May , 2019
Rationalisation of agricultural input subsidy is required
16:58 pm

Kishore Kumar Biswas

Indian economy is to a large extent an agrarian economy. Agriculture’s contribution to the GDP of India has been falling from the 1950s. Price stability of the economy depends much on the performance of agriculture. In this article the role of inputs used in agriculture and its performance is discussed.

It is to be noted here that Tamma Koti Reddy and Madhumita Dutta of Department of Economics, IBS, Hyderabad, have pointed out some of the major findings on this matter. Their article, “Impact of Agricultural Inputs on Agricultural GDP in Indian Economy” is noteworthy. The main inputs of agriculture have been fertilizers, net irrigated area, pesticides, electricity, rainfall and usage of HYV seeds, etc.


The use of fertilisers in Indian agriculture has received a boost from the late 1960s.

This was related mainly with the use of high-Yielding Varieties Programme. The consumption of fertilisers increased from 66,000 tonnes in 1952-1953 to 125.46 lakh tones in 1990-1991 and in 2014-2015, stood at 255.76 lakh tonnes. India emerged as the second largest consumer of fertilisers after China. In a few years, problem of imbalanced nutrient use came up. Organic fertilisers were gradually neglected. The average fertiliser consumption in India increased from 69.84 kg per hectare in 1991-1992 to 128.08 kg per hectare in 2014-2015.


In the early 1950s, the consumption of pesticides was negligible but in mid 1960s, the use of pesticides increased considerably. The pesticide consumption rose from 24.3 thousand tonnes in 1970-72 to 57.4 thousand tonnes in 2014-2015.


The government of India and many state governments have been investing hugely on major and medium irrigation projects since 1951, but even the well to do beneficiaries of these projects have not been asked to pay for it. The running costs of these projects should be collected from a section of users of these projects.

The researchers have suggested that the government has to regulate the consumption of ground water levels and registering of pump sets should be made compulsory on the part of the farming community. Watershed projects as well as construction of minor irrigation and maintenance of age-old water resources shall be placed in the hands of farming community. Investment on water resource development (the conservation and consolidation of traditional water resources) should receive immediate attention.

Research and development

Government has to expand agricultural research and extension activity and the peasants are to be prepared to face future challenges in a scientific manner. Reviving public sector investment is critical due to its multiplier effect on the overall GCF (Gross Capital Formation) in the sector. It is therefore suggested that there is a need to formulate a long-term perspective plan for rural infrastructure that focuses on infrastructural projects that have the highest total impact and strongest linkages.

Findings about input contribution

Reddy and Dutta evaluated different statistical measures to test the correlation and regression among various inputs use and agricultural outputs. They found that the variables like fertilisers and net irrigated area are not statistically significant.

That means they do not have a significant impact on agricultural GDP during the time period 1980-1981 to 2015-2016. Their study further reveals that the variables like pesticides, electricity, rainfall and seeds are statistically significant. It is inferred that these variables have a significant impact on agricultural GDP during the period. But pesticides and electricity have a negative relationship with agricultural GDP and rainfall and seeds have a positive impact on it.


At present, overuse of inputs is a matter of discussion. The overuse is mainly due to untargeted subsidy in inputs. In this respect one can recall the works of Ashoke Gulati, Infosys Chair professor for agriculture at ICRIER.

In article of Gulati in the book, Supporting Indian Farms the Smart Way, which he co-edited with Marco Ferroni and Yuan Zhou, shows that every rupee spent by the government on fertiliser subsidy adds just 88 paise to the agricultural GDP. While roads add Rs. 1.10 and agriculture R&D adds a Rs. 11.2. Therefore, he suggests rationalising input subsidy in agriculture by the government. The rich farmers get the maximum financial benefits from subsidy regime. The electricity, diesel, and irrigation subsidies also affect the environment in different ways including depleting ground water level.


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