Why 'Minimum Support Price' Has All But Disappeared From Modi's Campaign

Mounting agrarian distress and failed promises on MSP hike could fuel massive anti-incumbency in rural areas.

Can 2019 be Modi’s ‘India Shining’ moment? The defeat of the Vajpayee government in 2004 remains a mystery.

Several theories have been advanced to explain it: Most prominently, it is believed that the government was not seen as a being pro-farmer and that it prided itself for keeping the food inflation under control. Could this have been the reason for its unpopularity in rural India? Will the same issue come back to haunt the Modi government as well?

The government that came to power in 2014 by making the tallest promise ever of raising the minimum support prices (MSP), did precious little to live up to that assurance during its first three years. They also tried to shift the focus away from the issue of MSP by talking about doubling the farmers’ income by 2022.

In principle, raising the MSP for their produce may not always be an economically efficient way of helping farmers. It doesn’t allow the market to decide what and how much to produce. It can lead to a surplus of food grain stock with the Food Corporation of India, in turn, leading to inflation.

It can keep farmers trapped in an ecologically unsustainable practice of cyclical cultivation of wheat and rice. There is an issue of equity too, as, the bigger the farmer, the larger is his produce and more will be the output subsidy of support prices for him. However, when agricultural growth has plummeted and rural distress is palpable, raising the MSP is the only means of pumping money into the rural sector.

Also Read: Will Anger Over Low Potato Prices Harm BJP in UP?

The rise in food prices can help not just the surplus producing farmers but also the net food deficit farmers if the latter are protected through an effective food subsidy cover. So these farmers will sell their produce at relatively higher prices and will buy it at cheap rates from the PDS shops. An increased MSP could raise the wages of farm labourers and they too can be net gainers if they are protected from food inflation. The increase in purchasing power can thus boost the rural economy.

Against this backdrop, comparing the rise in the MSP under the Modi government with that of the Manmohan Singh government could offer some insight. The chart below shows the percentage rise in MSP during these two regimes for major crops.

For most of the crops mentioned in the chart above, the MSPs got doubled during the ten years of the UPA period. The percentage of rise in MSPs during the NDA period is just a fraction of what it was under the UPA. Of course, comparing ten years to five years of the Modi regime will be unfair. But it is indicative of the fact that the UPA had adopted a more generous policy regarding MSPs.

Also Read: Fact Check: Did Centre Provide 80% Additional Profit Over MSP to Sugarcane Farmers?

This argument is further corroborated when we look at the average growth rates of MSPs for these crops during NDA (I and II)  and UPA (I and II). (see the bar chart).

Narendra Modi followed the Vajpayee government’s policy regarding MSPs until his government felt the heat of rural distress. He also tried to correct his course towards the end of his tenure.

The GDP growth of agriculture also dipped significantly during the Modi regime. Unfortunately, manufacturing growth has also remained sluggish during this period, narrowing the already small openings for the surplus population in agriculture to move out of this sector.

Also Read: A Minimum Support Price for Farmers Should Be Made a Legal Right

So could all this translate into a shock for the incumbent regime, similar to the one in 2004? Modi has cleverly shifted the entire discourse away from vikas towards emotive issues of national security. Unlike in 2014, he is now invoking the religious identities of farmers. He is speaking to them as a Hindu leader rather than as their prime minister.

So words such as ‘minimum support prices’ have entirely disappeared from his speeches. Instead, only the words ‘Pakistan’ and ‘Pulwama’ are heard.

Milind Murugkar writes on economic and political issues.