Even with a rise of 5-10 per cent of the minimum support price (MSP) for 14 types of kharif crops, the government on Wednesday said it does not foresee an impact on inflation. However, it acknowledged that the higher income has led to higher demand of cereals, which are seeing double digit retail inflation.

The Cabinet Committee on Economic Affairs (CCEA) has approved the hike in kharif crop MSPs for which sowing has already begun. Briefing the media later, Food Minister Piyush Goyal said: “Farmers will benefit from the increase in the MSP at a time when the retail inflation is on a declining trend.” The MSP for 23 crops (14 kharif, six rabi and three special crops) has been fixed on the recommendations of the Commission for Agricultural Costs and Prices (CACP).

However, the farming community is not satisfied. According to Rampal Jat, president of Kisan Mahapanchayat, while the MSP hike in moong is the highest in comparison to other crops this year, farmers can get the benefit only when its purchase is made like wheat and paddy. “At present, 75 per cent of the total production of moong has been excluded from the purview of MSP as official purchase of more than 25 per cent of the total production is restricted,” he said.

On the double-digit inflation in cereals, Goyal said the inflation is lower than in other countries, while stressing that this is reflective of a rise in demand for cereals owing to an increase in income. The Prime Minister has given high priority to check food inflation, which is much under control compared to other countries, he said, adding that a Group of Ministers under Home Minister Amit Shah regularly meets to take stock of the situation.

Echoing the same, a research report by SBI said the role of MSPs in influencing the inflation trajectory in India has been an issue of intense academic and public policy debate. While empirical findings are mixed, the actual impact of the hike would depend on the Centre’s procurement strategy as well as the ruling market prices of various crops compared with the revised MSPs.

“The impact on inflation will be muted as the e-NAM prices are higher than the increased MSP for many of the crops and procurement of crops other than rice and wheat is also limited,” it said.