RELATION BETWEEN THE MINIMUM SUPPORT PRICE AND DOUBLING FARMER’S INCOMES

Abstract

Let us consider this analysis to be based on the fact that MSP is more than 60% of the cost of production. Let us also consider that there are enough procurement agencies, so that the farmers will not lose out due to a lack of agencies in these areas which are rural. These are much more loose assumptions as compared to the reality on the ground. The question that we would try to answer here is whether an increase in MSP and terms of trade in agriculture leads to betterment of farmers in terms of income and well-being. If we were to give the answer in one word, the answer would be no. Farmers in India are not a single unit. According to the National Sample Survey Office data, a huge number of farmers (92%) in India are marginal farmers who cultivate less than 2 hectares (5 acres) of land in 2010–11. Thus, there are a very small number of farmers with large holdings. Given this, there would only be a very small fraction of households who would be net buyer of agricultural commodities and a very few of them would be net sellers. This thus creates an imbalance which works in the favor of the large farmers and any increase in MSP would thus go into further enriching the farmers with larger landholdings. Rawal (2016) has argued, on studying various villages in many parts of India, that top five households in a village derive the most substantial income from crop produce. According to the Agricultural Statistics at a Glance, Ministry of Agriculture , the sale of power tillers increased three times from Rs 17,000 in 2004–05 to Rs 49,000 in 2015–16; for tractors the figures were Rs 2,48,000 and Rs 5,71,000. These figures indicate the ability of the large farmers to invest their surplus in further enhancing the productivity of their farms thus showing their ability to invest in times which were generally considered to be times of agrarian distress.