Introduction
The concept of economic development has received tremendous changes since the pre-colonial era, a feature that seeks government intervention to enhance growth. These changes have an implication on the role of the government in developing effective programs to enhance economic development in a state. Economic growth prospects are achieved through efficient allocation of resources, which are the main factors that steer production by moving a country from low productivity to high productivity. However, the desire to experience rapid economic development goals is often hampered by existence of rigidities, which are either in technological or institutional forms. Therefore, the sector is faced with challenges in establishing efficient resource transfer, an aspect that calls for government intervention by enacting effective programs to help enhance economic development (Chirwa & Dorward, 2013). There are different programs used by the government to increase economic growth in a country, and examples include fiscal policy or subsidies. The paper aims at outlining the role of government intervention in promoting economic growth in a country with a primary focus on input subsidies in the agricultural sector.
Main Body
The concept of agricultural input subsidies came into existence in the 1960s to 1980s as a government intervention to enhance agricultural production in poor rural economies, especially in Africa. The inputs were made available to all farmers or specific regions, which were either provided free or sold at lower prices than prevailing market prices. For the case of small-scale farmers, they were allowed to access the inputs at discriminated prices for production purposes and were not allowed to sell the inputs to other people whatsoever. However, with increased use of the products, the programs become more expensive for governments to support and maintain the political pressures experienced, recommending for a subsidy rate to increase (Kumar & Joshi, 2014).
Subsidies in agricultural development are renowned for enhancing productivity in the sector, and this is supported by the adoption of new technologies. Reduced cost is significant in increasing the profitability rate of farmers as they obtain the right inputs for use and get to understand the correct usage of the same. The subsidy programs offer farmers with an opportunity to get access to credit and extension services, and these aspects support efficient development of the agricultural sector.
Enhancing agricultural productivity is one of the approaches that countries use to obtain stability in food security, an issue that researchers understand to be accomplished through provision of agricultural input. Developing countries require having adequate inputs as they mainly depend on the agricultural sector for the development of their national economy. However, it is vital to note that inputs and technologies required for enhancing productivity in the industry are often expensive, hence are beyond reach of most of the poor farmers. Therefore, through agricultural input subsidies, inputs are made affordable to farmers as price is set below the market rates. Some of the significant impacts of the program include realization of increased productivity, improved food security, low cost of food prices and continued economic growth.
As mentioned earlier, the concept of agricultural subsidies came into existence in the 1960s and 1970s but was later regarded ineffective in the ‘90s. However, in the recent past, the programs have proved effective in most parts of the developing countries, a feature that has made them be referred to as smart subsidies. The introduction of subsidy programs does not only solve the short-term goals of a country, which is meeting food security goals, but also satisfies the long-term objectives of increasing productivity (Kumar & Joshi, 2014). The government subsidies, therefore, utilize the concept of vouchers to farmers, rationing, and other practices to ensure that allocation of inputs reaches the poor in the society who are in need.
Some of the direct impacts of subsidy programs in a country include intensification of agricultural production and enhanced productivity. Historically, the subsidy programs have been used to enlighten farmers on better farming techniques and adequate knowledge, an aspect that resulted in increased benefits to farmers. The programs further help in introducing new innovative practices that do not only contribute to increased productivity but also the development of the national economy.
However, inefficient use of subsidy programs often contributes to negative impacts on economic development, an aspect that makes investors consider these programs as inefficient (Ricker et al., 2013). Some of the adverse effects include ineffective control of the cost of subsidies, diversion of inputs to other unintended stakeholders, overuse, and market distortions among other factors. However, despite the challenges, the debate of inefficient state of the programs has over the decades been challenged as most countries still consider the programs as more efficient in supporting economic development.
However, it is important for countries to understand the following concerns while introducing input subsidies so as to yield the several benefits from government intervention programs. It should be observed that ineffective implementation of the programs brings a lot of risks and challenges to the management of economic development plans in a country. From the study, it is evident that input subsidy has played a role in enhancing agricultural development and are used in overcoming market failures that constrain economic growth. Moreover, another benefit of subsidies includes the fact that it contributes to increased production of staple food, an aspect that is important to consumers.
Government intervention, by use of agricultural input subsidy, helps enhance consumer welfare as it lowers price of the food prices. This initiative increases demand for the product hence benefiting the producers as well. Therefore, for governments to realize significant results from the programs, they have to introduce an aspect of rationing to limit the cost of the inputs as well as targeting to ensure that the merchandise reaches the intended farmers (Ricker et al., 2013).
Although critics argue that government intervention has an adverse impact on economic growth, most scholars think otherwise and are stating that the government has a role in spurring economic development. Some of the negative roles of government in regulating economic growth in the past include enforcing of policy issues, taxation and other aspects to deal with inefficient spending. However, a researcher like Tambunan, (2008) is in agreement that without government intervention, countries would not have achieved their current economic state of development. Over the years, we have evidenced cases where governments have pursued industrial policies, aspects that contribute to increased cases of economic development.
As evidenced by the study, governments intervene in the market for purposes of addressing issues with inefficiency. In cases of a perfectly efficient market, resources are optimally allocated to those that need them and in the right amounts. For our case study, agricultural input subsidy is a government intervention to help supply inputs to poor farmers who cannot afford the products based on the retail market rates. Therefore, government intervention helps by combating different inequalities by introducing subsidies with a target to reach poor farmers in the local setting to enhance productivity (Balázs, 2014). Some of the primary goals of government intervention in a country are to help maximize social welfare, by way of eliminating negative externalities experienced in an inefficient market. For the purpose of our study, government intervention is necessary to help promote general economic fairness; this is possible through introduction of welfare programs to reallocate resources to people in society who are in need of them. The subsidy programs have rationing to ensure that the target individuals obtain the right inputs in the right quantities as stipulated by the government.
Conclusion
Government intervention plays a vital role in supporting economic development in a given state as it supports maximization of social welfare as well as effective allocation of resources to the needy through different programs. In the study, it is evident that agricultural input subsidy is a government intervention intended to spur agricultural productivity in a country, which is critical in supporting economic development. However, though the concept came into existence in the 1960s, it is evidenced that if the program is not well implemented, it has adverse effects on the economic development of a country. However, if well implemented as for the case of smart subsidies that enforced targeting and rationing policies, the program has significant contributions to supporting economic development in a country. Therefore, it is worth concluding that every government has important roles in promoting economic growth of their respective countries by introducing programs such as subsidies, fiscal policies, and taxation. From our studies, African countries indicate areas where governments have in the past succeeded in the implementation of agricultural input subsidy programs to support the growth of their respective economies.
References
Balázs, F. (2014). Government Interventions in the Venture Capital Market – How Jeremie Affects The Hungarian Venture Capital Market?. Annals of the University of Oradea, Economic Science Series, 23(1), 883-892.
Chirwa, E., &Dorward, A. (2013).Agricultural input subsidies: changing theory and practice.United Kingdom: Oxford University Press.
Kumar, P., & Joshi, P. K. (2014). Input subsidy v s farm technology — which is more important for agricultural development? Agricultural Economics Research Review, 27(1), 1-18
Ricker-Gilbert, J., Jayne, T., & Shively, G. (2013).Addressing the “wicked problem” of input subsidy programs in Africa.Applied Economic Perspectives and Policy, 35(2), 322–340
Tambunan, T. (2008). SME development, economic growth, and government intervention in a developing country: The Indonesian story. Journal of International Entrepreneurship, 6(4), 147–167.
