How do subsidies affect the cropping pattern, crop diversity and economy of farmers? What is the significance of crop insurance, minimum support price and food processing for small and marginal farmers?

An agricultural subsidy is an incentive paid by the government to the agricultural organizations as a supplement of their income to maintain the supply of the agricultural commodities. In India, the subsidy covers fertilizer, irrigation, equipment, credit subsidy, seed subsidy, export subsidy, etc. Fertilizer subsidy is provided by the Central government and the state government provides subsidies on water and irrigation.


The subsidy directly influences the cropping pattern, crop diversity, and economy of farmers in the following way.

  • The crops which get more subsidy from the government, have dominance over other crops. The farmers choose more subsidized crops in order to get the maximum benefit. A significant disparity is noticed for Global food prices and international trade.
  • Certain food grains got special focus due to the assured market and low cost of production due to subsidies. Farmers are more confined to some selected crops. The subsidy system severely affects crop diversity.
  • Subsidies are undoubtedly beneficial for the farmers and especially for the marginal tenants, but the production of the same variety of food over the years could create an imbalance. Ultimately the particular food lost its value and ended up increasing the poverty figure of the country.

Crop Insurance

Crop insurance facilities are provided by the government to protect the loss due to crop damage by natural disasters like hail, drought, and floods. Insurance could also be provided for declines in the prices of agricultural commodities.

Minimum support price

Minimum Support Price (MSP) is a form of market intervention of the Government of India to ensure a minimum price for certain crops. It saves the agricultural producers from facing a huge loss. The Department of Agriculture and Cooperation, Government of India, fixes the Minimum Support Prices.

Food processing

Food processing is the process of transformation of raw agricultural products into other forms of food. It includes different food processing methods like grinding grain to make raw flour.


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