Economics • Indian EconomyEasy
In the context of the Indian agricultural sector, what does the term 'Minimum Support Price (MSP)' signify?
A. The maximum price a private trader is legally allowed to pay farmers
B. A guaranteed price floor set by the government to protect farmers against unexpected sharp drops in crop prices✓ Correct Answer
C. The retail market price fixed by consumer forums
D. The export tariff levied on agricultural commodities
💡 Solution & Explanation
Minimum Support Price is a form of market intervention by the Government of India to insure agricultural producers against any sharp fall in farm prices, acting as a guaranteed safety net floor. Private traders are not legally bound by maximum price caps under this system, and it is distinct from export tariffs. The government announces MSPs for 22 mandated crops plus sugarcane before the sowing season begins.
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