Socio-economic Inequality, Public Procurement and Agriculture Prices across Indian States: Evidence from NSSO Unit Level Data.

Abstract

Nearly half of India’s workforce is attached to the agriculture sector, and more than 86 per cent of the farmers are small and marginal. While there is hardly any evidence of economies of scale in Indian agriculture relating to yield, regressive trends clearly exist regarding the price received by farmers of different social and economic backgrounds. Thus, price becomes the most important factor influencing the profitability of farmers in general and farmers belonging to socially and economically deprived sections in particular. Though price policy in the country comprises the announcement of minimum support prices (MSP) for most food grains, in the absence of any statutory guarantee, an overwhelming proportion of farmers receive prices significantly lower than the MSP. Since government-regulated procurement agencies are largely bound by MSP regulations, higher public procurement leads to more farmers receiving MSP. The impact of public procurement on the average price received by farmers can be attributed to two factors: first, by directly providing higher prices to farmers selling in the regulated market and second, with spillover impact based on higher procurement putting upward pressure on prices in the non-regulated markets. In this context, the paper’s analysis is based on unit-level data from two rounds of NSSO Surveys on the Situation Assessment of Farmers, 2013 and 2019. The study tries to explain, firstly, how the average price received by farmers changed over this period for select states and, secondly, to explore the factors influencing such change in prices during the same period. The paper will also explore to what extent farmers’ socioeconomic status affects their bargaining power and the role of public procurement in this regard.