Influence of the msp-related procurement on farm harvest prices of paddy and wheat in India

This study investigates the impact of the Minimum Support Price (MSP) system on farm harvest prices (FHPs) for paddy and wheat in India. As a government intervention aimed at stabilizing agricultural markets and safeguarding farmers against price volatility, the MSP establishes a price floor for designated crops prior to planting, thereby guaranteeing a minimum price for farmers’ produce. Our research assesses the effectiveness of the MSP in influencing FHPs for paddy and wheat across key producing states from 2002 to 2021. Utilizing a comprehensive dataset, we employ a panel model to analyze the relationship between MSP-related procurement volumes and FHPs, while controlling for variables such as production costs, market prices, and overall production levels. The results indicate that government procurement under the MSP significantly enhances FHPs for both crops, highlighting the crucial role of such interventions in improving farmers’ incomes. In light of these findings, we recommend expanding MSP-based procurement to encompass a wider array of crops and regions.