Public procurement of foodgrains and farm income nexus in India: A macro-level analysis

Public procurement of foodgrains with pre-announced MSPs in many ways helps the farmers to increase their income from farm enterprise. Although studies are available on the role of MSPs on farm income of different crops, not many studies are available relating public procurement of paddy and wheat with its farm income covering different states over a time. An attempt has been made in this study to examine the role of public procurement of paddy and wheat on its farm income. The trends in public procurement of paddy and wheat in relation to its production in India has been analysed covering data from 1970-71 to 2015-16. With the use of regression analysis, the impact of public procurement of paddy and wheat on farm income has been analysed covering major states using data of six time points: 1991-92, 1995-96, 2000-01, 2005-06, 2010-11 and 2014-15. The analysis on procurement shows that the state-wise concentration of procurement of paddy and wheat has diffused over a time. The descriptive analysis shows that the states that have the procurement percentage of above the national average have reaped higher farm income than those states having the procurement level less than the national average in both paddy and wheat. The regression analysis carried out to measure the exact impact of public procurement on farm income suggests that every one percent increase in procurement has increased the farm income by about Rs. 221 per acre for paddy and about Rs. 100 per acre for wheat during the period of analysis. It is also found that the increased percentage of procurement in relation to its total production of each state is more important than the absolute quantity of procurement to have increased farm income in both paddy and wheat.