SEBI Reg. Investment Advisor

Download App
Help Center Pricing
Money Works 4 Me Logo MoneyWorks4Me
Login Get Free Account
Sign Up

MoneyWorks4Me

Log In Sign Up Schedule Free 15‑min Call
Login Get Free Account
Sign Up
  1. Home
  2. Stock Market News
  3. Sharp MSP hikes may add to food inflation, subsidy burden

Sharp MSP hikes may add to food inflation, subsidy burden

15 Jun 2012 Evaluate

In an attempt to woo farmers to plant more and increase their profitability, the government unveiled its recent populist measure by hiking the minimum support price (MSP) of kharif or summer crops for 2012-13 (October-September) season in the range of 16% to 53%. However, the move is likely to have serious implications, as on one hand it would stoke up inflationary pressure on the economy while on the other increase the food subsidy bill, which is already hovering around Rs 75,000 crore.

At a time when input costs are rising, the Cabinet Committee on Economic Affairs’s (CCEA) decision to hike MSPs of major crops would provide some relief to farmers as it would not only compensate them for higher input costs but also increase their profitability. However, government’s decision seems to be ill-timed as the headline inflation has resumed its skyward journey and is hovering at 7.55% which is way above the Reserve Bank of India’s comfort zone.

The rise in MSPs will further augment structural uptrend in food price inflation, which in turn would underpin headline inflation and complicate matters for monetary policy. An increase in the floor prices of oilseeds and pulses is also likely to burn holes in the pockets of consumers. However, some experts also believe that this move will have little impact on inflation as the market prices of most of the commodities are already more than the new MSPs.

The total food subsidy deficit at the end of the current year is forecasted to reach Rs 40,000 crore with increased MSP on paddy which is substantially higher than Rs 31,750 crore under-provisioning of food subsidy expected earlier in the current year. This is likely to exert added pressure on the food subsidy burden of the government.

Register Now to get our Free Newsletter & much more!
2026 ©The Alchemists Ark Pvt. Ltd. All rights reserved. MoneyWorks4Me® is a registered trademark of The Alchemists Ark Pvt. Ltd.

About MoneyWorks4Me

MoneyWorks4Me is a SEBI-registered Investment Adviser (IA) dedicated to helping investors build long-term wealth through transparent, research-driven, conflict-free guidance. Founded in 2008, we started our journey as a Research Analyst (RA), providing deep fundamental analysis, intrinsic value insights, and long-term investing frameworks for Indian equities. In 2017, we transitioned to a full-fledged SEBI-registered Investment Adviser, strengthening our commitment to acting as a fiduciary—always putting the investor’s interest first.

Our Vision

To become India’s most trusted, research-powered fiduciary advisory platform—where every investor, regardless of experience, can make calm, confident, and well-reasoned investment decisions.

What Makes MoneyWorks4Me Different

Our Approach: Ensuring compounding work its magic on client portfolio.

MoneyWorks4Me ensures this through:

×