An agricultural subsidy is a governmental subsidy paid to farmers and agribusiness to supplement their income, manage the supply of agricultural commodities, and influence the cost and supply of such commodities.
It is considered to be the most effective mechanism for accelerating the growth of agricultural sector.It works as a tool for developed countries to maintain their supremacy
The use of agricultural subsidies is widespread in the Caribbean. The objectives are: to encourage adoption of improved agricultural practices for increasing agricultural production and conservation of natural resources. The subsidies are provided in the form of cash, production inputs and, more recently, as rebates on income taxes. There are many rather small cash and other incentives. Farmers do not perceive these as incentives to practice adoption but rather as snippets of assistance or dole provided by governments to farmers. This perception, plus the disproportionate amount of energy and time small farmers must exert in order to obtain these small subsidies can create in them feelings of irritation and frustration. As a result they tend to perceive these small subsidies as needed nuisances, more bane than boon. Caribbean farmers are market oriented and respond to meaningful monetary incentives. Given a choice they would prefer to have an assured market and a “reasonable” price for their farm produce or the availability at reduced prices of production of marketable produce.
Subsidies in Indian agriculture have increased significantly in the post-reforms period. Food subsidies increased from Rs. 2,850 crore in 1991-92 to about Rs. 72,823 crore in 2011-12 (Revised Estimates), an increase of over 25 times in 21 years (Table 1). As a result, its share in total central government subsidies under non-plan expenditure increased from 23.3 percent to 33.7 per cent between 1991-92 and 2011-12. As a percentage of agricultural GDP, the food subsidy increased from 1.8 per cent to 5.8 per cent during 1991-92 and 2010-11. Food subsidy, which increased at an annual compound growth rate of about 17.8 per cent during the 1990s, remained stable between 2002-03 and 2006-07 mainly due to low off take of food grains and marginal increases in procurement prices. However, there has been a significant increase in food subsidy during the last few 5-6 years. For example, food subsidy more than tripled from Rs. 24,014 crore in 2006-07 to Rs. 72,823 crore in 2011-12 and is estimated to cross Rs. 75,000 crore in 2012-13, at an annual compound growth rate of 21.6 per cent.