According to some economists, what is the effect of fertiliser and pesticide subsidies?
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → They result in overuse of resources, which can be harmful to the environment.
A subsidy keeps the price of an input low. The low price hides how scarce the input is, so farmers use more of it than needed. Too much fertiliser and pesticide can harm the environment.
Option (1) They result in overuse of resources, which can be harmful to the environment. — Correct. Subsidies give an incentive for wasteful use of resources.
Option (2) They make farmers use fertiliser and pesticide with greater care. — Incorrect. Care in use comes with a higher price, not a subsidised one.
Option (3) They lead farmers to choose crops suited to the water supply of their region. — Incorrect. Farmers choose crops suited to the region when water is priced to reflect scarcity.
Option (4) They allow the price of fertiliser to show how scarce fertiliser is. — Incorrect. Subsidies do not allow prices to indicate the supply of a good.
NCERT (2026-27): “Box 2.6: Prices as Signals … Some economists point out that subsidies do not allow prices to indicate the supply of a good. When electricity and water are provided at a subsidised rate or free, they will be used wastefully without any concern for their scarcity. Farmers will cultivate water intensive crops if water is supplied free, although the water resources in that region may be scarce and such crops will further deplete the already scarce resources. If water is priced to reflect scarcity, farmers will cultivate crops suitable to the region. Fertiliser and pesticide subsidies result in overuse of resources which can be harmful to the environment. Subsidies provide an incentive for wasteful use of resources. …” |