We must not let Indian agriculture turn into an unending tragi-comedy

livemint.com:

₹4 trillion. To put it in context, that is around 8% of the budget’s total expenditure, second only to defence in its non-interest expenditure pie. Add to it separate outlays from state governments—state-level top-ups for minimum support prices (MSPs), power subsidies, etc—and the amount is likely to go up substantially.

By international standards, India is a massive outlier. As per the Food and Agriculture Organization (FAO), India spent 7.55% of total government expenditure on agriculture in 2022. Comparative numbers for both developed and developing countries are a lot lower: the US is at 0.39%, Australia at 0.59%, Brazil at 1.05% and Indonesia at 2% in the same period.

Besides direct fiscal support, in India there is also credit directed by policy towards agriculture, with banks given hard targets for Priority Sector Lending (PSL) and the bulk of such loan use-cases relating to agriculture. As a result, nearly 12% of total credit in 2022 was extended to agriculture. Comparable numbers elsewhere were lower: the US at 0.63%, Australia at 9.5%, Brazil at 2.1% and Indonesia at 7.6%.

The policy results in an implicit burden of hard PSL targets on other borrowers and depositors, as the incremental cost of extending agricultural loans needs to be spread across a base of all bank customers, including non-agricultural as well. In other words, in monetary terms, the Indian taxpayer already spends quite a lot on support for the agricultural sector. Second, is this all eventually aimed at protecting the consumer instead of the producer (farmer)? As the popular cliché goes, it’s complicated.