UPSC Prelims 2020 Q69: Indian Economy – Agriculture & Rural Development

UPSC Prelims 2020, General Studies Paper I · Indian Economy

Consider the following statements : 1. In the case of all cereals, pulses and oil - seeds, the procurement at Minimum Support Price (MSP) is unlimited in any State/UT of India. 2. In the case of cereals and pulses, the MSP is fixed in any State/UT at a level to which the market price will never rise. Which of the statements given above is/are correct ?

(a) 1 only
(b) 2 only
(c) Both 1 and 2
(d) Neither 1 nor 2

Answer: (d) Neither 1 nor 2

Explanation

MSP for Cereals/Pulses/Oilseeds: Procurement & Pricing

Statement	Claim	Verdict	Detail
1	Procurement unlimited in all states	FALSE	Procurement varies by state based on production + govt budgets. Unlimited in some (Punjab grain); limited in others (minor crops).
2	MSP set to level market price never rises above	FALSE	OPPOSITE: MSP is set BELOW market peaks. MSP = price floor (support minimum), not ceiling. Market can rise above MSP during shortage.

Both statements are wrong. Answer: (d) Neither 1 nor 2.

Answer: (d) Neither 1 nor 2.

Why each option is right or wrong

(a) Incorrect. Both statements are false.
(b) Incorrect. Both statements are false.
(c) Incorrect. Both statements are false.
(d) CORRECT. Statement 1 is false (procurement varies by state/budget). Statement 2 is false (MSP is floor, not ceiling).

Key point

MSP concept: Minimum support price = FLOOR (government buys at this if market falls below). Market can rise ABOVE MSP. Procurement limited by budget + warehousing capacity, not unlimited.

Remember

In India, MSP procurement is NOT unlimited in all states - it varies based on production, budget, and storage capacity (Statement 1 wrong). The MSP is NOT set at a level to prevent market price from rising above it - MSP is a price FLOOR, and market prices CAN rise above it during shortages (Statement 2 wrong).

Common mistakes

Confusing MSP (floor) with price control ceiling (maximum). MSP is for farmer protection, not consumer protection.
Assuming unlimited procurement. Govt operates on budget constraints; storage capacity also limited (~80M tonnes).
Missing that MSP varies by region (state production, strategic reserves, political factors).

Exam tip

MSP system: Farmer gets minimum guaranteed price. But during surplus years, market price falls TO MSP level (no price discovery). During shortage, market price RISES ABOVE MSP. System protects from price collapse but not from high prices.

Sources

Ministry of Agriculture - MSP Policy Documentation
CACP - Commission for Agricultural Costs and Prices

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