Jan , 2024, Volume : 5 Article : 3
Beyond MSP: Rethinking India’s Age-Old Procurement Policy
Author : Ayush Mishra and Seema Kujur
While the government introduced Minimum Support Price (MSP) to ensure that farmers receive fair compensation for their efforts in making India self-sufficient in foodgrains, Minimum Support Prices have incentivised foodgrains over other crops over the years, thereby diverting the lands from pulses, oilseeds, and other cereals to paddy-wheat cultivation. To export the excess of rice and wheat, the government has to provide an export subsidy, which raises concerns with the World Trade Organisation. Moreover, rising costs caused by annual increases in Minimum Support Prices mean domestic consumers must pay higher prices for food grains. This has posed challenges before agricultural policymakers as they often struggle to maintain a balance between controlling food inflation and ensuring remunerative prices for the farmers. There is little doubt that farmers require assistance but less distortive policies benefit both farmers and consumers.
Keywords: Climate change; Green revolution; Inflation; Price support; Trade.