Minimum Support Price (MSP) is a Necessity

Minimum Support Price (MSP) of farm produce has always been a controversial issue as higher MSP always meant higher cost of living for the salaried class and so higher inflation for them! And when urbanization in India has become more prominent than ever, high MSP becomes a political issue rather than being just an economic matter. And over time, MSP which was brought in the Indian economic policy making has become completely a political issue and its economic importance has been pushed in political background!

But the question remains unanswered as to why India needs a regime of MSP when it is a very politically, socially as well as economically sensitive issue?

For salaried class and the populace living in urban centers, higher MSP simply means a costly thing for them for sure in form of inflation and taxes but on the other hand, for the farmers, it is the only tool available to them to get somehow less than enough prices for their products. People sitting in the cities and at urban centers may fail to understand this and they have reason to behave in that way. But this is the irony and cruel truth about the agriculture sector in India.

At this point of time, we need to understand that Economics is not always Mathematics!

We know very well that farmers don't have pricing capabilities. Rather the buyers for farmers who are middlemen decide the prices of agriculture produce and these buyers fix prices on their own wishes to protect their own interests rather than any economic sense. Farmers don’t have a market for themselves which works for them; which protect them! All the efforts to bring that market in place by the Central Government through Farm Bills were snubbed by the political outfits of farmers finally leading to their losses! But who cares? At least farmers are not.

Just think if the farmers have pricing capabilities like other producers, would there have been any relevance of this MSP regime? The answer to this question is very simple. No, not at all! If they could, they must have been fixing the prices to protect their interests than just to protect consumers! This plain fact itself is enough to tell that they need to be supported through the MSP mechanism or some other regime which can at least provide some relief to them if cannot protect their interests!

But the problem is that MSP must not be used as a political tool which it is today! And the kind of politics to which we are used to, MSP would always be a political issue in India! None wants an economic discussion on merits! At least the farmers are not ready to understand that they need to think of their interests through economic rationales than political stunts!

Rajeev K. Upadhyay