What do you mean by Minimum Support Price (MSP)? How will MSP rescue the farmers from the low income trap? (UPSC 2018)

Minimum Support Price (MSP) is the assured floor price fixed by the Government of India for selected crops, based on recommendations of the Commission for Agricultural Costs and Prices, to protect farmers when market prices fall below production costs.

• Prevents distress sale: Farmers need not sell below a minimum price during glut or bumper harvests.
• Stabilises income: It reduces price risk, helping repayment of loans, household spending and sowing decisions.
• Encourages investment: Assured returns can promote use of quality inputs, irrigation and machinery, raising productivity.
• Promotes diversification: Better MSPs for pulses, oilseeds and millets can shift farmers from low-value, water-intensive crops.
• Improves bargaining power: MSP acts as a benchmark price against trader exploitation.

Thus, MSP can help farmers escape the low-income trap by ensuring minimum returns, lowering risk and encouraging higher productivity, though its impact depends on effective procurement and timely payment.