Input Subsidy vsFarm Technology — Which is More Important for Agricultural Development?

Abstract

The input subsidy and technology are the two significant factors for the development of agriculture in India. Concerns are often expressed about a decrease or increase in input subsidy and inadequate investment in farm technology development. Policy planners often face the questions like what would happen to output supply, factor demand, agricultural prices and farmer income under alternative input subsidy and farm technology scenarios. and what would be the impact of input subsidy and technological innovation on the welfare of producer and consumer ? To find answer to such questions, empirical unified models for two major cereals — wheat and rice — have been developed and analyzed for input subsidy and farm technology. The study has revealed that technology is the most powerful instrument for neutralizing factor price inflation and safeguarding the interest of producers as well as consumers, while input subsidy has a weak effect on output supply. The study has observed that investments in irrigation, rural literacy, capacity building, research and extension and information flow are crucial to increase supply at a higher growth rate.