Practice Question 12

Q) Will a rise in the minimum support price (MSP) solve the problem of agriculture distress? Critically discuss.

Superb Hints:

Minimum Support Price is the price at which government purchases crops from the farmers, whatever may be the price for the crops. Minimum Support Price is an important part of India’s agricultural price policy.

The main objective is to support the farmers from distress sales and to procure food grains for public distribution.

Role of MSP in reducing agriculture distress-

1. Controlling price Volatility-Minimum Support Price (MSP) system acts as a tool for the government to control sharp fall and rise in the prices of crops. This helps keep a minimum price so that prices do not fall below a certain point. This helps farmers in between price fluctuation.

2. Reducing debt burden -Farmers get fair amount for their produce which helps them to sustain their losses, thus they do not get affected drastically due to debt burden.

3. Increased income- Farmer's income gets augmented and it can be used as a tool to bring them out of their poverty levels

4. Eliminating middlemen - Farmers can directly sell their produce to the government at fixed prices and save themselves from the wrath of traders and dealers who generally cheat farmers by offering them low prices.


Limitations of MSP-

1. Inflation - The higher returns due to increased MSPs increase the cash flow in the economy and this may again lead to increase in prices of food grains thus affecting poor farmers the most.

2. Low MSP coverage- Effectiveness of government procurement is more in few states like Punjab, Haryana and Andhra Pradesh etc. Although Govt announces MSP for 23 crops but effectively procures only wheat and rice. Thus, only handful farmers are able to have benefit.

3. Degrading Soil fertility - Increase in MSP leads to excessive sowing of a particular crop which reduces the prices obtained by it. For example, due to intensive growing of crops like paddy and wheat the lands in Haryana and Punjab are becoming infertile due to salination of soil. Land degradation affects farmers directly.

4. Lack of Private investment - Due to sure return under MSP, farmers rely on political pressure to remedy their problems, instead of adapting to market. This all keeps private investment away for the sector.

5. Lack of awareness in small and marginal farmers - Majority of marginal farmers sell their crop to village moneylender thus defeating the purpose of MSP.


Certain suggestions other than MSP rise that can address agricultural stress:

1. To increase the farm productivity India needs to adopt more scientific approach to agriculture and needs better investments in research to find better-yielding seeds. This in turn will augment farmer’s income.

2. For sustainable farming, farmers need to be better educated on the advantages of growing pulses and encouraged to dedicate more acreage for the crop.

3. Government needs to strengthen the procurement system across the country and enlighten the small farmers particularly about the MSP regime and the procurement process.


Minimum Support Price (MSP) does help to provide safety net to farmer but just increasing MSP rate will not serve the purpose. Better marketing facilities, institutional credit, irrigation, quality seeds and fertilizers, procurement during times of market glut and a social safety net during natural calamities are the basic inputs and services farmers need. They together will ameliorate the agricultural distress.

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