Evaluating the emission impacts of agricultural subsidies policy in India

Shadman Zafar

Indian Growth and Development Review, 2025, vol. 19, issue 1, 24-42

Abstract: PurposeThe purpose of this paper is to examine the complex relationship between agricultural input subsidies and environmental sustainability in India. It specifically looks at how fertilizer, power and irrigation subsidies affect the environment and compares how much they contribute to greenhouse gas (GHG) emissions from farming activities.Design/methodology/approachThe study utilizes an autoregressive distributed lag model within a time-series framework, examining data from 1981 to 2020. The model delineates both the short-term and long-term interactions between input subsidies and GHG emissions, thereby quantifying the degree to which subsidized inputs exacerbate environmental externalities.FindingsThe results show that subsidies for fertilizer and power greatly raise emissions, with the power subsidy having the most intense emissions. The irrigation subsidy, on the other hand, has no effect on emissions. These results show that different parts of the subsidy have different effects on the environment. They also show the tradeoffs between making farming more productive and keeping the environment healthy.Research limitations/implicationsThis study extends the subsidy–productivity framework by empirically linking input subsidies to greenhouse gas emissions, thereby illustrating a rebound effect akin to the Jevons Paradox in Indian agriculture. It highlights the need to incorporate environmental dimensions into existing theories that have traditionally focused only on yield enhancement and farmer welfare.Practical implicationsThe findings underscore the need to redesign subsidy programs by gradually shifting away from inorganic fertilizer subsidies toward cash transfers that incentivize organic and low-carbon alternatives. Policymakers should integrate agri-environmental schemes, promote renewable energy use in farming and provide farmer training on climate-smart practices to align agricultural productivity goals with long-term sustainability.Originality/valueThis research provides original insights by measuring the varying emission intensities of agricultural input subsidies in India. The study provides a comprehensive framework by combining empirical evidence with policy implications, facilitating the formulation of environmentally sustainable agricultural policies that mitigate emissions while maintaining productivity.

Keywords: Input subsidies; Greenhouse gases; Jevon’s paradox; Agriculture; ARDL; India (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:igdrpp:igdr-10-2024-0181

DOI: 10.1108/IGDR-10-2024-0181

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