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The article delves into the complexities of agricultural support systems in the United States and India, highlighting the potential implications for ongoing trade negotiations between the two nations. It begins by contrasting the sheer scale of their respective farming sectors: a relatively small number of family farms in the US compared to the massive number of agricultural households in India. Despite the disparity in numbers, US farmers receive considerable government support, a fact that has become a point of contention in trade discussions where the US is pushing for greater access to the Indian agricultural market. The article meticulously dissects the forms of assistance provided to farmers in both countries, revealing fundamental differences in approach. While India relies heavily on subsidies for inputs like fertilizer, electricity, and water, the US primarily utilizes direct payment programs such as Price Loss Coverage (PLC) and Agriculture Risk Coverage (ARC). These programs aim to protect farmers against price volatility and revenue shortfalls for a range of crops, functioning as a safety net without directly intervening in the market through physical procurement. The PLC program, for instance, triggers payments when the average market price of a covered commodity falls below a pre-determined 'effective reference price' (ERP), analogous to India's Minimum Support Price (MSP). However, unlike the MSP, which necessitates government purchase of crops, the PLC provides direct payments to farmers to cover the difference between the market price and the ERP. Similarly, the ARC program compensates farmers when the actual revenue from a crop falls below a guaranteed level based on historical yields and market prices. The Dairy Margin Coverage (DMC) program is also mentioned as a vital tool for stabilising farm income by protecting against price declines and input cost increases within the dairy industry. The article presents compelling data on the magnitude of US farm support, showcasing the gross cash income and expenditure of the US farm sector over several years. Direct payments to producers under federal farm programs have fluctuated significantly, ranging from $9.3 billion to $45.6 billion annually. In 2020, pandemic-related assistance boosted these payments to an unprecedented level, accounting for a substantial portion of the net cash income of US farmers. Looking ahead, direct government farm payments are projected to remain significant, driven by supplemental disaster assistance. A pivotal revelation from the US Government Accountability Office (GAO) report further underscores the extent of financial assistance provided to agricultural producers. The report reveals that approximately $161 billion was disbursed by the US Department of Agriculture across 27 programs between 2019 and 2023. These programs encompassed a wide range of initiatives, including crop insurance, COVID-19 pandemic assistance, market facilitation/trade disruptions relief, PLC/ARC/DMC, and environmental conservation. A particularly striking finding of the GAO report is the concentration of these payments among a relatively small number of producers. A substantial portion of the total financial assistance went to a select group of farmers, highlighting the potential for inequities in the distribution of government support. This raises questions about the effectiveness of these programs in supporting the broader agricultural community. The article then shifts its focus to India, comparing its agricultural support system to that of the US. India operates a federal direct income support program, Pradhan Mantri Kisan Samman Nidhi (PM-Kisan), which provides income support to millions of farmers. However, the amount provided to each farmer is relatively small compared to the average federal payments received by US producers. When considering other forms of support, such as subsidies on fertilizer, crop loans, and insurance, as well as the costs associated with MSP procurement and state government expenditures on direct payments and subsidized electricity and irrigation, the total annual support to Indian farmers is estimated to be substantial. However, this support is spread across a vastly larger number of farmers compared to the US, resulting in significantly lower individual payments. The article concludes by emphasizing the implications of these disparities for trade negotiations between India and the US. It argues that opening up India's agricultural market to US produce would create an uneven playing field, given the substantial financial support received by US farmers. This argument is further bolstered by the World Trade Organization's (WTO) provision for 'special and differential treatment' for developing countries, which allows them to implement measures to protect their domestic producers.
The comparison between the US and Indian agricultural support systems illuminates the stark differences in their approach and scale. In the US, the emphasis is on direct payments and risk management programs that provide a safety net for farmers without directly intervening in the market. These programs are designed to protect farmers from price volatility and revenue shortfalls, allowing them to make independent decisions about what to plant and how to manage their operations. The magnitude of US farm support is substantial, with billions of dollars disbursed annually through various federal programs. However, the distribution of these payments is not uniform, with a significant portion going to a relatively small number of producers. This raises questions about the equity and effectiveness of these programs in supporting the broader agricultural community. In contrast, India's agricultural support system is characterized by a complex web of subsidies and interventions. The government provides subsidies on inputs like fertilizer, electricity, and water, which aim to reduce the cost of production for farmers. It also operates a Minimum Support Price (MSP) system, which guarantees a minimum price for certain crops and involves government procurement. While these measures are intended to protect farmers from market fluctuations and ensure food security, they can also lead to inefficiencies and distortions in the market. The scale of India's agricultural sector is enormous, with millions of farmers relying on agriculture for their livelihoods. However, the individual payments received by Indian farmers are relatively small compared to those received by US producers. This is due to the vast number of farmers who are eligible for support, as well as the limited resources available for government programs. The trade implications of these differences are significant. The US argues that India's agricultural market is too closed and that it should be opened up to US produce. However, India contends that its farmers cannot compete with US farmers who receive substantial government support. This disagreement has become a major obstacle in trade negotiations between the two countries. The WTO's provision for 'special and differential treatment' for developing countries is relevant in this context. This provision allows developing countries to implement measures to protect their domestic producers, taking into account their specific circumstances and development needs. India argues that it should be allowed to maintain its agricultural support system in order to protect its farmers and ensure food security. The US, on the other hand, argues that India's support system is trade-distorting and that it should be reduced or eliminated. The resolution of this dispute will require careful consideration of the economic and social implications for both countries. It will also require a commitment to finding mutually beneficial solutions that promote trade and investment while protecting the interests of farmers and consumers. The ongoing trade negotiations between India and the US provide an opportunity to address these issues and to forge a stronger and more equitable trading relationship.
Looking at the historical context of agricultural support in both the US and India is crucial for understanding the current landscape. In the US, government intervention in agriculture dates back to the Great Depression, when policies were implemented to stabilize prices and support farmers facing economic hardship. Over time, these policies have evolved to include a range of programs, including direct payments, crop insurance, and conservation initiatives. The rationale for these programs has been to ensure a stable food supply, protect farmers from market volatility, and promote environmental sustainability. However, the effectiveness and fairness of these programs have been subject to ongoing debate. Critics argue that they disproportionately benefit large-scale producers and that they distort market signals, leading to overproduction and environmental damage. In India, government intervention in agriculture has been driven by the need to ensure food security and to support a large rural population that depends on agriculture for their livelihoods. The Green Revolution of the 1960s and 1970s transformed Indian agriculture, leading to significant increases in production. However, it also created new challenges, including environmental degradation and increasing inequality. The government has implemented a range of policies to address these challenges, including subsidies on inputs, price supports, and rural development programs. However, these policies have also been subject to criticism. Critics argue that they are inefficient, costly, and that they distort market signals. The challenge for both the US and India is to develop agricultural policies that are sustainable, equitable, and that promote both economic growth and environmental protection. This will require a shift away from policies that simply subsidize production and towards policies that promote innovation, diversification, and value addition. It will also require a greater focus on addressing the challenges faced by small-scale farmers and on ensuring that they have access to the resources and support they need to thrive. The future of agriculture in both the US and India will depend on the ability of policymakers to adapt to changing conditions and to develop policies that are responsive to the needs of farmers, consumers, and the environment. This will require a collaborative approach, involving farmers, researchers, policymakers, and other stakeholders. It will also require a willingness to experiment with new approaches and to learn from past mistakes. The stakes are high, as agriculture plays a vital role in the economies and societies of both countries. By working together, the US and India can create a more sustainable and equitable agricultural system that benefits all. The disparities in the US and Indian agricultural support systems highlight the complexity of global trade negotiations. Successfully navigating these complexities necessitates open dialogue, a willingness to understand differing perspectives, and a commitment to finding solutions that promote fair and sustainable trade practices for all nations involved.
Source: How the US supports its farmers & why this matters in Washington-Delhi trade negotiations