The document discusses government intervention in the Indian agriculture sector. It notes that agriculture comprises a major share of India's economy and food grain demand is projected to surpass 350 million tonnes by 2030. The government heavily subsidizes agricultural production but challenges like low productivity persist. The government is taking measures to double farmers' incomes by 2022 through targeted interventions. Government intervention in food grain markets began in the 1960s to incentivize the sector through subsidies and price supports. Key measures included minimum support prices, buffer stocks, and distributing grains through public shops at reasonable prices. Government intervention is needed to stabilize prices, guarantee incomes for farmers, and supply affordable food to the poor.

1. Government Intervention
By Aanya Chandra

2. What is government intervention?
 In simple words, Government intervention is any action carried out by the government or public
entity that affects the market economy with the direct objective of having an impact in the
economy, beyond the mere regulation of contracts and provision of public goods. This includes
taxes and subsides.
 What are taxes and subsides?

3. Government intervention in agriculture
 Agriculture comprises a major share of economic production in India, which is primarily driven by
monumental demand. By 2030, food grain demand in India is set to surpass 350 million tonnes.
 The government is heavily involved in supporting and subsidising agricultural production, although
certain problems persist. Low productivity and poor price realisation are some, while others include
a lack of market connectivity, post-harvest losses, and a number of others.
 The challenges call for changes in a number of domains, ranging from financial planning to
infrastructural development, all of which requires government intervention. The Government of
India has recently revealed plans to double farmers’ income by as early as 2022, through a variety of
targeted interventions.

4. .
 Government intervention in food grain marketing in India began in 1960’s. The objective of the
intervention is to revamp and incentivise the agriculture sector by using HYV seeds and
technological inputs with the ultimate aim of increasing food grain production.
 Increasing production alone is not sufficient; the government needs to ensure that increase in
production benefits the poor/ consumer. Several measures were undertaken to achieve the twin
objective of ensuring food security and raising food production. The key measures were:
 Price assurance to producers using the system of Minimum Support Prices.
 Maintaining Buffer Stocks.
 Distribution of food grains at a reasonable price through a network of fair price shop under Public
Distribution System.

5. advantages

6. disadvantages

7. Why is Government intervention needed in
food grain markets?
 To achieve the goal price stability at the time of bumper harvest or below normal production.
 To provide a guaranteed price to producer farmers.
 To supply food to vulnerable and poor sections at a lower price.
 The government has been carrying out procurement and storage of food grains in India since 1960’s through mainly
two institutions:
 The Commission for Agriculture Cost and Prices (CACP).
 The Food Corporation of India (FCI)
 The CACP is entrusted with the task of suggesting the Minimum Support Prices. The FCI is entrusted the task of
procurement and storage of food grains.
 The critical aspect of this whole intervention is the price at which the produce is procured from farmers. Till the
beginning of economic reforms MSPs for food grains were based entirely on domestic factors, mainly on the cost of
production of crops. Though CACP was required to take into consideration the international price situation, this aspect
was never given any weight while arriving at the level of MSPs.

8. Need for govt intervention
 Equality. In a free market, there is likely to be significant inequality and poverty. This is not due to a meritocracy, but it could be due to
unfair advantages of circumstances (inherited wealth, superior education). Governments can intervene to provide a basic security net –
unemployment benefit, minimum income for those who are sick and disabled. This increases net economic welfare and enables
individuals to escape the worst poverty. This government intervention can also prevent social unrest from extremes of inequality.
 Public goods. Public goods tend not to be provided in a free market because there is no financial incentive for firms to provide goods
that people can enjoy for free. Governments can provide national defence, law and order and pay for it out of general taxation.
Looking after the environment is also a public good, there are an increasing number of areas, where a government is needed to deal
with issues such as forest fires, rising sea levels and pressure on water supplies.
 Education. Merit goods are under-consumed in free-market because people underestimate the personal benefits and/or ignore the
external benefits. This leads to an underprovision of health care and education. Government intervention to provide free education
can lead to a significant improvement in the quality of life for people who are educated. There are also many positive externalities to
the rest of society. A well-educated society can improve labour productivity and economic growth.
 Shift consumer behaviour. The consumption of demerit goods like alcohol, tobacco and opiates can cause personal costs and
significant social costs (e.g. crime). If the government identifies damaging goods, they can slowly change consumer behaviour – such
as using higher tax, advertising campaigns and behavioural economics, e.g. making cigarettes difficult to buy with unappealing
packets. Long-term government campaigns to reduce smoking in the UK and US have been effective in reducing smoking rates –
something that has helped to increase life-expectancy.

9.  Environment. The environment is an area with a significant need of government intervention. The
free market ignores external costs of business on the environment. It also fails to consider long-
term considerations. For example, market forces may lead to the burning of fossil fuels, which cause
increasing environmental problems around the world – which will get worse in the future. Given the
potential costs to future generations, there needs to be government action to shift behaviour to
renewable energy which doesn’t cause these environmental costs. Also, the environment involves
many issues where private ownership does not apply. If pollution causes a worsening air quality,
then this affects everyone on the planet, but market mechanisms do not provide an opportunity to
deal with the issue. (If someone pollutes your back-garden, you can sue them. But, if air quality
deteriorates, who takes action?
 Monopoly power. In a free market, firms can gain monopoly power to charge high prices to
consumers and monopsony power to pay lower wages to workers. This increases inequality
and deadweight welfare loss. Government intervention to limit mergers and monopoly power can
lead to increased economic welfare.
 Strategic planning on infrastructure. Another limitation of the free market is to underinvest in quasi-
public goods like roads and railways. This can lead to transport bottlenecks. Governments can plan
for future transport trends and invest in the roads and railways which are needed for the future.


10. Biblography
 https://www.consultancy.in/news/2535/government-intervention-is-crucial-to-protect-indias-
agriculture-sector
 https://www.civilsdaily.com/government-intervention-in-indian-agriculture/
 https://www.economicshelp.org/blog/151818/economics/pros-and-cons-of-government-
intervention/