Minimum Support Prices and Its Impact on Agricultural Economy

Abstract

Minimum Support Price (MSP) Policy has been one of the supportive mechanisms which were put in place during the wee years of formation of the Agricultural Price Policy. The four decades experience is significant enough to have a close review of the policy. Agricultural Price Policy and price support system have come under academic scrutiny due to the recent changes towards liberalization of the Indian economy. In a true sense, agricultural sector remained far from liberalized despite the fact that agriculture itself is a private activity. In the factor market, the farmer is at receiving end, as the factor prices are largely dictated by the suppliers of the factors of production. At the same time, in the product market, the farmers remain at the receiving end again wherein the prices are decided and dictated by the middlemen or the purchasers. The effectiveness of minimum support price (MSP) for paddy has been examined in different regions of India and its role and contribution towards production in surplus states like Punjab have been studied. Being at the cross roads from both sides and taking the worst part of the market on either side, agriculture remains at the mercy of the operators in these two markets. The study is designed with an objective to explore the effectiveness of MSP and to ascertain if the intended benefits have reached the farmers after such a long period of implementation. The constraints faced in the implementation of MSP have also been analyzed.

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