Critically analyze and compare agriculture subsidies vs corporate

1. 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

2. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. 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

9.  Second Model,
Here,
W= Production of manufacture sector
γ= intercept coefficient
V1= corporate subsidies
V2= export of manufacture sector
V3= employment
V4= CO2 emission

10. 0
100000
200000
300000
400000
500000
600000
700000
Rs.inCrore
Agriculture Subsidies Vs Corporate Subsidies
Total Corporate Subsidies (Rs.
Crore)
Agriculture Subsidies (Rs. Crore)
Source- Receipt Budget and Indian Public Finance Statistics

11. 0
0.5
1
1.5
2
2.5
3
0
20000
40000
60000
80000
100000
120000
140000
160000
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Agriculture Subsidies (Rs. Crore)
Agriculture subsidy as per centage of GDP
Source- Handbook of the statistics and Indian Public Finance Statistics

12. 0
100000
200000
300000
400000
500000
600000
700000
0
2
4
6
8
10
12
1 2 3 4 5 6 7 8
Corporate subsidy as per centage of
GDP
Total Corporate Subsidies (Rs. Crore)
Source- Handbook of the statistics and Reciepts Budget

13. 0
50000
100000
150000
200000
250000
300000
350000
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
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

14. 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

15. 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

16. -100000
0
100000
200000
300000
400000
500000
600000
700000
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13
Total Corporate Subsidies (Rs. Crore)
Gross Fiscal Deficit (Rs.Crore)
Difference between TCS and GFD (Rs.
Crore)
Source- Receipts Budget and Handbook of Statisics

17. EMPIRICAL ANALYSIS OF
DETERMINANTS OF PRODUCTION

18. 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

19. 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

20. 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 .

21. 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

22. THANK YOU !!!