CRITICALLY ANALYZE AND COMPARE AGRICULTURE SUBSIDIES VS CORPORATE SUBSIDIES IN INDIA

Presented by- Nishant Kumar & Paramananda Sahu

3rd Year Int.M.Sc Economics

Date -08/04/15

INTRODUCTION Government Subsidy has been used as a major instrument to reduce poverty and

malnutrition and to accomplish the goal of social justice. The relationship between agriculture subsidy and corporate subsidy has become

increasingly important to policy makers. Corporate subsidy is the financial grants or tax breaks or other benefits the

government gives to corporations, purportedly to encourage the investment or to

develop a certain section of the economy. Tax breaks targeted to benefit specific corporations could also be considered a

form of subsidy. Its also known as Hidden Subsidy. Agricultural subsidies that encourage production and productivity have been

widely criticized because of the cost of subsidies and they are perceived to be far

from uniformly distributed. Agriculture subsidy is given by two ways , first government may pay high price

for agricultural products and second through the input product like fertilizer ,

electricity and credit subsidy.

LITERATURE REVIEW ON CORPORATE SUBSIDY

Fredrik Bergstrom found that subsidization is positively correlated with growth of value added and that productivity of the subsidized firms seems to increase the first year after the subsidies were granted, but after the first year it seems that the more subsidies a firm has been granted the worse total factor productivity growth.(2000).

According to XUN CAO, ASEEM PRAKASH, and MICHAEL D.WARD, the relative budgetary salience of social welfare to industrial subsidies is influenced by the interplay between governmental partisan gravity and changes in imports.(2007)

Corporate Karza maafi is growth industry and an efficient one.( P. Sainath, 2014) According to Ralph Nader, It's hard to find a major industry today whose principal

investments were not first made by the government - in aerospace, telecommunications, biotechnology and agribusiness. Government research and development funds are given freely to corporations, but they don't announce it in ads the next day.

According to Sinn, the numbers clearly show that corporations are “mooching” off the government at a much higher rate than 47% of citizens.

LITERATURE REVIEW ON AGRICULTURE SUBSIDY According to Ashok Gulati (1989) found that there is a

declining efficiency in the use of input subsidies as agricultural incomes go up. This is because states with high agricultural incomes are the ones that exhibit higher subsidies.

Ashok Gulati and Sudha Narayanan(2000) found that Subsidy estimates in the budget are 'largely' influenced by the domestic costs of producing fertilizers what farmers actually pay.

Vijay Paul Sharma and Hrima Thaker(2009) examined one-third of fertilizer subsidy goes to fertilizer industry is misleading.

OBJECTIVE Analyzes the pattern, progress and compare of agriculture subsidies

and corporate subsidies for the period 2005-06 to 2012-13.

To verify its impact on agriculture production and manufacture production.

DATA AND METHODOLOGY

The data has taken from secondary source.

It has been collected from Indian Public Finance Statistics of

various years, Planning Commission, World Bank, Handbook of

Statistics on the Indian Economy ,Ministry of Statistics and

Programme Implementation, National Crime Records Bureau

(NCRB) and Receipts Budget.

Simple percent ratio method is used to analyze the pattern of food

subsidy.

Ordinary Least estimation technique is used to obtain the regression

coefficients.

MODEL Two individual multiple regression model in a dynamic frame work has

been specified in order to verify the impact of agriculture subsidy and corporate subsidy on agriculture production and corporate production.

First model,

Y= α+β11X1+β2 X2+ β3X3+β4 X4 + Ei

Here,

Y= Agriculture and its allied Production

α= intercept coefficient

X1 = agriculture subsidies

X2 = employment

X3 = export of agriculture and its allied

X4 = farmers suicides

E= error term

Second Model,

Here,

W= Production of manufacture sector

γ= intercept coefficient

V1= corporate subsidies

V2= export of manufacture sector

V3= employment

V4= CO2 emission

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

2011-12

2012-13

0

100000

200000

300000

400000

500000

600000

700000

Agriculture Subsidies Vs Corporate Subsidies

Total Corporate Subsidies (Rs. Crore)Agriculture Subsidies (Rs. Crore)

Rs.

in C

rore

Source- Receipt Budget and Indian Public Finance Statistics

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-130

20000

40000

60000

80000

100000

120000

140000

160000

0

0.5

1

1.5

2

2.5

3

Agriculture Subsidies (Rs. Crore)Agriculture subsidy as per centage of GDP

Source- Handbook of the statistics and Indian Public Finance Statistics

1 2 3 4 5 6 7 80

2

4

6

8

10

12

0

100000

200000

300000

400000

500000

600000

700000

Corporate subsidy as per centage of GDPTotal Corporate Subsidies (Rs. Crore)

Source- Handbook of the statistics and Reciepts Budget

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-130

50000

100000

150000

200000

250000

300000

350000

Decomposition of Corporate Subsidy

Tax expenditure on corporate taxpayers (Rs Crore)Tax expenditure under Excise duty regime (Rs. Crore)Tax expenditure under the Customs duty regime (Rs. Crore)

Source- Receipts Budget

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

0

5000

10000

15000

20000

25000

30000

35000

40000

Tax Forgone on co-operative taxpayers during 2005 -13

STPI Units and Unit located in SEZ, EPZ and FTZ

Accelerated depreciation

Profit undertaking engaged in development of infra. facilities, SEZ and Indus. part, genern of power and Tele srvc.

Others

Source- Receipts Budget

Contribution of Top 5 Commodity Groups contributing to Custom Duty Foregone 2011-12

(in Rs. Crore)

Sector Revenue Forgone % Share in Total Custom Duty

Foregone

Diamond & Gold 65975 23

Crude Oil and Minerals oils 55576 19.5

Vegetables oil 32407 11.5

Machinery 32386 11.5

Chemicals and Plastics 20758 7

Total 207102 72.5

Source: Statement of Revenue Foregone, Union Budget 2013-14

2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13

-100000

0

100000

200000

300000

400000

500000

600000

700000

Total Corporate Subsidies (Rs. Crore)Gross Fiscal Deficit (Rs.Crore)Difference between TCS and GFD (Rs. Crore)

Source- Receipts Budget and Handbook of Statisics

EMPIRICAL ANALYSIS OF DETERMINANTS OF PRODUCTION

Variable Coefficients t- value

Agriculture Subsidy -0.18261 -1.1032

Employment 0.07581 -0.460

Export of Agriculture & its allied -0.0718 2.2012

Farmer Suicides -14.379 -1.12602

R square =0.98

Number of observations = 8

Variables Coefficients t- value

Corporate Subsidy -0.476 -0.6963

Employment 0.02726 1.3365

Export of Manufacture Sector 0.5384 0.185

CO2 emissions 1459.60 2.352

R square =0.995

Number of observations =8

CONCLUSION Government are shifting towards the corporate side. The graph

shows that the gap between the agriculture subsidy and corporate subsidy is increase time to time.

Here whatever I took variable , its not the satisfied the models and models are not valid due to there are highly correlation between the variables.

If government take off the completely corporate subsidy it will played a main factor to control the gross fiscal deficit.

By control the corporate subsidy we can control the CO2 emissions .

REFERENCE Ashok Gulati and Anil Sharma,Subsidy Syndrome in Indian Agriculture(1995) Ashok Gulati and Sudha Narayanan, Demystifying Fertiliser and Power Subsidies in India(2000) P.Sainath, Corporate Karza Maafi at Rs. 36.5 Trillion, 2014 Ralph Nader, Stop Corporate Welfare Vandana Shiva,The Suicide Economy Of Corporate

Globalisation,2004 XUN CAO, ASEEM PRAKASH, and MICHAEL D.WARD, Protecting Jobs in the Age of Globalization:

Examining the Relative Salience of

Social Welfare and Industrial Subsidies in OECD Countries,2007 Mike P Sinn, Government Spends More on Corporate Welfare Subsidies than Social Welfare Programs

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