DAW 20th January 2026, Mains Answer Writting 2027

DAW 20th January 2026, Mains Answer Writting 2027

Question

“India’s food and fertiliser subsidies are operating at a sub-optimal level and require structural reform.” Critically analyse this statement in the context of fiscal sustainability, farm incentives, and nutritional security. (250 Words, 15 Marks).

Model Answer

Approach: Introduction:  

  • Quote scale of subsidies (₹3.7 lakh crore; ~8–8.5% of FY26 Budget) and original intent. 

  • Contrast with current reality: low poverty (5.3%), fiscal stress, ecological and incentive distortions. 

  • Pose reform question in “Reform Express” context. 

Body: 

  • Food Subsidy: Fiscal Sustainability vs Welfare. 

  • Nutritional Security Dimension. 

  • Fertiliser Subsidy: Incentives & Ecology. 

  • Impact on Farm Incentives. 

  • Reform Pathways. 

Conclusion: 

  • Conclude with subsidies are misaligned, not misguided. With a rare reform window, income support and productivity focus can put India on the “Reform Express” toward Viksit Bharat 2047. 

      

        Introduction: 

  • India’s food and fertiliser subsidies- together accounting for nearly ₹3.7 lakh crore (≈8–8.5% of the Union Budget FY26)- were historically designed to ensure food security, farmer protection, and price stability. However, with extreme poverty declining to 5.3% (World Bank, 2022), rising fiscal pressures, environmental degradation, and distorted farm incentives, these subsidies are increasingly operating at a sub-optimal level. The current policy discourse, reinforced by Ashok Gulati’s analysis and the government’s “Reform Express” narrative, raises a critical question: Can India reform these subsidies to achieve fiscal sustainability, correct farm incentives, and enhance nutritional security without undermining welfare? 

 Body: Food Subsidy: Fiscal Burden vs Welfare Outcomes: 

  • Current Status: 

  • Food subsidy FY26: ~₹2.03–2.25 lakh crore. 

  • Coverage: ~813 million people (~56% of population) under NFSA + PMGKAY. 

  • Economic cost to FCI: Rice: ~₹42/kg and Wheat: ~₹30/kg. 

  • Issue: Free cereals distributed even to non-poor households and producers themselves. 

  • Critical Analysis: 

  • Fiscal Sustainability: With poverty sharply reduced, blanket coverage is fiscally inefficient. Even by a higher poverty line ($4.2/day PPP), only ~24% require strong support. 

  • Targeting Failure: Despite Aadhaar-seeded ration cards and ePOS machines (84% coverage), inclusion errors persist, while resources remain locked in storage and procurement. 

  • Opportunity Cost: High food subsidy crowds out investment in irrigation, storage, agri-R&D, and nutrition interventions. 

  • Political Economy: The policy increasingly resembles a consumption-side revdi, rather than a calibrated social safety net. 

  • However (Counterpoint): 

  • PDS has acted as a powerful inflation stabiliser, especially during COVID and post-pandemic food price shocks. 

  • Abrupt withdrawal risks nutritional and political backlash. 

 Nutritional Security: Calories without Nutrition: 

  • Structural Limitation:  

  • PDS remains cereal-centric, while India faces a triple burden of malnutrition:  

  • Protein deficiency,  

  • Micronutrient deficiency, 

  • Rising obesity. 

  • Evidence: 

  • NFHS data repeatedly shows high anaemia and child stunting, despite record grain distribution. 

  • Cereals dominate procurement due to MSP bias toward rice and wheat. 

  • Assessment: 

  • Food subsidy ensures calorie security, not nutrition security. 

  • This mismatch undermines long-term human capital formation. 

 

Fertiliser Subsidy: Distorted Incentives and Environmental Costs: 

  • Current Status: 

  • Fertiliser subsidy FY26: ₹1.56–2.0 lakh crore. 

  • Larger than entire MoAFW budget (₹1.37 lakh crore). 

  • Urea price fixed at ~₹242/45 kg bag; DAP & MOP decontrolled. 

  • Critical Issues: 

  • Nutrient Imbalance: 

  • India’s N:P:K ratio ≈ 10.9:4:1 (ideal: 4:2:1). 

  • Punjab uses 61% excess nitrogen, underuse potassium by ~89%. 

  • Low Efficiency: 

  • Nutrient Use Efficiency: 35–40%. 

  • Fertiliser-to-grain response fell from 1:10 (1970s) to 1:2.7 (2015). 

  • Environmental Damage: 

  • Groundwater nitrate contamination. E.g., Punjab & Haryana region. 

  • Nitrous oxide emissions (≈278× CO₂ potency). 

  • Leakages: Despite Neem-coating, 20–25% urea diversion persists. 

  • Macroeconomic Risk: Import dependence- Natural gas ~78%, Phosphate ~60% & Potash ~90%. 

  • Comparative Insight (China): 

  • Market-determined prices + per-hectare subsidies. 

  • Balanced N:P:K (~2.6:1.1:1). 

  • Double India’s agri-GVA with similar cropped area. 

 Impact on Farm Incentives and Cropping Patterns: 

  • Subsidies + MSP + procurement have created a rice–wheat–sugarcane trap. 

  • Pulses and oilseeds remain under-produced despite missions and MSP assurances. 

  • Result: 

  • Agri-GDP growth falls to 3.1% in FY26. 

  • Farmers suffer price crashes (pulses 10–30% below MSP). 

  • Atmanirbharta in pulses remains elusive. 

 Reform Pathways: From Input Subsidies to Income Support: 

  • Food Subsidy Reforms: 

  • Gradually reduce PDS coverage: 56% → 40% → 25% → 15%. 

  • Restrict free food to Antyodaya (≈5–10%). 

  • Introduce food coupons/digital wallets (~₹700/family/month). 

  • Convert 20% FPS into nutrition hubs (pulses, eggs, milk, oil). 

  • Fertiliser Subsidy Reforms: 

  • Bring urea under Nutrient-Based Subsidy (NBS). 

  • Phase-wise price decontrol with DBT compensation. 

  • Shift subsidy administration to MoAFW. 

  • Promote bio-fertilisers, micronutrients, fertigation. 

  • Scale PM-PRANAM to reward states for reducing chemical use. 

  • Convergence with PM-KISAN: 

  • Merge food and fertiliser subsidies into an augmented PM-KISAN. 

  • Advantages: 

  • Preserves farmer income. 

  • Restores price signals. 

  • Reduces fiscal leakages. 

  • WTO-compliant (Green Box shift). 

 Conclusion: 

  • India’s food and fertiliser subsidies, though well-intentioned, are structurally misaligned with current economic realities, creating fiscal stress, ecological damage, distorted incentives, and nutrition gaps. With poverty at historic lows, digital systems in place, and macroeconomic stability, India has a rare reform window. A shift toward income support, nutrition security, and productivity-enhancing investments- converged with PM-KISAN- can place the country firmly on the “Reform Express” toward Viksit Bharat 2047.