Minimum Support Prices Applied by the Government of India
Minimum Support Prices
A Microeconomics Project
This project analyses the Minimum Support Prices (MSP) applied by Government of India. Justification for the MSP applied to wheat is also given. Finally, measures to reduce the MSP expenditure are recommended.
ACKNOWLEGEMENTS
We would like to thank our mentor Dr.Chandrima Sikdar for making herself available whenever we asked for any help and advice. Regular discussions with her molded our approach to problem solving. She showed us the importance of intuitive, clear understanding and that the quality of work is what matters in the long run. Her enthusiasm, dedication and work ethics have always been a source of inspiration for us. It has been a pleasure to work with and learn from her.
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TABLE OF CONTENTS
1 Introduction .................................................................................................... 4 1.1 1.2 1.3 1.4 2 What is a Minimum Support Price? ........................................................... 4 What is the need for MSP? ........................................................................ 4 How Government decides MSP? ............................................................... 4 List of product that receive MSP ................................................................ 5
MSP Policy of Wheat ....................................................................................... 6 2.1 2.2 Introduction............................................................................................... 6 How did MSP policy of wheat come into picture? ..................................... 6
3 4
Justification of MSP for Wheat ....................................................................... 8 MSP Pricing of Wheat – Higher or Lower ...................................................... 10 4.1 4.2 High MSP – Increases Inflation ................................................................ 10 Low MSP – Farmer’s Income Affected
A Microeconomics Project
This project analyses the Minimum Support Prices (MSP) applied by Government of India. Justification for the MSP applied to wheat is also given. Finally, measures to reduce the MSP expenditure are recommended.
ACKNOWLEGEMENTS
We would like to thank our mentor Dr.Chandrima Sikdar for making herself available whenever we asked for any help and advice. Regular discussions with her molded our approach to problem solving. She showed us the importance of intuitive, clear understanding and that the quality of work is what matters in the long run. Her enthusiasm, dedication and work ethics have always been a source of inspiration for us. It has been a pleasure to work with and learn from her.
1
TABLE OF CONTENTS
1 Introduction .................................................................................................... 4 1.1 1.2 1.3 1.4 2 What is a Minimum Support Price? ........................................................... 4 What is the need for MSP? ........................................................................ 4 How Government decides MSP? ............................................................... 4 List of product that receive MSP ................................................................ 5
MSP Policy of Wheat ....................................................................................... 6 2.1 2.2 Introduction............................................................................................... 6 How did MSP policy of wheat come into picture? ..................................... 6
3 4
Justification of MSP for Wheat ....................................................................... 8 MSP Pricing of Wheat – Higher or Lower ...................................................... 10 4.1 4.2 High MSP – Increases Inflation ................................................................ 10 Low MSP – Farmer’s Income Affected
Bibliography: 1. Planning Commission - AN ANALYSIS OF THE PRICE BEHAVIOUR OF SELECTED COMMODITIES (http://planningcommission.nic.in/reports/sereport/ser/stdy_price.pdf) 2. India Budget Economic Survery : http://indiabudget.nic.in/es2011-12/echap-08.pdf 3. CACP Rabi MSP Report: http://cacp.dacnet.nic.in/RPP/Rabi_Report_2011-12-Vol1.pdf 4. NMCE Report on Wheat: http://nmce.co.in/files/study/wheat.pdf 5. Robert Pindyck , Daniel Rubinfeld; Microeconomics (7e); Prentice Hall 17