Answer

India’s agricultural subsidies, including support for fertilizers, electricity, and Minimum Support Prices (MSP), aim to improve farm incomes and maintain food security. However, these interventions significantly influence cropping patterns, affect crop diversity, and shape the economic outcomes for small and marginal farmers. 

Impact of Subsidies on Cropping Pattern, Crop Diversity and Economy of Farmers

Cropping Pattern

• Monoculture increase: Subsidies on urea and free electricity have incentivised the rice–wheat cropping pattern, contributing to groundwater depletion and soil degradation.
  Eg. In Punjab, groundwater levels dropped by nearly 10 metres since the 1980s due to reliance on subsidised paddy–wheat cycles.
• Cash crop expansion: Subsidised electricity promotes cultivation of high-return crops like maize, altering regional cropping decisions.
• Increased pulse cultivation: Higher MSPs for pulses have shifted cropping away from cereals, promoting soil health and nutritional security.
  Eg. For the 2025-26 season, Minimum Support Price (MSP) for pulses like tur raised by up to 9% to encourage farmers to plant them over paddy.

 Crop Diversity

• Shrinking biodiversity: Preferential subsidies and procurement have reduced agro-biodiversity by discouraging fruit and vegetable farming.
• Millet revival: Support under the National Millet Mission has promoted nutri-cereals, enhancing dietary and climate resilience.
• Allied diversification: Subsidies for fisheries and micro-irrigation have encouraged farmers to supplement incomes through allied sectors.

Farmers’ Economy

• Income enhancement: Combined input subsidies and MSPs have increased farm profitability.
• Rising indebtedness: Overuse of subsidised resources has escalated production costs and farmer debt.
  Eg. As of 2025, Andhra Pradesh reported the highest agricultural debt in India, with the average farm household owing ₹2.45 lakh.
• Fiscal burden: Rising subsidy expenditure pressures public finances, leading to calls for Direct Benefit Transfer (DBT).

Significance of Crop Insurance, MSP & Food Processing

Crop Insurance

• Risk coverage: The Pradhan Mantri Fasal Bima Yojana (PMFBY) protects farmers against crop loss due to natural calamities.
  Eg. PMFBY paid claims worth ₹1.75 lakh crore to 23.22 crore farmers by February 2025.
• Participation challenges: Issues like delayed payments and awareness gaps hinder enrolment among marginal farmers.
  Eg. A 2023-24 analysis found that farmer enrollment in PMFBY had declined by 9% between 2018 and 2022, often due to delayed claim settlements.
• Product expansion: Weather-based insurance now includes high-value crops like tea, widening the protective net.

Minimum Support Price (MSP)

• Income stability: MSP provides assured returns, ensuring a margin over cost of production.
  Eg. The MSP for the 2025-26 Kharif season was set to give farmers a return of at least 50% over their production cost, with the highest margin projected for bajra (63%).
• Market assurance: MSP procurement shields smallholders from price crashes.
• Market distortion risks: Narrow MSP coverage limits private investment and export growth.

Food Processing

• Value addition: The Formalisation of Micro Enterprises (FME) Scheme enhances farmer income through food processing.
• Infrastructure enhancement: The PM Kisan SAMPADA Yojana has improved cold-chain logistics, reducing post-harvest loss.
  Eg. As of 2025–26, the scheme is expected to leverage  more than ₹11,000 crore, benefit 2.85 million farmers, and generate around 5.5 lakh direct/indirect jobs
• Employment growth: Processing initiatives have created jobs and entrepreneurial opportunities in rural areas.

While subsidies have contributed to higher farm incomes, they also promote monoculture, increase resource strain, and add to the fiscal burden. Reforms must focus on diversification, insurance outreach, and value-chain integration to ensure resilient, inclusive, and sustainable outcomes for small and marginal farmers

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