricultural subsidies provided by the Indian government are indirect. The PM-KISAN scheme became operational in 2018 and was formally launched on 24 February 2019, providing direct income support to farmers. In contrast, fertiliser subsidies, concessional electricity, and irrigation facilities are examples of indirect support. Therefore, both types of assistance were already present in India in 2022.