While subsidies encourage farmers to use new technology, they are a huge burden on government finances. Discuss the usefulness of subsidies in the light of this fact.


The following arguments are given to prove the usefulness of subsidies (i) It was necessary to use Subsidies  to provide an incentive for adoption of the new HYV technology by farmers, especially the small farmers. (ii) Any new technology is considered as being risky by farmers. Subsidies were, therefore, needed to encourage farmers to adopt the new technology initially. (iii) Farming in India is still a risky business and subsidies provide hedging against the risk of climatic conditions. (iv) Most farmers are very poor and they will not be able to afford the required inputs without subsidies. (v) Subsidies bring about equity between rich and poor farmers by enabling the poor farmers to use modern technology and inputs.

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