Agricultural Reforms in India

From Japan to the United States (US), and Europe to China, agriculture survives on huge government subsidies. This is not only due to the history of state support but also due to peculiarities of the sector. It might not be wrong to claim that high-tech and high-productivity agriculture cannot sustain without state support (Nanda 2009). Most developed countries of the world and some developing countries provide substantial agricultural subsidy, which has been a bone of contention between India and many developed countries at the World Trade Organization (Nanda 2017).

According to the Organisation for Economic Co-operation and Development (OECD) database, while OECD and European countries provided production subsidy in the range between 15% and 20%, India’s production subsidy was consistently in the negative (Figure 1, p 26). Countries like Norway, Japan and South Korea gave subsidy in the range of 40%–60%. Within the developed world, one country that provides relatively low subsidy (between 1% and 3%) is Australia, which has a cereal productivity level lower than that of India (Figure 2, p 26). Within India, two states that receive subsidy and major shares of procurement support have much higher productivity of foodgrains compared to other states and the national average (Figure 3, p 27). Among the developing countries, China has been able to raise its productivity substantially. It also provides substantial subsidy to agriculture. While agricultural productivity in India is quite low compared to the developed world, it is quite comparable in the case of Punjab in India. This indicates that it is difficult to achieve and sustain high agricultural productivity without state support.