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Last updated: 10 Jul, 2018  

Farmer.9.Thmb.jpg MSP hike

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Bikky Khosla | 10 Jul, 2018

The Union Cabinet last week cleared a big jump in minimum support prices (MSPs) for Kharif crops. It gives farmers a fixed margin of 50% over their input costs. This marks the highest increase in MSP since 2013. Needless to say, the announcement is eye-catching, and amid lingering farm sector woes, it also sounds a much welcome one. The last week decision is in line with the Modi government's Budget announcement that it would procure crops from farmers at 1.5 times the cost of production.

Supporters of the hike view that farmers would benefit from it. The farm sector, despite several ongoing reform measures taken recently, has failed to recover and the hike will now give farmers a much needed relief. Nominal agricultural sector GVA growth stands at 4.5 percent in FY18, the lowest growth since FY04, and the big MSP hike, followed by aggressive procurement by the government, can certainly reverse this situation. Rural demand will get a big push as well, giving a multiplier effect for a large number of sectors.

Critics are sceptical about the move, however. The Opposition took no time in terming the decision as 'politically motivated'. Several farmer unions are of the view that the hike will hardly help as it is based on the A2+FL formula which, unlike the C2 formula as recommended by the M.S. Swaminathan Committee, does not take into account several costs like rent on land and interest on capital, etc. Some economists, on the other hand, see no logic in offering farmers a fixed margin of 50% over their input costs, ignoring demand, supply and international competitiveness.

Both sides of the argument seem to hold water. The decision, coming just ahead of the upcoming general elections, definitely looks like a politically motivated one. The concerns raised by farmers and economists cannot be downplayed altogether. But still we can expect benefits from the hike. It will depend, on the one hand, on how the government ensures benefits to the farmers, and on the other hand, on how effectively it can handle inflation, fiscal deficit and other possible side-affects of the decision.

I invite your opinions.

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It is politically motivated decision only
Umesh Shukla | Wed Jul 11 10:55:55 2018
Hike in MSP for agriculture produce, fixing 50 % margin for farmers, is not good for anyone. Ignoring consumers' interest, and this will further fuel inflation in the country, along with high prices of Petroleum produce. It will be detrimental for Indian exporters of agri produce, as they will lose their competitiveness in global markets. In domestic markets too, consumer demand will be affected severely due to artificial forced inflation in living cost, as all staple foods and Agri commodities will be costly. Should not Indian govt. look into controlling inflation for all people, and they should not forget that Farmers too are consumers, largest consumer demand comes from Rural area, and they will be badly robbed by inflation, no respite will come from hiked MSP, as that will be only futuristic dream, difficult to enforce, against reducing demand, due to reducing purchasing power of consumers both in Urban and Rural area, and on top of it reducing competitiveness in Global exports will make economy in further doll drums, May god give relief to people from such political decisions by ruling parties.

Kunnakkattu | Wed Jul 11 07:00:09 2018
Do not support Government action blindly. When the 7th pay commission report implemented without any change or discussion, why Swaminarayan commission ignored for farmers MSP. Without any benefit to government if the salary and perks of MPs can revise to 100%, then it is not financial problem Government faces, but it is just discrimination. This discrimination too because farmers are not under one banner unlike employees union.

Increase in MSP ( Kharif crop)
Sitaram sharma | Wed Jul 11 06:11:39 2018
It is very good decision taken by present govt & will support to farmers to get better realization. Now govt.Make 100% guaranttee/ensure to purchase full quantity of crop from their Mandies.

MSP Hike
Sandeep Sood | Wed Jul 11 05:44:50 2018
A very welcome step in the right direction. We can go on arguing as to which formula is right for determining prices of farm out put but what is important is a step being taken in the required direction. What is significant is increase in price realisation by the farmers.

Effect of democracy
Shashank | Wed Jul 11 04:55:46 2018
In democracy, popular decisions are political motivated. Otherwise in free market economy no govt. would determine the prices of commodity artificially. Agriculture needs to get more organized like other industries. Else problems of farmers wouldn't end.

sanjay shah | Wed Jul 11 04:09:28 2018
It is good. Demand for taking rent and interest on capital are not justifyable

Subhash Patil | Wed Jul 11 03:46:48 2018
The factors like land rent, loan intrest, draught, losses due to heavy rain should be taken in to account and then fix the MSP. As per my opinion, being a son of farmer, it should be 100% of the cost of expenditure and not 50%.

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