Current World Environment

Introduction

Agriculture is the backbone of India's economy, providing livelihoods to a majority of the population. More than 60 percent of India's population earns a living from agriculture, as it provides employment to around 58 percent of people (GOI). Given agriculture's immense contribution, the sector requires special policy attention and support to sustain growth. In recent years, India's focus has shifted more towards industrial advancement, which has led to a decline in agriculture's contribution to GDP. Therefore, revitalizing the agricultural sector’s growth is critical (Kumar, 2020). The government plays a vital role in developing the agricultural sector by providing various kinds of financial and technical support. These efforts aim to ensure food self-sufficiency, provide technical assistance to small-scale producers for adopting modern technologies, maintain price stability, boost employment generation, and increase farmer incomes. The government forms various policies to support agriculture, including input subsidies (fertilizer, electricity, seeds) to lower costs, minimum support price (MSP) mechanisms, concessional trade policies for import-export of farm products, and direct income transfers. Overall, agricultural subsidies refer to financial transfers given by the government to farmers and agribusinesses with the aim of enhancing farm incomes (Salunkhe & Deshmukh, 2012).

According to the WTO, subsidies represent financial contributions by the government or public entities that confer benefits to the general public. Subsidies can provide economic benefits to the agriculture sector. Input subsidies help provide essential inputs like fertilizers, electricity, and water to farmers at affordable rates. Such input subsidies form a significant portion of overall agricultural subsidies. Subsidies may also take the form of direct cash transfers to producers or tax rebates on the import and export of farm products. As agricultural subsidy is most debatable issue in the world. Many researchers have presented their thought on the agricultural subsidies on the national as well as international level through research papers and articles. Swaminathan (1975) highlight the role of subsides in promoting the usage of high –yielding crop varieties and modern farming practices, which led to increased food production. This period marked the beginning of the government’s intervention in agricultural markets through price support, input subsidies, and credit facilities. Gulati et al. (2005) and Kumar and Joshi (2018) have examined the relationship between agricultural subsidies and productivity. While some argue that subsidies have played a crucial role in increasing crop yields and food security. Others have raised concerns about their efficiency and the unintended consequences, such as soil degradation and excessive water use. Mathur et al. (2006) looked at the patterns in the rise in agricultural output in India and the factors influencing that expansion. The results of the study showed growth in Indian agriculture sector has a declining trend during the study period. Authors suggested that for the future growth of the agricultural sector government need to increase its expenditure by 10 to 15 percent and provides basic infrastructure to the rural area. Kaur and Sharma (2012) have examined the agricultural subsidy in India during the time period 1980-81 to 2008-09. They consider input subsidy like fertilizer, seed, electricity, irrigation and machinery subsidy. The result showed increasing trends in all these subsidies during the study period. There is a need to form rational policy for to improve the efficiency of agricultural subsidy. Salunkhe and Deshmush (2012) tried to seek insight about the agricultural subsidies and their distribution in India. This research was conducted using secondary data. The conclusion of the study showed that government of India provides many types of subsidies to the agriculture. It also showed that the trends of the investment in agriculture has been increased but at the same time total cultivated area also increased. Authors suggested that policy maker should focus more on the agriculture sector so that growth for the same can be possible. Gautam (2015) review the argument for and against the agricultural subsidy. Effectiveness of the program depend on the three issues, targeting the needed people other than who want subsidies, second one is it should be effective by the insuring positive impact and reducing wastage. Third on is, it should be sustainable by reduce environmental footprint. Lovelace and Diamond (2017) discussed about the supply management and subsidy in agriculture. They provide some insight about the US farm bill through the Polonyian and Food regime Political-economic theories. In the conclusion authors revealed that there were some problems associated with the supply management, farm policy and over production. To deal with overproduction, an efficient supply management policy is necessary. It was recommended that a cross border alliance may aid in the export of food commodity and that a policy for coordination be put forward. Farmers need to understand the supply management in agriculture. Anand and Sha (2020) investigated the importance of the agricultural subsidies in India. The factors that studied were agricultural finance, irrigation, production, infrastructure and technology. The study shows that the agriculture subsidy was helpful for the growth of the agriculture sector but the some mismanagement, corruption and hurdle in the distribution system make it difficult to reach the benefit to the real beneficiary. Kumar (2020) examined the impact of agricultural subsidies on the agriculture sector in India. It was a review based study. The conclusion of the study revealed that various study recommended the withdrawal of agricultural subsidies because that fund can be used in other development activities. But it also creates fear of reduction in agricultural production and income of the farmers. Author suggested that government should frame such policy which makes distribution of agricultural subsidies more transparent and policy should be farmers friendly. It will helpful in the increase of production and income of farmers.

There are many researchers, those tried to explain various aspects of the agricultural subsidy and how it is evolve with the time. It can be extract that agriculture is important part for the government of India as it can stimulate the economic condition and political viability of the country.  Examining the budgetary allocations, expenditure related to agricultural subsidies and the impact they have on environment is the goal of current study. 

Methodology

Based on the secondary data obtained from various government agencies and research publications, including Agricultural Statistics at a Glance, Demand for Grants, Fertilizer association of India, Central Electricity Authority and Central Water Commission, the present study was carried out. The effect of agricultural subsidy on environment has been driven from the view point of different researchers. 

Agricultural Status of India

Focus of the study is to know the state of agriculture sector through the subsidy provided by the central and state. Agriculture was the top in the list to contribute in the Indian GDP. Now agriculture is third largest contributor to the Indian GDP, with 20.19% share, following to service sector (53.89%) and Industry sector (25.92%). Agriculture is important sector of India, employing a significant portion of the population and contributing to the GDP (Arun, 2017). However, it faces challenges such as food consumption and population growth, which demand increased output (Balkrishna et al., 2021). Sustainable agriculture is proposed as a solution to these challenges. The sector also needs to be strengthened through education, reforms, and development, particularly for small and marginal farmers (Amutha, 2013). The agricultural sector in India faces major challenges that hinder its growth and development. A key issue is the lack of investments in research, infrastructure, and technology adoption (Kumar, 2019). This is a major obstacle to achieving the aim of doubling farmer incomes by 2022, as envisioned by the current government. To support the sector, the Indian government provides financial assistance through various agricultural schemes and programs. However, the shift from traditional low-input farming to more intensive inorganic practices has not necessarily translated into sustained improvements in farmer livelihoods (Parsad et al., 2020). In the 2021-22 budget, the agricultural ministry received a 14% increase in allocation over 2019-20 levels. Key budget proposals for agriculture include an agriculture infrastructure cess on certain imported goods to finance infrastructure development, integration of over 1000 Agricultural Produce Market Committees (APMCs) into the electronic National Agriculture Market (e-NAM) platform, and expansion of the Operation Greens scheme which provides subsidies for storage and transportation of perishable commodities, now covering 22 products to support value addition and exports.

Importance of subsidy in SDGs 

Subsidies play a complex role in achieving the Sustainable Development Goals (SDGs). While they can support the transition to sustainability, their impact can be negative, particularly in the case of financial subsidies for self-help groups (Pati, 2009). In the agricultural sector, subsidies can be both beneficial and harmful to the environment, and their effectiveness depends on their design and implementation (Heyl et al., 2022). Public service, including the provision of subsidies, is crucial for achieving the SDGs (Jackson, 2020). However, the scope and limits of subsidies must be carefully considered, as they can be a powerful tool for income redistribution and addressing market failures (Goldstein, 2009). India has a complex system of agricultural subsidies that aims to achieve food security and support farmer livelihoods, but has mixed results in aligning with the SDGs. India's fertilizer, power, irrigation, and procurement subsidies total over $25 billion annually (Gulati and Juneja, 2019). On hunger and food security (SDG 2), India's input subsidies have helped boost production and self-sufficiency in staple grains. However, subsidies are not sufficiently targeted, allowing disproportionate gains for larger farmers (Krishnapriya, 2021). Persistent malnutrition also underscores the need for more nutrition-sensitive agriculture. On reducing inequality (SDG 10), 89% of agricultural subsidies go to medium and large farmers, while smallholders receive only 11%, exacerbating inequality (Gulati et al., 2021). Reforms to target marginalized farmers could better align with SDG 10. On sustainability (SDGs 12, 15), current subsidies incentivize chemical input overuse, water depletion, and biodiversity loss (Nandi et al., 2019). Increased subsidies for agroecology, organic practices, and water conservation could mitigate these impacts. Trade-offs exist between subsidies and investments in health, education, and infrastructure (SDGs 3, 4, 9). Reducing untargeted subsidies could free up fiscal resources for these other priorities (Krishnapriya, 2021). Experts recommend refocusing India's agricultural subsidies on sustainability and equity through better targeting, incentives for regenerative practices, and support for women and marginalized farmer groups (Gulati et al., 2021; Nandi et al., 2019).

Investment in Agriculture Sector

Capital investment in the agriculture sector shows increasing trends. it was Rs. 273870 crore in 2011-12 to reaches at Rs. 557570 crore in 2020-21. This increase depicts the government intention to insure growth in agriculture and sustainability in agriculture sector. Gross Capital Formation (GCF) is the indicator for the capital investment in relation to the Gross Domestic Product (GDP).                    

Figure 1: Gross Capital? Formation (GCF) in Agriculture & Allied sector at Current Prices.   Click here to view Figure

Source: Agricultural Statistics at a Glance, 2021

The above figure displays the percentage of GCF in the agriculture and related sectors. The percentage of the agriculture and related sectors has decreased from 8.5 percent in 2011–2012 to 7.4 percent in 2019–2020, notwithstanding an increase in capital investment. It increases to a peak of 9.7 percent in 2020–2021. 

Table 1: Fund allocated by the Ministry of agriculture to the departments

Source: Demand for Grants 2023-24 Analysis.

As shown in table 1, fund distributed in different department. Agriculture, cooperation and Farmers’ Welfare received around 94 % of total fund and Agricultural Research and Education received 6 %. Fund allocated in 2021-22 budget, is 14% more than the fund allocated in 2019-20 budget for the Department of Agriculture, Cooperation and Farmers’ Welfare.  Fund for the Agricultural Research and Education this increase is 6 %. This shows that government is looking forward to boost the agriculture through the increased (14%) financial assistance.

Table 2: Allocation of funds under Department of Agriculture, cooperation and Farmers’ Welfare (Rs. crore)

*for procurement of pulses and oilseeds

Sources: Demand for Grants 2022-23 Analysis.

Government provides financial support to the agricultural sector through various schemes. These schemes are beneficial for the farmers. The purpose of the financial support is to improve productivity and increase the income of farmers. As table 2 shows that around 83% of the department has been proposed to spend on three income support schemes. These programs included the PM-KISAN (55%), Pradhan Mantri Fasal Bima Yojana (13%), and interest subsidies on short-term loans to farmers (16%). There is a downward tendency in farm spending. However, programs like the Green Revolution/Rashtriya Krishi Vikas Yojana (98%), the Agriculture Infrastructure Fund (150%), and the Formation and Promotion of 10,000 Farmer Producer Organizations (100%), show a considerable increase. The Pradhan Mantri Fasal Bima Yojana (-3%) and the Market Intervention Scheme and Price Support Scheme (MIS-PSS) (-58%), among other programs, saw a decrease in government spending. The overall funding allotted to the Department of Agriculture, cooperation, and Farmers' Welfare has increased by 4%, according to these figures. 

Table 3: Allocation of funds in the Department of Agricultural Research and Education (Rs. crore)       

Sources: Demand for Grants 2022-23 Analysis

The funds allotted to the Department of Agricultural Research and Education are displayed in Table 3. The Indian Council of Agricultural Research (ICAR) will receive around 73% of the department's overall funding in 2024–25, with the remaining 14% going to crop science. However, the funding allotted for agricultural education has increased by 16%. The government will raise funding for the central agricultural institutions by 8% in 2024–2025. The ICAR head office head receives the highest allocation of funds (73%). 

Table 4. Distribution of subsidies & Gross Cropped Area in India (2000-2021)

Sources: Fertilizer association of India, various issues

Ministry of Agriculture and Farmers Welfare, GOI, PIB, 

Agricultural Statistics at a Glance, 2021,

Central Electricity Authority, GOI, various years 

Central Water Commission, 2021

Note: Percentages are shown in parentheses

The above table shows that total subsidies increases year by year. The amount was Rs. 55461.71 crore in the year 2000-01, that reached to 251045.07 crore in the year 2020-21. In the context of Gross Cropped area also shows increasing trends, it was 185.34 million hectares in the year 2000-01 and 196.50 million hectares in 2020-21. As the gross cropped area increase but the population of India also increased (Salunkhe and Deshmush, 2012). The data shows there is great change in the share of three subsidies in total subsidy. The share of the fertilizer subsidy increase from 24.88% in 2000-01 to 53.35% in the year 2020-21 and canal irrigation subsidy share reduced to 26.53% to 6.51% in the year 2000-01 and 2020-21 respectively. For the year 2023-24, irrigation subsidy shows increase in its share in total subsidy by 9 percent. 

 Environmental impact of Agricultural Subsidies

Like many other countries, agricultural subsidies in India have both Positive and negative environmental impacts. These impacts can vary depending on the type of subsidy, how it implemented and distributed. There are some key environmental impacts of agricultural subsidies in India:

Increased food production

Subsidies can help increase food production, ensuring food security for the growing population like India. This can reduce the pressure on natural ecosystems caused by land conversion for agriculture (Kumar, 2022). Banga (2016) found that Green Box subsidies can increase agricultural productivity, production, and trade. However, Kumbhakar (2010) reported a negative effect of subsidies on farm productivity but a positive influence on technical efficiency.

Technology adoption

Some subsidies promote the adoption of modern and sustainable agricultural practices, such as the use of high-yield crop varieties and efficient irrigation systems. These practices can lead to higher agricultural productivity with lower resource use (Potter and Tilzey, 2007; Fan, 2008).

Livelihood Support

By providing financial support to farmers, subsidies can help maintain rural livelihood, reducing migration to urban areas and the associated urbanization and environmental pressures (Salunkhe, 2016).  Dorward (2015) notes that while subsidies can have positive impacts on food security and poverty reduction, they can also have negative effects.

Overuse of resources

subsidies like fertilizers and water can lead to their overuse, which can result in soil degradation, water pollution and loss of biodiversity. Excessive use of chemical fertilizer can lead to nutrient runoff and soil contamination (Singh, 2000).

Monoculture and Biodiversity Loss

Subsidies that encourage the cultivation of a few high-yield crop varieties can lead to monoculture farming, which is detrimental to biodiversity. It reduces the diversity of crops, making agriculture more susceptible to pests and diseases (Singh, 2000).

Water Depletion

Subsidized irrigation can lead to excessive groundwater pumping, depleting aquifers and causing long-term water scarcity. This is a significant concern in regions with heavy agricultural subsidies (Badiani and Jessoe,2019). Electricity subsidy is responsible for the increased dependence on the ground water usage and it will create a serious problem in future (Badiani et al., 2012).

Greenhouse Gas Emission

Intensive agricultural practices supported by subsidies can contribute to greenhouse gas emissions, primarily through the use of fossil fuels for machinery and release of methane from livestock (Baig et al., 2023).

Waste and pollution

subsidies can lead to wasteful practices, such as overproduction of certain crops that are then discarded, contributing to food waste. Additionally, the improper disposal of agricultural waste, including plastics and chemicals, can cause pollution (Demirbas, 2009). With availability of input on subsidized price, it encourages the more usage of inputs which lead to the wastage of input and also increase soil pollution (Gautam, 2015).  Top o

Climate Change

Agriculture makes a substantial contribution to greenhouse gas emissions. Particularly worrisome are emissions of nitrous oxide from fertilizer use and methane from cattle. Sustainable farming practices promoted through subsidies, such as agro-forestry, organic farming, and low-emission livestock management, can help reduce these emissions and contribute to climate change mitigation (Baig et al., 2023 and Mowbray). Gautam (2015) indicate that use of subsidized fertilizer create nutrient imbalance and it will reduce the productivity by 25 percent.  

Table 5: Contribution by Different Researcher showing Impact of Agricultural Subsidies on Environment

Conclusion

Despite India's growing investments and extensive arable land, the agricultural sector has shown slow growth rates. While agricultural subsidies have increased, so has the gross cropped area, diluting benefits. On the positive side, subsidies can ensure food security, stabilize supply, and support farmer livelihoods. They can also incentivize sustainable practices and environmental conservation. However, subsidies may distort markets, encourage overproduction of certain crops, and stifle innovation. Therefore, the impact of subsidies depends largely on design, implementation, and objectives. Policymakers must weigh social, economic and environmental trade-offs to support farmers while promoting fiscal prudence and sustainability. Moving forward, subsidy programs need better targeting to reach intended beneficiaries and not misused by undeserving groups. There is a need to evaluate subsidy schemes to strengthen positive impacts like adoption of regenerative agriculture, while mitigating negative effects like ecological damage. Impact assessments and course corrections must become integral to subsidy policy. Additionally, a nuanced mix of investments, research, and market-linked incentives is required rather than subsidies alone, to resuscitate agricultural growth. Realigning subsidies with sustainability and farmer welfare goals while harnessing technology and markets can catalyze the transformation of Indian agriculture. In summary, re-launching India’s agricultural policy requires reorienting the subsidy regime towards balanced outcomes, integrating it with wider interventions, and instituting regular impact reviews to maximize benefits for farmers, consumers and the environment.

Acknowledgement

The authors would like to thank Department of Management Studies of Deenbandhu Chhotu Ram University of Science & Technology for granting the research work.

Funding Source

The authors received no financial support for the research, authorship, and/or publication of this article.

Conflict of Interest

The authors declare no conflict of interest.

Authors’ Contribution

First author supervise overall manuscript. The second author compiled all the data and arranges the manuscript.

Data Availability Statement

All the data is available on the government websites.

Ethics Approval Statement

Not applicable

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