Subject: Economy

Answer:

The Minimum Support Price (MSP) represents a crucial agricultural price policy instrument that serves as a safety net for farmers by guaranteeing a minimum price for their produce, protecting them from market volatility and ensuring food security for the nation. The recent increase in MSP for Rabi crops 2025-26, with wheat prices rising to ₹2,425 per quintal, demonstrates the government's commitment to farmer welfare.

How MSP Functions as Income Support

• Price Floor Mechanism: Acts as a minimum guaranteed price, preventing distress sales during harvest season and market gluts.
• Risk Mitigation: Provides income security to farmers by protecting against price fluctuations and market uncertainties.
• Production Incentive: Encourages farmers to grow essential food crops, contributing to national food security objectives.

Impact on Farmer Income

• Direct Income Support: Studies show that improved market access increases net farm income by Rs. 392 and gross income by Rs. 764 per percentage point improvement.
• Regional Benefits: States with robust procurement systems like Chhattisgarh, Telangana, and Odisha have shown significant positive impact on farmer incomes.
• Market Stabilization: Helps maintain price stability in agricultural markets, benefiting both farmers and consumers.

Challenges in MSP Implementation

• Limited Coverage: Not all farmers benefit due to procurement constraints and regional variations.
• Awareness Issues: Low awareness in certain regions limits the effectiveness of the MSP system.
• State Variations: While MSP is uniform nationwide, varying production costs across states affect profitability differently.

Way Forward

• Technology Integration: Implementation of e-NAM (Electronic National Agriculture Market) to improve market access and price discovery.
• Awareness Programs: Strengthening farmer awareness through Krishi Vigyan Kendras and agricultural extension services.
• Infrastructure Development: Enhancing storage and procurement facilities through schemes like Pradhan Mantri Kisan Sampada Yojana.

The effectiveness of MSP in rescuing farmers from the low-income trap requires a holistic approach combining price support with market reforms and infrastructure development. The success stories of states like Chhattisgarh and Telangana demonstrate that when implemented effectively, MSP can significantly contribute to farmer welfare and agricultural sustainability.