One silver lining to the 24 per cent fall in quarterly GDP between April and June was that growth in the agriculture sector was positive at 3.4 per cent. This is the first time in India’s history that we are experiencing a steep recession without any adverse shock of drought or a failed monsoon affecting agriculture. Another notable positive was the robust procurement of the spring harvest (Rabi crop), especially of wheat. Not just the frontrunners like Punjab and
Haryana, but also states like Rajasthan, Madhya Pradesh and Uttar Pradesh had a good Rabi procurement via the Food Corporation of India. When FCI does procurement, usually through its designated agencies, based in various states, it means that the farmer gets the assured price called the Minimum Support Price (MSP). That was over Rs 1,900 per quintal this time.
The MSP is determined as a political decision, based on inputs given by the Commission on Agricultural Costs and Prices (CACP). This commission was set up nearly 60 years ago, and provides a logical and scienti¦c basis to costs, and hence what is a reasonable price to be paid for the crops. Due to input cost escalation for seeds, pesticides, diesel, credit, fertilisers etc, the MSP too needs to go up, so that the farmer receives an adequate return. Otherwise, it is a loss-making proposition. In the past 50 years, the average escalation in MSP has been about 6 per cent per year
for wheat and similarly for paddy. But the actual procurement by the government agency has gone up nearly 70 to 80 times during this period.