Govt hikes paddy MSP by Rs. 60 per quintal for 2016-17
The article reports announcement by the Indian Government to increase the Minimum Support price for Paddy – a move to support the paddy farmers. The increase in the MSP (Minimum Support price) will compensate the paddy farmers/producers for increase in costs of production and other volatilities in Market Demand for paddy crop with the consideration for the reserve stock of rice in the country.
Topics include Minimum Price, Buffer stock, Price Control and consequences of Price Control. Explain the unintended effects of Minimum Support Price on the Paddy market and its effect on Allocative and Cost Efficiency of markets using the Price Control and Buffer Stock diagrams.
Evaluation will cover perspectives of consumers, farmers (producers), and government in short term and long term. The governments are responsible for addressing Income volatilities of farmers / primary producers while taking into account the larger and long term impact of lopsided paddy production on markets and environment. Discuss how Market Intervention is a necessary step with its undesired side effects.