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MSP: The tool for doubling farmers’ income

MSP, the Minimum Support Price is the minimum price promised by the government to the farmers.

Need of MSP

  • To assure
  1. Minimum income to farmer
  2. Food security
  • To promote
  1. Agriculture production
  2. Rural economic growth
  3. Sustainable economic growth
  • To help bridge
  1. Rural-urban divide
  2. Rich-poor gap

MSP in India

  • A type of market intervention taken by government of India
  • Announced by government of India
  • Calculated and recommended by CACP
  • Announced at the beginning of sowing period
  • Not universal
  • Open ended scheme

Methodology of MSP calculation

CACP  adopts different methods to calculate MSP. They are

  1. 1.A 2 cost
  2. 2.A 2 + FL cost
  3. 3.C 2 cost
  4. C 3 cost

Limitations of present methodology

It ignores

  1. Demand- supply conditions of the market
  2. Inter-crop price parity
  3. Agriculture – industrial products price parity
  4. Price trends in the domestic market
  5. Price trends in the international market
  6. It fails to analyzes terms of trade

How to double farmers’ income through MSP?

  1. Suggestion by Swaminathan Commission should be implemented i.e. government should declare MSP at C 2 + 50%.
  2. The price disparity created since independence must be gradually gaped down.

Shortcomings of MSP

  • Not universal
  • Limits risk taking appetite of farmers
  • Against agro-climatic zoning
  • Creates regional disparity
  • Against balanced diet
  • Burden on exchequers

Substitute for MSP

  • Income assurance either in the form of IAS or UBI
  • Commercialization of agriculture
  • Infrastructural development in rural India like
  1. E-NAM
  2. Storage
  3. Retail chain
  4. Road & telecom connectivity


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