Govt's decision to hike MSP for Kharif crops is a master stroke: Experts

The Indian government’s recent announcement of increasing the minimum support prices (MSP) for Kharif crops for the marketing season 2023–24 has been hailed as a masterstroke by experts. Led by Prime Minister Narendra Modi, the Cabinet Committee on Economic Affairs (CCEA), has approved the MSP hikes for various crops.

Among the 14 Kharif crops, moong witnessed the highest increase in MSP, going from Rs 7,755 to Rs 8,558 per quintal. Sesame also saw a significant increase to Rs 8,635 per quintal from Rs 7,830 in the previous season, ranking as the second-highest increase after moong.

The MSP plays a crucial role in providing a safety net to Indian farmers, ensuring they receive a minimum guaranteed price for their products. It also helps in stabilising food prices in the market and serves as a tool for the government to incentivise farmers to cultivate specific crops.

Summaries of economists' reactions to the MSP increase

Kotak Economic Research

• MSP has increased by almost 17.4 per cent annually, when factoring in productivity.
• That's lower than in previous years leading up to elections. A higher MSP would likely serve as a floor for other crops, however, this would depend heavily on supply.
• If the MSP is raised, it will likely increase demand in rural areas, but the RBI will likely seem cautious about doing so.
• The odds of a rate increase in August are high. There won't be a substantial monetary effect.

UBS Global Research