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Updated on July 18, 2023

MSP stands for Minimum Support Price, and it is a price floor set by the government for certain agricultural commodities in the commodity market. The MSP serves as a form of guaranteed price support to safeguard the interests of farmers by ensuring that they receive a minimum price for their produce.

How is MSP determined?

The government determines the MSP based on various factors such as the cost of production, market conditions, demand-supply dynamics, and the need to provide a fair return to farmers. The MSP acts as a safety net for farmers, protecting them from fluctuations and market uncertainties. It aims to incentivize agricultural production, promote food security, and ensure farmers receive remunerative prices for their crops.

Why is it important?

When the market price for a particular commodity falls below the MSP, the government may intervene by purchasing the produce directly from farmers at the MSP or providing subsidies to bridge the price gap. This helps support farmers’ income and provides stability to the agricultural sector.

MSP plays a crucial role in agricultural policies and has an impact on the overall economy. It can influence farmers’ production decisions, input usage, crop choices, and supply dynamics in the market. The MSP policy has both supporters and critics, and debates often revolve around its effectiveness, impact on government finances, market distortions, and the need for reforms in agricultural marketing systems.