The Case to Legalize the MSP: Analysis of the Impact on Agricultural Market and Farmer Income

In India, agriculture represents the backbone of village economy and livelihood for masses of farmers.As MSP has been instrumental in ensuring a certain amount of income availability to farmers, its legality, together with distortion within agricultural markets, has been debated as an issue.In the absence of any legal guarantee over MSP, the fairness of the agricultural market and the well-being of farmers have been questioned.This paper tries to quantify some of the effects that the legalization of MSP would have on agricultural markets and the income levels of farmers.The argument is supported by national surveys and literature.This paper tries to elaborate on the pros and cons of such a policy by comparing the trends in agricultural pricing, income stability, and market efficiency.Findings of this revealed that legal guarantees on MSP might create an economically stabilizing mechanism for the farmers while associated risks do indeed arise about the incidence of market distortion and, particularly, its fiscal consequences on the part of the government.