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Q97. Which of the following are the determinants for MSP:

1. Cost of production

2. Terms of trade between agriculture and non-agriculture sectors

3. Inter-crop price parity

4. Demand and supply conditions

Select the correct answer using the codes given:


  1. (a) Only 1 and 4           

  2. (c) Only 2 and 3           

  3. (d) All of the above

  4. (b) Only 1, 3 and 4


Solution

The correct option is C

(d) All of the above


While recommending price policy of various commodities under its mandate, the Commission on Agricultural costs and Prices keeps in mind demand and supply, cost of production, price trends in the market, both domestic and international, intercrop price parity, terms of trade between agricultural and non-agricultural sectors, likely implications of MSP on consumers of that product, besides ensuring optimal utilization of natural resources like land and water. It may be noted that cost of production is an important factor that goes as an input in determination of MSP but it is not the only factor. Thus, recommending MSPs of various crops is not a ‘cost plus’ pricing exercise, though cost is an important determinant

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