What are the direct and indirect subsidies provided to farm sector in India? Discuss the issues raised by the World Trade Organization (WTO) in relation to agricultural subsidies.
Approach · directive: “what / discuss”
What it asks · List India's direct and indirect farm subsidies, then discuss the WTO's objections and India's own concerns about the Agreement on Agriculture.
The question has 3 parts — answer each
- List the direct subsidies provided to the farm sector in India
- List the indirect subsidies
- Discuss the issues raised by the WTO on agricultural subsidies, and India's position on them
Open with · India's farm support runs through cash transfers, subsidised inputs and price support, all of which the WTO's Agreement on Agriculture measures and limits.
Cover
- Direct: PM-KISAN cash transfer, interest subvention on Kisan Credit Card loans, crop-insurance premium support and direct benefit transfer for some inputs.
- Indirect: fertiliser subsidy, cheap or free farm power, low-priced canal water, subsidised seed and machinery, and MSP-based procurement.
- WTO framework: the Agreement on Agriculture caps trade-distorting domestic support (Amber Box); developing countries may give support up to 10% of the value of production (de minimis).
- Issues raised: India's rice and wheat procurement at MSP can breach the 10% cap because the calculation uses 1986-88 reference prices; others allege trade distortion and export effects.
- India's stand: a permanent solution for public stockholding for food security, protection of MSP, a Special Safeguard Mechanism, and cuts in the larger subsidies of developed countries; the 2013 'Peace Clause' gives interim relief.
- Disputes: sugar-support cases brought by Australia, Brazil and Guatemala; no permanent solution on public stockholding at the 2022 Ministerial Conference.
- Way forward: shift towards decoupled income support (Green Box), rationalise input subsidies and improve efficiency while defending food-security programmes.
Close with · India should reform to make subsidies more efficient while defending, with the developing world, its policy space for food security and small farmers.
Question: UPSC's CS (Main) 2023, GS Paper III — paper ↗. Approach: Minimalist IAS, checked 30 Sept 2026 (how we verify) — UPSC publishes no model answers. ·
Model answer · 258 words (UPSC limit 250) · Minimalist IAS
India supports its farmers through cash transfers, subsidised inputs and price support, all of which the WTO's Agreement on Agriculture measures and limits.
Direct subsidies
- PM-KISAN cash transfers to landholding farmers.
- Interest subvention on Kisan Credit Card loans.
- Premium support under crop insurance.
- Direct benefit transfer for some inputs.
Indirect subsidies
- Fertiliser subsidy paid to manufacturers to keep farm-gate prices low.
- Cheap or free farm power and low-priced canal water.
- Subsidised seed and machinery.
- MSP-based procurement of rice and wheat, which holds prices above the market.
Issues raised at the WTO
- The Agreement on Agriculture caps trade-distorting domestic support (Amber Box); developing countries may give such support up to 10% of the value of production (de minimis).
- India's MSP procurement of rice and wheat can breach the cap because support is calculated against fixed 1986-88 reference prices, which inflates the measured subsidy.
- Members allege that stockholding at administered prices distorts trade and leaks into export markets.
- Disputes: Australia, Brazil and Guatemala challenged India's sugar-support measures.
India's stand
- A permanent solution on public stockholding for food security, protection of MSP, a Special Safeguard Mechanism against import surges, and cuts in the far larger subsidies of developed countries.
- The 2013 'Peace Clause' shields existing programmes from challenge, but the 2022 Ministerial Conference brought no permanent solution.
Way forward
- Shift towards decoupled income support (Green Box), rationalise input subsidies that waste power, water and fertiliser, and improve targeting.
India should reform to make its subsidies efficient while defending, with the developing world, its policy space for food security and small farmers.
Written by Minimalist IAS from facts checked at source (how we verify). UPSC publishes no model answers: compare your structure and coverage with this, then write your own.