3.1.1. Need of MSP Policy

Rapid and violent fluctuations in agricultural prices can have negative consequences on the economy of a country, such as:

a) In case, the price of a particular crop declines steeply: growers will be left with little income and no incentive to grow the same crop next year. If this happens to a staple food item, the reduced supply next year will force the government to import that food item to fulfill the demand of people. This will create a fiscal burden over economy.

b) In case, there is steep rise in price of a commodity: consumers will suffer. If this happens to a necessary item of consumption, consumers will not have enough income left to spend on some of the other items. This will have a disastrous effect on other sectors of the economy.

So, there should be an agricultural price policy which can safeguard the interests of both producers and consumers.