Improving Competitiveness

MSP benefits remain concentrated

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Minimum support price (MSP) has been an integral part of India's agricultural policy. While it is driven by a well-intentioned effort to ensure food security and safeguard farmers from price risks, it has also had unintended consequences such as less than desired crop diversification and environmental degradation in some parts of the country.

While there is a need to boost farm income, a legally enforced MSP, which some farm groups are demanding, may not be the best solution. This may disrupt price discovery and skew production further, among other consequences. Besides, it is not an effective measure to protect farm income. A recent study by the ICAR-National Institute of Agricultural Economics and Policy Research concludes that the outreach of MSP remains limited. The findings indicate that only 15 per cent of paddy and 9.6 per cent of wheat farmers engage with the procurement system.