New Delhi: of the Union Cabinet decision According to economists, raising the minimum support price (MSP) for a range of rabi crops on Tuesday is aimed at slowing the rapid growth in India’s current account deficit (CAD) by encouraging domestic producers.
The Cabinet Committee on Economic Affairs has approved the increase in MSP for all mandatory Rabi crops for the marketing season 2023-24. The highest increase of Rs 500 per quintal was provided for pulses (Mussoorie), followed by an increase of Rs 400 per quintal for rapeseed and mustard. The MSP of safflower was increased by Rs 209 per quintal and for wheat, barley and gram by Rs 110, Rs 100 and Rs 105 per quintal, respectively.
The decision to increase MSP, especially for lentils and oilseeds such as rapeseed and mustard, is an attempt by the government to encourage domestic production to reduce India’s import dependence for these two crops.
“For pulses and edible oils, we have a huge dependence on imports,” DK Pant, chief economist at Mumbai-based credit rating agency India Ratings, told ThePrint.
“Look at the situation the country is facing, it is facing a rise in global prices, so your CAD is rising and this is having an impact on your currency. So it is a double whammy of high commodity prices and weak currency,” he said.
“Now, if you can increase domestic production by increasing the MSP, you can have a favorable impact which will reduce your import dependence,” Pant said.
India’s CAD – the volume by which imports exceed exports – rose to $23.9 billion in the April-June 2022 quarter, the latest data available. This is the highest in at least three years. some guesses The CAD is projected to grow further to $40 billion in the July-September 2022 quarter.
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incentive to increase production
Another reason why the government may go ahead with such a significant increase in MSP is to ensure that domestic production either remains the same or increases in the event of a Estimated global shortfall, DK Srivastava, India’s chief policy advisor at consultancy firm Ernst & Young, told ThePrint.
“The world economy as a whole is characterized by a projected shortage of various food items, and in order to avoid any impact of this on the Indian economy, the Government is inclined to ensure that farmers are provided with the means to maintain or increase production in selected crops. Enough is encouraged,” he explained.
Srivastava further said that the government also wants to procure for its stock, adding that the MSP not only serves the purpose of providing minimum income to the farmers, but also helps the government in procuring these crops.
According to the MSP increase press release, the government is contemplating to provide remuneration rate to the farmers in respect of cost of production.
“The increase in MSP for rabi crops for the marketing season 2023-24 is in line with the announcement of the Union Budget 2018-19, with a target to fix the MSP at a level of at least 1.5 times the all-India weighted average cost of production. Fair fair remuneration for farmers,” it read.
It said the maximum rate of return is 104 per cent for rapeseed and mustard, followed by 100 per cent for wheat, 85 per cent for lentils, 66 per cent for gram, 60 per cent for barley and 50 per cent for safflower .
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‘BJP Promise’
Your 2018-19 . In budget speechThe then Finance Minister Arun Jaitley had said that the government has kept the BJP’s manifesto promise of providing farmers 1.5 times their cost of production.
Jaitley had said, “Our party manifesto states that farmers should recover at least 50 per cent more than the cost of their produce, in other words, one and a half times the cost of their production.
He had further said that the government is very sensitive to this proposal and has declared MSP at least one and a half times the cost for most of the Rabi crops.
Tuesday’s press release said the government is particularly focusing on increasing the production of oilseeds and pulses. Government data shows that oilseeds production has increased from “37.7 million tonnes in 2021-22” to “27.51 million tonnes in 2014-15”, a growth of 37 per cent.
“The productivity of pulses and oilseeds has increased significantly since 2014-15,” the release said, adding, “In case of pulses, the productivity increased from 728 kg/ha (2014-15) to 892 kg/ha (2014-15). hectare (Fourth Advance Estimate, 2021-22) i.e. an increase of 22.53%. Similarly, productivity in oilseed crops has increased from 1,075 kg/ha (2014-15) to 1,292 kg/ha (4th Advance Estimate) , 2021-22).
(Edited by Therese Sudeep)