Impact of Minimum Support Price on Crop Diversification in India

Abstract

Minimum Support Price (MSP) is one of India’s most influential agricultural policy instruments, designed to protect farm incomes and incentivize production of selected crops. However, MSP’s impact on crop diversification depends less on announced prices alone and more on credible procurement, market access, and relative risk-adjusted profitability across crops. This paper examines how MSP affects crop diversification in India through (i) inter-crop price parity (relative MSPs), (ii) procurement concentration (where MSP is “real” via government purchase), and (iii) cropping pattern outcomes using recent national land-use statistics. Using official MSP series (2020–21 to 2024–25) and national area data (2015–16 to 2024–25), we show that rice and wheat continue to dominate India’s cereals acreage—rice+wheat constitute roughly ~75–77% of cereals area over the last decade (Figure 2). Evidence from policy analysis highlights that high-procurement states (notably in the rice–wheat belt) exhibit strong path dependence, limiting diversification despite MSP announcements for pulses/oilseeds. The paper concludes that MSP can support diversification only when paired with procurement/price support mechanisms, processing and marketing infrastructure, and risk mitigation (insurance, assured offtake) for non-rice/wheat crops.