Arun Jaitley bats for blending subsidy with investment to boost farm sector

Jaitley said that important areas that require investment included physical infrastructure, social sector and farm sector

Finance Minister Arun Jaitley on Tuesday made a case for blending subsidy with investment to augment farm sector growth and make it sustainable. He also said formalisation of the economy has started showing visible result in terms of higher resource mobilisation, leaving more in the hands of the government for the capital formation in various sectors.

“There is a lot of formalisation of economy taking place in several other sectors... We can see visible results, and it is leading to additional resources in the hands of the government. I don't think this process will now be reversed,” he said, after releasing a book titled Supporting Indian Farms the Smart Way. The book, co-authored by agriculture economist Ashok Gulati, showed that public investment in agriculture as percentage of GDP declined from 3.9 per cent in 1980-81 to 2.2 per cent in 2014-15, while input subsidies as a percentage of agriculture GDP increased from 2.8 per cent of about 8 per cent during the same period. 

“The government should shift from price policy to income policy as is done in China, free up the fertiliser sector, increase water use efficiency and avoid generalised loan waivers to give best results to farmers,” Gulati said.  Jaitley, meanwhile, said that important areas that require investment included physical infrastructure, social sector and farm sector. 

"As resources grow, the capital and development expenditure will increase. Hopefully, the resource crunch to spend in these areas will not be there. This has encouraged us... Year after year, the government has taken conditional steps to invest in agriculture in terms of subsidy support, price support, crop insurance support or the interest subvention support. 

"I do see a point on blending the subsidy support with the investment because, to have a model, which sustains indefinitely only on subsidy will not be a sustainable model. Investments will make farm sector self-sufficient on ground. With less subsidies, a self-sufficient farmer may be able to serve the cause of Indian agriculture better," he said. 

Talking about the growth, Jaitley said India has grown at reasonable pace in the last quarter century.

"We have acquired a position when we are growing much faster than the rest of the world and hopefully there are various avenues of further generating this growth. There are regions in the country that have not grown well in the past therefore there is lot of potential for growth," he said.