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  • 4 things to know about the hike in MSP

    Publish date: 6th July, 2018

    The minimum support price (MSP) is the price at which the government purchases crops directly from the farmer, regardless of the original value.

    Every year, they announce the minimum price for about 20 crops. This year, the government raised the MSP considerably for Kharif crops.

    It’s not surprising because the country’s heading for polls next year. Here are four things you need to know about the current revision.

    • Biggest increase in MSP:

      During the Union budget in February, the government announced it would buy crops from farmers at 1.5 times above the cost of production. This is the biggest increase in MSP over the past few years. The MSP for paddy - the most important Kharif crop - has been increased by Rs 200 per quintal (13%). This is much higher than the 5.4% increase last year. Other crops that received a booster dose were Ragi (52%), Jowar (43%) and Bajra (37%).

      • Impact on the economy:

        The implementation of MSP could boost rural demand. However, it has the potential to stoke inflation too. The hike in MSP could increase wholesale inflation by 38 basis points (bps) and retail inflation by 70 bps, according to India Ratings and Research. 100 bps is 1%