To complete reform drive, rationalise food and fertiliser subsidies
Indian Express
1. Core Thesis and Context
Subsidy rationalisation as unfinished reform
The article argues that India’s structural reform agenda remains incomplete without deep reform of food and fertiliser subsidies, which together impose a large and growing fiscal burden while delivering diminishing marginal welfare gains.
The context is the government’s broader reform narrative (DBT, fiscal consolidation, agricultural reform) juxtaposed against persistent subsidy expansion.
2. Key Arguments
1. Fiscal unsustainability of subsidies
Food and fertiliser subsidies together consume a disproportionate share of Union expenditure, crowding out public investment in health, education, and infrastructure.
2. Distorted incentives in agriculture
Fertiliser subsidies, especially urea, encourage imbalanced nutrient use, soil degradation, groundwater depletion, and inefficient cropping patterns.
3. Inefficient targeting of benefits
The Public Distribution System and fertiliser subsidies benefit a wide population, including non-poor households, diluting their poverty-alleviation impact.
4. Case for DBT and price rationalisation
Direct transfers and gradual price corrections are presented as superior alternatives that preserve welfare while restoring market signals.
5. Reform sequencing matters
The author stresses gradualism to avoid political backlash and food inflation, advocating calibrated transition rather than abrupt withdrawal.
3. Author’s Stance
Technocratic reformist with fiscal discipline lens
The stance is clearly pro-reform, grounded in economic efficiency, fiscal prudence, and global best practices. Welfare is acknowledged, but efficiency and sustainability are prioritised.
4. Biases and Limitations
1. Economic rationalism bias
The article privileges efficiency over political economy realities, underestimating resistance from farmers, states, and fertiliser lobbies.
2. Underplaying food security anxieties
Concerns about inflation volatility, nutritional security, and last-mile delivery challenges under DBT are insufficiently explored.
3. Urban policy gaze
The perspective leans towards macro-fiscal stability, with limited engagement with rural distress and farm income uncertainty.
5. Pros and Cons of the Argument
Pros
Clear fiscal logic
Demonstrates how subsidies constrain capital expenditure and long-term growth.
Evidence-based reasoning
Uses price distortions, nutrient imbalance, and budgetary data to support reform.
Policy relevance
Directly aligns with ongoing debates on DBT, MSP reform, and fiscal consolidation.
Cons
Political feasibility gap
Implementation challenges in cooperative federalism and electoral politics are understated.
Transition risks
Short-term shocks to small farmers and poor consumers are not fully addressed.
6. Policy Implications
Agricultural policy
Shift from input subsidies to income support and productivity-enhancing investments.
Fiscal policy
Improved fiscal space for infrastructure, climate adaptation, and human capital.
Governance reform
Greater reliance on digital delivery, beneficiary databases, and outcome monitoring.
7. Real-World Impact
Short-term
Potential inflationary pressures, farmer protests, and coordination challenges with states.
Medium-term
Better nutrient use efficiency, improved soil health, and reduced subsidy leakages.
Long-term
More resilient agriculture, sustainable public finances, and higher quality public spending.
8. UPSC GS Paper Alignment
GS Paper II – Governance
- Welfare schemes: efficiency vs inclusion
- Centre–State fiscal relations
GS Paper III – Economy & Agriculture
- Subsidy reforms
- Fiscal deficit and public expenditure quality
- Agricultural inputs and sustainability
GS Paper IV – Ethics in Public Policy
- Balancing welfare with responsibility
- Equity vs efficiency trade-offs
9. Balanced Conclusion
The article makes a strong economic case for rationalising food and fertiliser subsidies as the logical next step in India’s reform trajectory. While analytically sound, it underestimates political economy constraints and transitional vulnerabilities. Reform is necessary, but sequencing, communication, and compensatory mechanisms will determine its legitimacy and success.
10. Future Perspective
India must move from price-based welfare to income and nutrition-based support, supported by robust DBT systems, agricultural diversification, and climate-sensitive policy design. Subsidy reform should evolve as a social contract—protecting the vulnerable while freeing the economy from chronic fiscal stress.
