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Supporting Indian Farmers: Price Support or Direct Income/Investment Support?

Author

Listed:
  • Ashok Gulati

    (Indian Council for Research on International Economic Relations (ICRIER))

  • Tirtha Chatterjee
  • Siraj Hussain

Abstract

In this paper we review the scheme, the challenges it posed in its implementation during kharif 2017-18, but more importantly compute its likely costs, if it is scaled at the national level. Under the assumption of MSP being equal to 1.5 times A2+FL cost, and excluding the quantum of paddy and wheat procured at MSP and sugarcane at FRP/SAP, we find that compensation of Rs 56,518 crore will have to be made if market prices are 10 per cent lower than MSP, Rs 1.13 lakh crore when market prices are 20 percent lower than MSP and Rs 1.69 lakh crore when prices are 30 per cent lower than MSPs. We find that the scheme is prone to manipulation by traders and lower level mandi functionaries, and may end up helping them more than the farmers, despite best intentions of the Government.

Suggested Citation

  • Ashok Gulati & Tirtha Chatterjee & Siraj Hussain, 2018. "Supporting Indian Farmers: Price Support or Direct Income/Investment Support?," Indian Council for Research on International Economic Relations (ICRIER) Working Paper 357, Indian Council for Research on International Economic Relations (ICRIER), New Delhi, India.
    • Handle: RePEc:bdc:wpaper:357
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