Union budget round the corner, it's customary to discuss fiscal prudence and consolidation. But it's also the right time to talk about the need for policy changes, especially those that can unshackle the agriculture sector.
First, a word of caution for votaries of minimum support price (MSP) as the primary tool of making the agriculture sector work better. Total value of agricultural and allied output in India is about ₹56 tn, out of which share of food grain is only 17%. Out of this, GoI is able to procure through MSP only 6% of the total agri and allied output, though it has entailed an expenditure of ₹3.4 lakh cr in FY23. (Interestingly, GoI procures 92.8% and 73.6% of paddy produced by Punjab and Haryana, respectively. For wheat, these ratios are 72% and 56.6%, respectively.)
Livestock at 31% tops the list, followed by vegetables, fruit and spices at 26%. Fishing and forestry produce corner 7% policy share each. So, it's a grave policy mistake to use MSP as the primary tool of price discovery in agriculture, not to mention as a political tool. Alternatively, the politics of 6% procurement clearly obfuscates a better deal for the 71%.
During the last 10 years, MSP of all 22 crops under its ambit has increased more than 100%, with GoI procuring mostly wheat and paddy through FCI and state agencies.