Vol. 1, Issue 2, Part A (2019)

The Government of India has put in place what it calls a Minimum Support Price (MSP) system for select crops since the 1960s. This is done to avoid any distress sales by the farmers. This system aims to stabilize agricultural income, promote production, and ensure food security. But experts continue to debate over how it affects farm households’ income distribution. The research examines the impact of MSP on the distribution of income among different categories of farm households of India. It primarily focuses on small, medium and large farmers. It also attempts to see whether this helps reduce poverty and inequality. With the help of statistical tools and case-based research design, the study examines the direct and indirect effects of MSP on farmers’ income in various regions. Farmers seem to rely on market intervention for stabilizing the rise and fall of income. Farmers with bigger land holdings or those who live in an area with good procurement systems gain maximum from MSP. However, small and marginal farmers are excluded. This research found that although MSP safeguards farmers against price fluctuations, it is not effective in narrowing the income gap between rich and poor farmers. Among others, it has been recommended to ensure MSP on more crops, improve implementation in underperforming regions and target small farmers to achieve equitable distribution.