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17th February 2024 (9 Topics)

What Swaminathan panel said

Context

The renewed protest by farmers over legal status of MSP has put the focus back on MSP. The government is reluctant to provide the legal status citing high fiscal cost and other reasons such as WTO norms adherence.

  1. Exaggerated Cost of Legal MSP:
    • Lack of Clarity on Demand: Farmers demand a legal guarantee for Minimum Support Prices (MSP) amid misconceptions about fiscal costs and market implications such as large figures to the tune of Rs 10-18 lakh crore have been floated as the cost of the guarantee.
    • Misconceptions on Fiscal Costs: Assumptions of Rs 10-18 lakh crore costs stem from misunderstanding agricultural markets and MSP's role in price stabilization.
    • Market Dynamics and MSP: Misconceptions persist regarding the extent of government intervention required, overlooking market dynamics and consumer subsidies.
  2. Market Intervention and Procurement:
    • Limited Implementation of MSP: Despite yearly announcements, MSP interventions are primarily limited to rice and wheat, often for fulfilling statutory obligations  and subsidy to consumers rather than supporting farmers.
    • Government Reluctance: Successive governments hesitate to legalize MSP due to concerns over excessive fiscal requirements, driven by inflated cost estimations.
    • Procurement Dynamics: Government intervention in procurement is necessary only when market prices fall below MSP, with actual procurement often lower than speculated figures.
  3. Economic Implications and Reform Opportunities:
    • Cost-Benefit Analysis: The cost of implementing legal MSP is likely overstated, with benefits including price stability, consumer protection, and rural economic revival outweighing fiscal concerns.
    • Diversification and Expansion: Legalizing MSP provides an opportunity to rectify existing imbalances by diversifying and expanding MSP coverage to bridge regional agricultural productivity gaps.
    • Addressing Agrarian Neglect: Farmer demands reflect years of agrarian neglect, necessitating reforms to improve real incomes, wages, and overall rural economic stability.
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