Consider the following statements about subsidies to Indian farmers:
(A) Supporters of subsidies argue that farming in India is no longer a risky business.
(B) Any new technology is seen as risky by farmers, so subsidies were needed to make them test it.
(C) Some economists believe subsidies should be phased out once the technology is profitable and widely adopted.
(D) Some economists say fertiliser and pesticide subsidies result in underuse of resources.
(E) Supporters argue that eliminating subsidies would violate the goal of equity.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → (B), (C) and (E) only
(A) Supporters of subsidies argue that farming in India is no longer a risky business. — Incorrect. Supporters say farming continues to be a risky business.
(B) Any new technology is seen as risky by farmers, so subsidies were needed to make them test it. — Correct. Subsidies gave farmers the incentive to adopt HYV technology.
(C) Some economists believe subsidies should be phased out once the technology is profitable and widely adopted. — Correct. By then their purpose has been served.
(D) Some economists say fertiliser and pesticide subsidies result in underuse of resources. — Incorrect. They result in overuse, which can harm the environment.
(E) Supporters argue that eliminating subsidies would violate the goal of equity. — Correct. Poor farmers could not afford inputs, so inequality would rise.
NCERT (2026-27): “2.3 Agriculture … The Debate Over Subsidies: The economic justification of subsidies in agriculture is, at present, a hotly debated question. It is generally agreed that it was necessary to use subsidies to provide an incentive for adoption of the new HYV technology by farmers in general and small farmers in particular. Any new technology will be looked upon as being risky by farmers. Subsidies were, therefore, needed to encourage farmers to test the new technology. Some economists believe that once the technology is found profitable and is widely adopted, subsidies should be phased out since their purpose has been served. Further, subsidies are meant to benefit the farmers but a substantial amount of fertiliser subsidy also benefits the fertiliser industry; and among farmers, the subsidy largely benefits the farmers in the more prosperous regions. Therefore, it is argued that there is no case for continuing with fertiliser subsidies; it does not benefit the target group and it is a huge burden on the government’s finances (see also Box 2.6). On the other hand, some believe that the government should continue with agricultural subsidies because farming in India continues to be a risky business. Most farmers are very poor and they will not be able to afford the required inputs without subsidies. Eliminating subsidies will increase the inequality between rich and poor farmers and violate the goal of equity. …” “Box 2.6: Prices as Signals … Fertiliser and pesticide subsidies result in overuse of resources which can be harmful to the environment. …” |