Minimum Support Prices in India: Distilling the Facts

20 Pages Posted: 25 Feb 2021 Last revised: 27 Feb 2021

See all articles by Prankur Gupta

Prankur Gupta

The University of Texas at Austin

Reetika Khera

Indian Institute of Technology Delhi

Sudha Narayanan

Indira Gandhi Institute of Development Research (IGIDR); International Food Policy Research Institute

Date Written: February 24, 2021

Abstract

In recent years, the Minimum Support Price (MSP) and government procurement especially of paddy and wheat have been discussed widely, but these discussions have often drawn on evidence that is dated and incomplete. Consequently, such discussions have clouded the facts, resulting in a large number of factoids. According to these popular beliefs, very few farmers benefit (6% only), only large farmers benefit, and only farmers of Punjab and Haryana (and to some extent western Uttar Pradesh) benefit. In this article, we examine these three factoids and draw on multiple data sources to distil the facts. We argue that existing evidence suggests a more complex picture –(1) the MSP impacts 13(16)% paddy(wheat) sellers; (2)the geographies of procurement have expanded to new states including notably, Madhya Pradesh, Chhattisgarh and Odisha, and (3) Although, at the national level, there is a large farmer bias, this doesn’t imply exclusion of small and marginal farmers. In fact, majority of the beneficiaries are marginal and small farmers on both the extensive and the intensive margins. Further, we find substantial heterogeneity by states. Haryana for instance has a bias in favour of small and marginal farmers. We conclude that debates on the MSP and procurement must therefore take into account the changed geography of procurement and the profile of sellers and recognize the diversity of experiences with procurement across states.

Keywords: price support, procurement, Minimum Support Price, paddy, wheat, India

JEL Classification: Q13, Q18, H7

Suggested Citation

Gupta, Prankur and Khera, Reetika and Narayanan, Sudha, Minimum Support Prices in India: Distilling the Facts (February 24, 2021). Available at SSRN: https://ssrn.com/abstract=3791859 or http://dx.doi.org/10.2139/ssrn.3791859

Prankur Gupta

The University of Texas at Austin ( email )

Department of Economics
2225 Speedway C3100
Austin, TX 78712
United States

Reetika Khera

Indian Institute of Technology Delhi ( email )

Hauz Khas
New Delhi, 110016
India

Sudha Narayanan (Contact Author)

Indira Gandhi Institute of Development Research (IGIDR) ( email )

Gen A.K. Vaidya Marg Santoshnagar
Goregaon (East)
Mumbai, Maharashtra 400065
India

International Food Policy Research Institute ( email )

1201 Eye St, NW,
Washington, DC 20005
United States

HOME PAGE: http://https://www.ifpri.org/profile/sudha-narayanan

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