Supply Response Analysis to Assess the Impact of Minimum
Support Price Policy on Food Grain Production in Karnataka
Vilas Jadhav, Ramappa K Band Jayadeva Nayak
Abstract
The present paper explores the impact of the minimum support price [MSP] policy on food grain production in Karnataka based on the time series data covering the period from 2004–05 to 2023–24 with the help of area response relations and production response relations.
The variables used in the model are tested for stationarity using the ADF test, and it is found that the time series for the selected variables are stationary. Hence, Nerlove’s price expectation cum area adjustment model is employed for both acreage and production equations, estimated with the help of OLS.
The findings reveal that the area allocation decision of farmers for food grain production is positively influenced by the technology, price, lagged output, risk, lagged area, lagged yield and negative effect of rainfall.
Short-Run Elasticities (SRE) of output response for ragi showed weak responsiveness across all factors, very low price and technology elasticities.
The study suggests the need for reducing the risk factor, especially price and weather risk, by enhancing the MSP and irrigation facilities, resulting in reduced price volatility and weather risk so that the farmers will be motivated to increase the allocation of area under the food crop and, in turn, enhance the production to meet the food and nutritional security demand.