Even as the Government of India caters to the popular demand of increasing the Minimum Support Price (MSP), data from NITI Aayog’s working paper show that from 2011-12 to 2020-21, despite receiving heavy subsidies and strong output-side support crops like rice, wheat, cotton and sugarcane — the backbone of India’s agriculture — are growing at a sluggish pace. Meanwhile, sectors with minimal or no government support, like fisheries and dairy, are thriving with growth rates that leave their heavily subsidised counterparts in the dust.

Data from the working paper titled ‘From Green Revolution to Amrit Kaal’ by Ramesh Chand and Jaspal Singh shows that rice, wheat, cotton and sugarcane, which receive the lion’s share of the government’s MSP guarantees and procurement assistance, show a growth rate of just 1.39 per cent over the last decade. These crops also benefit from sky-high input subsidies, yet this investment appears to yield diminishing returns.

On the flip side, sectors like fisheries, which enjoy no such MSP safety net and no input subsidies, boast an astounding growth rate of 8.97 per cent — the highest among all the commodities listed. Similarly, dairy and livestock products, despite only receiving institutional support for cooperative marketing of milk and little direct aid, register a healthy 5.84 per cent growth rate.

Growth without government crutches

Coarse cereals, pulses, and oilseeds, with small subsidies and partial MSP support, recorded 2.44 per cent growth —still higher than grains like rice and wheat. Even fruits and vegetables, with high input subsidies but no output side support, outperformed the staple crops with a solid 3.47 per cent growth rate.

“Thus, it is not wrong to infer that Indian agriculture has now reached a stage where government intervention, in the form of output price support and input subsidies, is not leading to higher growth in output. The underlying reason for this is that the power of demand side factors in pulling growth is much stronger than the power of government support in pushing growth” the report commented.

According to the 2023-24 Economic Survey, procurement of foodgrains at MSP and distribution of foodgrains at less than economic cost have financial implications for the government. The economic cost of rice and wheat for the year 2023-24(RE) is ₹3,931.34 per quintal and ₹2,709.59 per quintal, respectively.

Call for policy rethink

Data from PRS Legislative research shows that the agriculture sector grew at 1.4 per cent in 2023-24, lowest since 2015-16. Growth in the sector has been volatile and averaged at 3.6 per cent in the past 12 years. Within agriculture, crop production accounts for over 50 per cent of the total production. The share of crop production in gross agricultural value added (at current prices) has decreased from 65 per cent in 2011-12 to 55 per cent in 2022-23.

The message from the data is clear: India needs to shift away from its deep-rooted MSP culture and instead focus on high-growth sectors like fisheries, dairy, fruits and vegetables. A more balanced, market-driven approach — along with investment in infrastructure like cold storage and transportation — could unlock the true potential of these burgeoning sectors.

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