(a) What are the major components of public expenditure on agriculture in India? Would you recommend any changes in the pattern…

(a) Public expenditure on agriculture. Its components are: (i) public investment in major and medium irrigation, flood control, rural roads, markets and storage, and agricultural research and education (ICAR and state universities); (ii) subsidies, chiefly on fertiliser, power, irrigation and interest on crop loans; (iii) price support through MSP procurement; and (iv) since 2019, direct income support under PM-KISAN (₹6,000 a year). The pattern has structural weaknesses. Subsidies, being open-ended and politically popular, have crowded out investment: public capital formation is a small share of agricultural GDP, while subsidies are several times larger. Subsidised urea skews use towards nitrogen and causes nutrient imbalance; free or cheap power depletes groundwater; and the benefits go mostly to larger, irrigated farmers. Studies (Fan, Hazell and Thorat; Gulati) find that the returns, in output and poverty reduction, are much higher for roads, research and irrigation than for input subsidies. I would recommend: (1) raising public investment, especially in research and extension (public R&D is below 1 per cent of agricultural GDP), micro-irrigation and efficient water use, rural roads, cold chains and market infrastructure; (2) rationalising subsidies by shifting to direct benefit transfer and balanced nutrient-based support, and rationalising power through metering and solar feeders (PM-KUSUM); (3) completing ongoing irrigation projects under PMKSY; and (4) targeting support to small and marginal farmers and to rainfed and eastern regions. This would raise yields, cut costs and ease the fiscal burden.

(b) Planning in a market-based economy. After 1991, planning shifted from the command mode of physical targets and licensing to indicative planning. The Planning Commission was replaced in 2015 by NITI Aayog, a policy think tank that frames vision, strategy and action agendas and promotes cooperative federalism. Planning remains significant because markets fail: they under-provide public goods (infrastructure, research, health, education), ignore externalities (pollution, groundwater depletion) and produce unequal outcomes (regional disparity, poverty). Planning sets long-term priorities, coordinates public and private investment, signals direction to markets, guides public expenditure and addresses inequality through targeted schemes; Finance Commission transfers and centrally sponsored schemes link plans to allocation. Its limits are weak enforcement of indicative targets, centre–state tensions and the risk of regulatory overreach. The balance is that markets allocate resources efficiently within an enabling framework that planning provides, as the strategic state coordination of East Asia shows.

(c) Procurement policy after liberalisation. The state still procures foodgrains at MSP, announced on the advice of the Commission for Agricultural Costs and Prices for 22 mandated crops, with a fair and remunerative price for sugarcane. Procurement is through the FCI and state agencies, mainly for wheat and rice, for the PDS and buffer stocks. Post-1991 changes include decentralised procurement (from 1997–98), higher MSPs after 2007 and again after 2018 (at least 1.5 times cost A2+FL), PM-AASHA (2018) with price-support, price-deficiency and private-procurement pilots, state schemes such as Madhya Pradesh's Bhavantar Bhugtan (2017), and e-NAM (2016). Impact on prices: MSP raised farm-gate prices of wheat and rice, especially in Punjab, Haryana and Madhya Pradesh, where procurement is effective, and set a floor for markets. But only about 6 per cent of farmers benefit (Shanta Kumar Committee, 2015); pulses, oilseeds and coarse cereals often sell below MSP, and eastern states see distress sales. Stocks of rice and wheat exceeded buffer norms by large margins in several years at high carrying cost, and cropping shifted towards paddy and wheat, depleting groundwater. Procurement thus stabilised prices for a few crops and regions, but coverage is narrow and costly, so wider price-deficiency or direct support is needed.