While subsidies encourage farmers to use new technology, they are a huge burden on government finances. Discuss the usefulness of subsidies in the light of this fact.

Meaning of Subsidies : Agricultural subsidy means an economic benefit (direct or indirect) by government to the farmers. Subsidies are given to the farmers to provide an incentive for adoptation of new technology by farmers in general and small farmers.
Arguments against subsidies : Following arguments are given against subsidies:

1. The object of giving subsidies was to provide incentive for adoptation of new technology by farmers in general and small farmers in particular. Now new technology has been widely adopted, so subsidies should be phased out.

2. Subsidies are meant to benefit the farmers but a substantial amount of fertilizer subsidy benefits the fertilizer industry and the farmers in the more prosperous regions. So there is no case for continue with fertilizer subsidy.

3. Rich farmers are taking advantages of subsidies. The target group is not being benefitted.

4. Subsidies is a huge burden on Government's finance.

5. After a limit, subsidies provide an incentive for wasteful use of resources.

Arguments in favour of subsidies : Following arguments are given in favour of subsidies :

1. Farming in India is a risky business. Most farmers are very poor and they will not be able to afford the required inputs without subsidies.

2. Eliminating subsidies will increase the inequality between rich and poor farmers and violate the goal of equality.

3. If subsidies are largely benefiting the fertilizer industry and big farmers, the correct policy is not to abolish subsidies but to take steps that only the poor farmers enjoy the benefit.

4. For providing an incentive for adoption of the new technology by farmers agricultural subsidies are essential. Without it small farmers will not be able to adopt new technology.

Conclusion : The government should not withdraw agricultural subsidies.