On Tuesday, when Finance Minister Arun Jaitley announced a massive bank recapitalisation plan of Rs 2.11 lakh crore and the Bharatmala project of Rs 7 lakh crore, one more thing happened, and that was to help country’s farmers. The government increased the minimum support price (MSP) of wheat, pulses and other winter crops, but rather “modestly” to encourage farmers to lift their production.
The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi approved a modest hike of Rs 110 per quintal in the MSP of wheat at Rs 1,735, up from Rs 1,625 per quintal last year. To encourage the cultivation of gram and masoor, their MSPs have been raised by Rs 400 per quintal to Rs 4,400 and by Rs 300 per quintal to Rs 4,250, respectively. Wheat is the main rabi crop, sowing of which will begin from this month. The crop will be marketed from next year April onwards.
Calling the decision to raise MSP of rabi (winter) crops marginally as “more encouraging action on the ground”, DBS said the decision will encourage farmers to lift their production while keeping procurement costs low. “While the bank recapitalisation plan captured most of the headlines, there was more encouraging action on the ground,” DBS said in a note.
“This comes ahead of the start of the planting season in key states of Uttar Pradesh and Punjab, with the marginal increase is meant to encourage farmers to lift production, whilst keeping procurement costs low,” DBS said adding that a modest increase in MSPs bodes well for food inflation.
In the midst of farmers’ protest and debate over farm loan waivers, DBS said that this year government, which has increased MSPs at the fastest pace in the past five years, is keen on balancing it with supportive measures ahead of key state elections. “This year’s MSP increases are fastest in over five years, signalling that the government is keen to maintain fiscal discipline while balancing that with supportive measures ahead of key state elections and boost the rural sector,” the bank said.