Question

Given below are two statements :
Statement (I) : A direct subsidy is a kind of subsidy which is provided to the farmers by the government in the form of cash for example farm waiver schemes, PM Kisan scheme etc.
Statement (II) : An indirect subsidy is a kind of subsidy that is being provided via discount on other agricultural purchase like seeds and fertilizers
In light of the above statements, choose the most appropriate answer from the options given below.

• A. Both Statement (I) and Statement (II) are correct.
• B. Both Statement (I) and Statement (II) are incorrect.
• C. Statement (I) is correct but Statement (II) is incorrect.
• D. Statement (I) is incorrect but Statements (II) is correct.

Hint:

Remember the main difference:
- Direct Subsidy: Cash flows directly into the farmer's pocket (e.g., PM-KISAN, loan waivers).
- Indirect Subsidy: Provided through cheaper inputs (e.g., subsidized fertilizer, free power, cheap seeds).

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
Agricultural subsidies are financial assistances provided by the government to farmers to promote agricultural production, stabilize food prices, and support rural livelihoods.
These subsidies are classified as direct or indirect based on the mechanism of transfer and support.

Step 2: Detailed Explanation:
Let us analyze both statements:
- Statement (I): "A direct subsidy is a kind of subsidy which is provided to the farmers by the government in the form of cash..."
This statement is correct. Direct subsidies involve direct cash transfers or financial benefits directly to the farmers' bank accounts.
Examples include income support schemes like the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN), where farmers receive cash directly, or debt waiver schemes.
- Statement (II): "An indirect subsidy is a kind of subsidy that is being provided via discount on other agricultural purchase like seeds and fertilizers."
This statement is correct. Indirect subsidies do not involve direct cash transfers to farmers.
Instead, the government subsidizes key inputs (such as urea, DAP, certified seeds, power, and canal water) so that farmers can purchase them at discounted, below-market prices.
The cash benefit is paid directly to the manufacturers or providers to cover the difference in cost.
Since both statements accurately define direct and indirect subsidies with appropriate examples, both Statement (I) and Statement (II) are correct.

Step 3: Final Answer:
The correct option is (A).