The government has announced a significant increase in the minimum support price (MSP) of wheat and masur for the 2023-24 crop year. The MSP of wheat has been raised by Rs 40 to Rs 2,015 per quintal, while the MSP of masur has been increased by Rs 400 to Rs 6,000 per quintal. This is the highest hike in the MSP of Rabi crops in the last ten years. The decision was taken in view of the rising food inflation and the need to ensure food security for the poor.
Food inflation driven by adverse climatic conditions
The country has been facing a period of elevated food inflation since February 2022, when adverse climatic conditions such as unseasonal rains, hailstorms, and cyclones damaged the crops and disrupted the supply chains. The retail food inflation was 6.8 percent in 2022 and 6.2 percent in 2023 (January-September), according to the official data. The prices of cereals, pulses, vegetables, fruits, eggs, and milk have increased significantly in the past year.
MSP as a factor of food inflation and procurement
Economists have often pointed out that the MSP is an important factor that contributes to food inflation, as it influences the cost of production and the market prices of agricultural commodities. The MSP is also a tool to incentivize farmers to produce more food grains and ensure adequate procurement by the government for public distribution. The government distributes wheat and rice to 81.35 crore people under the National Food Security Act 2013 at subsidized rates.
Comparison of MSP hike under NDA and UPA governments
The NDA government has generally given a lower hike in the MSP of Rabi crops than the previous UPA government. The average annual increase in the MSP of wheat during the UPA period (2009-10 to 2013-14) was 9.4 percent, while it was 5.4 percent during the NDA period (2014-15 to 2022-23). Similarly, the average annual increase in the MSP of masur during the UPA period was 11.8 percent, while it was 7.9 percent during the NDA period.
Implications of MSP hike for farmers and consumers
The hike in the MSP of wheat and masur is expected to benefit the farmers who grow these crops, especially in states like Punjab, Haryana, Madhya Pradesh, Uttar Pradesh, and Bihar. The farmers will get a higher income from their produce and will be assured of a fair price for their crops. However, the hike in the MSP may also have an impact on the consumers, as it may lead to higher food prices and inflationary pressures in the economy.