Subsidy means the economic benefit given by the government directly or indirectly to the domestic producers of goods and services. Agricultural subsidy means the benefit given to the farmers for using new and advanced technologies and producing more food grains.

These subsidiaries are important because -

•They provide an incentive for adoption of new technology by the farmers specially the small farmers.

•It assures farmer against the risk of new technology.

•It provides hedging against the risk of climatic conditions and brings equity between rich and poor farmers by enabling the poor farmers to use modern technology and imports.

However, these subsidies are burden for the government and arguments against agricultural subsidies are -

•The objective of granting subsidies was adoption of new technology in agriculture and as the new technology has been widely adopted so now the subsidy should be removed.

•After certain limit subsidies provided incentive for the wasteful use of resources.

•The rich farmers also enjoy the benefits of subsidies though they don't require it.

•Subsidies benefit the fertilizer industry more than the farmers.