The Effectiveness, Accessibility, and Feasibility of Price Policy Mechanism in India: Evidence from the Situation Assessment Survey 2018–2019

Abstract

India’s agricultural price policy came under serious criticism in the past for its inefficiencies and the financial burden that it puts on the state exchequer. Using the household-level Situation Assessment Survey, published by the National Statistical Office (NSO), this study inspects the effectiveness, accessibility, and feasibility of price policy mechanisms in India. It is found that farmers’ income in India has been increasing at a slower rate and the share of income from crop cultivation has been declining over the years. However, farmers who have received the benefits of minimum support price (MSP) and procurement mechanism, reported having a better income as compared to farmers who sell to the local market right after harvest. Indian agriculture is dominated by small and marginal farmers operating on less than two hectares of land. They are more vulnerable to shocks, such as climate change, price crashes, and post-harvest loss. This study critically evaluates the operation of price policy with special reference to the landholding classes of the farmers. It finds that MSP played an important role in keeping the market prices high and ensuring a better return. However, the reach of MSP has been limited to a few crops and in selected states.