Explain the provision of minimum support price and its impact on the market?
Dear Student,
A pre-announced price paid to the farmers for their crops is called Minimum Support Price. It is declared by the government every year before the sowing season to provide incentives to the farmers for raising the production of these crops .
As the prices are announced before the crops are ready to harvest, it assures the farmer of getting a minimum price from the govt and not worry about the prices in the market after harvest.
The disadvantage of MSP is that the government issues price on selected crops like rice and wheat and not on coarse grains that the poor can afford.
A higher MSP leads to increase in crop price, which should invariably increase the inflation index. MSP ensures a definite return to the producer thus keeping the price line steady and helping inflation rather than let price fall with high availability,which could adversely affect the prices thus reducing inflation.
The hike in MSP is all set to impact international price of rice and cotton — top agricultural commodities exported from the country.
Regards
A pre-announced price paid to the farmers for their crops is called Minimum Support Price. It is declared by the government every year before the sowing season to provide incentives to the farmers for raising the production of these crops .
As the prices are announced before the crops are ready to harvest, it assures the farmer of getting a minimum price from the govt and not worry about the prices in the market after harvest.
The disadvantage of MSP is that the government issues price on selected crops like rice and wheat and not on coarse grains that the poor can afford.
A higher MSP leads to increase in crop price, which should invariably increase the inflation index. MSP ensures a definite return to the producer thus keeping the price line steady and helping inflation rather than let price fall with high availability,which could adversely affect the prices thus reducing inflation.
The hike in MSP is all set to impact international price of rice and cotton — top agricultural commodities exported from the country.
Regards