The report also mentioned that MSP might be converted to floor price of auction on e-NAM to benefit farmers.
State Bank of India’s Economic Research Department has published a report on recent increase in MSP (Minimum Support Price) for Kharif crops for marketing season 2023-24 by central government. The report has been authored by Dr Soumya Kanti Ghosh, Group Chief Economic Adviser, State Bank of India.
Highlights from the report:
The Union Cabinet has approved increased MSP for Kharif crops for marketing season 2023-24. The increase in MSP is in the range of 5-11 per cent. Interestingly, this increase is unlikely to be inflationary as any impact on inflation is directly proportional to procurement. While procurement of cereals is primarily in the realm of wheat and rice, the procurement of pulses by NAFED is not much.
Separately, in a welcome move that is unnoticed is that latest average modal prices in e-NAM mandis are higher than the MSP for some of the crops. MSP should be converted to Floor Price of Auction on e-NAM so that growers of crops like maize, ragi, moong are also benefitted. The e-NAM is not a parallel marketing structure but rather a device to create a national network of physical mandis which can be accessed online. Currently 1.76 crore farmers are part of e-NAM in 1361 mandis.
The role of MSPs in influencing the inflation trajectory in India has been an issue of intense academic and public policy debate. While empirical findings are mixed, the actual impact of the MSP hike would depend on the procurement strategy of the Government as well as the ruling market prices of various crops vis-à-vis the revised MSPs. In our case, we believe the impact will be negligible depending on the prices prevailing in e-NAM markets and also the procurement.
We recommend that MSP should be converted to Floor Price of Auction on e-NAM so that growers of crops like maize, ragi, moong are also benefitted.
