General Studies (Paper - 3) : Model Question & Answers

Question: 'Minimum Support Price (MSP) Policy in India has mainly favoured the producers rather than abiding to all the principles of an ideal Agricultural Pricing Policy.' Do you agree? Give arguments to support your answer.

Answer: Yes, this is largely true for India. An ideal MSP policy should take care of both the producers and consumers in order to fulfil the food security goal. But, in India it has focused more on producers, particularly since 1980s by offering higher MSP for Wheat and then Rice, under political pressure from the large farmer lobbies.

MSP has often been much higher than both paid-out and imputed costs put together which not only increase food subsidy, but also fuels higher price in the market. It has increased wastage of grains due to lack of storage facilities.

Also, pricing policy intervention by government should have been more beneficial to the poor farmers which has not happened in India as most of such benefits have gone to already developed states like Punjab and Haryana.

Pricing policy plays more important role during a surplus when market prices may fall affecting the farmers but in India, higher MSPs are announced well before the cropping season. Although critiques say that this is also because we have largely reduced input subsidy that was given earlier. Less input subsidy loss can only be balanced out by higher MSP.