Indian farmers use government subsidies differently across various states, depending on state income levels, agricultural practices, and local schemes. Higher-income states often provide fewer subsidies relative to their fiscal capacity, while lower-income and middle-income states typically allocate a larger share of their budgets to support farmers.

Statewise Variations

Subsidy distribution in India shows substantial regional differences:

• High-income states such as Kerala, Tamil Nadu, Telangana, Gujarat, Haryana, and Karnataka offer the least subsidies relative to their GSDP.
• Lower-income states like Bihar and Chhattisgarh allocate a greater share of their budgets to agricultural subsidies.
• Middle-income states such as Punjab and Andhra Pradesh provide higher subsidies compared to wealthier states.
• States like Jharkhand and West Bengal, despite lower incomes, spend less than some peers, highlighting variations in policy priorities.

Types of Subsidies Used

Farmers benefit from multiple categories of government subsidies, often shaped by local needs:

• Input subsidies like fertilizer, electricity, seeds, and irrigation infrastructure are prevalent in states with poorer farmers or less agricultural development, boosting yields especially for smallholders.
• Price support such as Minimum Support Price (MSP) is most effective for staple grains (rice, wheat), creating regional biases toward these crops.
• Insurance and credit programs, including PMFBY (crop insurance) and Kisan Credit Card schemes, are widely offered to reduce risk and improve access to credit, with varying uptake across states.
• State-specific schemes like Madhya Pradesh’s Bhavantar Bhugtan Yojana, which pays farmers when market prices fall below support levels, also diversify the landscape.

Equity and Impact

Large farmers tend to benefit more in absolute terms from input subsidies, as their land and input usage is greater. However, targeted initiatives for small and marginal farmers (e.g., PM-KISAN) aim to address gaps in direct support. Subsidies have helped raise incomes and output, but impact varies:

• Fertilizer subsidies deliver the greatest benefits in less developed regions.
• Electricity subsidies are most valuable where irrigation needs are highest, like in Punjab for rice and sugarcane cultivation.
• Crop insurance uptake depends on regional risk profiles and awareness campaigns.

Policy and Reform Trends

There is increasing focus on rationalizing and refining subsidies, with state and central governments prioritizing direct income support, targeted insurance, and post-harvest infrastructure to balance fiscal pressures and sustainability concerns.

In summary, the use and effectiveness of government subsidies by farmers in India is highly state-dependent, shaped by economic, climatic, and policy factors, with both central and local support schemes influencing agricultural outcomes.